Real Estate in Latin America
By Tim Leffel
Many a traveler has wondered, as they found a city they liked, “What would it be like to live here?” Many people who spend their days working remotely anyway start thinking, “Why don’t I just work from here and cut my expenses by half?”
In most of Latin America, residents coming from the U.S., Canada, or Europe can live on a fraction of what they spend to get by at home. This fact hasn’t been lost on retirees, who have flocked to Mexico in the past decade. Estimates of how many U.S. citizens are living there full time or close to it range from 700,000 to a million. Other sunny spots have seen a huge influx of retirees, including Costa Rica, Belize, Panama, and Ecuador.
Homes of all sizes are available in Mexico, some very reasonably priced.
More intrepid adventurers have ventured further south to Colombia, Argentina, or Uruguay to take advantage of great buys on real estate, lower rents, more affordable healthcare, and cheap salaries for domestic help. Others have shrugged off the volatile exchange rate in Brazil to be a part of one of the world's most dynamic economies.
In recent years these retirees have been joined by younger and younger expatriates who are taking advantage of a relatively new phenomenon: the ability to do their job from anywhere with a high-speed Internet connection. These younger residents don’t receive the same incentives that retirees do, but with the cost of living a fraction of what it is in more developed countries, they still come out way ahead.
Here are some of the factors to consider and resources to check into when thinking about a move to Latin America, either on a sabbatical or as a full-time residency.
Retiree Incentives Starting at Age 45
The country of Costa Rica came up with the brilliant idea a few decades ago: offer incentives to rich (by their standards) gringos and watch the foreign investment flow in like a river. It worked so well that they finally stopped offering the incentives and didn’t even grandfather in the people already living there. But the construction crews didn’t miss a beat. The momentum kept going. So some parts of the Pacific Coast of Costa Rica are now more expensive than parts of the U.S., though as the housing bust in the U.S. definitely slowed the torrent of “crazy California money” flowing down south. The interior is much more reasonable for those who want nature instead of ocean.
Many other Latin American countries still offer great incentives to expatriates. There is usually an age requirement—though this can be as young as 45 in some cases—and residents must prove an ongoing income over a certain amount per month. This amount is high by local standards but low by first-world standards: $1,000 a month in Panama and Nicaragua, $1,500 in Honduras, and $2,000 in Belize for instance—where you have to be 45 or older to be "retired." The required income for Mexico went up last year (to more than $2,300 per month), but if you can show enough in bank accounts, including retirement IRAs or 401Ks, that can suffice. Nicaragua will actually waive the age requirement if your income is high enough and Honduras will waive it if you invest $50,000 in a business that employs locals. In many cases, investing in a farm or a business that hires locals will give you tax-free status.
If you can meet the official requirements—including a letter from the police stating that you haven’t been convicted of a felony—you get a whole basket of goodies. These may include a fast-track residency permit, duty-free importation of household goods, reduced or eliminated property taxes, a tax waiver on construction materials, cheaper medical care, and even discounts on travel and entertainment.
These vary from country to country. Panama has long had the most generous program, with a 20-year property tax exemption that can be passed on in a sale and a whole range of discounts: 50% discounts off movie and event tickets; 25% off domestic airline tickets; 50% off at hotels; 15% off hospital bills; 20% off already-inexpensive doctor’s consultations; and 50% off closing costs for home loans. Ecuador’s retirees get 50% off all domestic airline tickets as well as international tickets on certain specified carriers.
Other countries may not offer anything; you’ll have to go beyond a quick Google search to find out what’s on offer and to get the fine print. Some—such as Mexico and Guatemala—put special requirements on the purchase of waterfront real estate. See the resources section at the end of the article for places to turn for specifics.
A Lower Cost of Living in Latin America
Many people move to somewhere in Latin America because they like the pace and culture, but the reduced cost of living is a major factor as well. Even if you are too young or your income is too low to receive incentives, you can easily cut your monthly cost of living down 30 to 60% without making a lot of sacrifices. I can’t keep track of all the articles I’ve read about a couple living on less than $1,000 a month in Ecuador or Nicaragua, having a great time. Bump it up to $1,500 or $2,000 a month and they’ve got a maid, a gardener, and one or two restaurant meals a day. Many countries allow you to stay for 180 days after arrival, which is half the year to stay put on just a tourist visa.
The cost of living can rise relatively quickly due to local factors: because of positive changes like a booming economy (Brazil, Chile, and Panama) or because of inherent financial problems leading to high inflation (Argentina). The cities of wealthier countries will naturally cost more than those in less developed countries, but you will still spend less overall for a better quality of life. Living in vibrant Buenos Aires doesn’t cost what it does to live in vibrant New York or London: the cost is more in line with living in Austin or Minneapolis—but with a lower tax bill. Panama City, with its double-digit growth, is not the bargain it once was, but you can still live there for half of what it costs in Miami.
Even in nearby Mexico, only those who live in fancy beachfront penthouses or in gated American-style housing communities are paying anything close to what they would at home. Away from the coastal tourist zones, finding a nice two-bedroom apartment for less than $500 a month is not difficult, and usually that’s with utilities included. A typical locals’ lunch will be two or three dollars. In most areas, you can easily do without a car.
In any country south of the Rio Grande, health care is far less expensive than under the high-profit system of the USA. From Mexico to the bottom of South America, you can pay for routine dental and health care expenses without wincing, even with U.S.-trained doctors in the best hospitals. For anyone who is self-employed and paying for their own insurance, this can mean a savings of $15,0000 or more annually.
I can’t tell you how much a month you will spend yourself anywhere: it depends on your expected level of comfort, whether you like the countryside or a city, and how much living space you need. Even just saying, “I’ll live like a local” doesn’t mean much. Dirt floors and an outhouse…or a walled-off mansion with two armed guards? You’ll see plenty of both from Mexico down through the tip of Patagonia.
In general, if incentives aren’t a factor but costs of living are, here are the countries that are cheapest overall, while still being attractive places to live. In Central America, it would be Guatemala, Ecuador, Nicaragua, and Honduras (apart from popular Roatan), while Panama is less expensive as a renter than an owner and prices drop quite a bit outside of the capital. If you just heard about buying in Costa Rica, you’re about 25 years too late. Look to Nicaragua instead. An ocean view building lot that would cost a half million dollars in Costa Rica, for example, would be more like $50,000 in Nicaragua. There’s a similar differential in home and condo prices. Subtract a zero when you cross the border.
For South America, the least expensive countries with a sizable expatriate population are Ecuador, Peru, Uruguay, Argentina, and Colombia—in that order. Brazil’s currency fluctuates like a small boat on a stormy ocean, so it’s a tough one to classify. Chile is the most expensive in many respects but has the best infrastructure.
Remember that Panama and Ecuador use the U.S. dollar as their currency, so you don’t have to worry about exchange rate changes in either of those. The Belize rate is pegged at a steady 2-to-1 exchange and the rate for Honduras rarely changes. Mexico’s rate can vary 20 to 40 percent from year to year, though it's most commonly between 11 and 13 pesos to the dollar. In many Latin American countries with their own currency, rents are usually listed in local pesos, but if you buy property it will be negotiated in dollars.
Moving to Latin America For a Different Way of Life
Many move to Latin America for reasons besides just the financial savings. They like the relaxed atmosphere and living amidst a culture that’s less obsessed with work and consumerism. There’s less government intrusion, fewer lawyers making things difficult for everyone, and—despite what the popular media would have you believe—lower crime rates. There are exceptions on the crime front of course: Guatemala, Honduras, and El Salvador have legitimate crime problems due to the drug trade, so it's important to avoid the trouble spots along trafficking routes. In Mexico, it's best to avoid the border cities and the clear transit routes. Colombia, on the other hand, has seen a dramatic drop in crime over the past decade.
The living atmosphere differs from country to country of course, which is why it makes sense to follow the advice you hear so often: live in a place for a while before you buy real estate there. Places that seem perfect on vacation may not be perfect for an entire year. A location that meets all your criteria as the perfect spot on paper may be less attractive when you actually spend a few months there. If you rent first, there's no major penalty if you change your mind.
Weather itself is a key factor for many expatriates. Panama City and parts of Mexico can feel like the inside of a sauna several months a year. It can get downright cold and damp though in some mountain regions. Rainy season in Central America is really rainy and can last half the year. Some prefer the “eternal spring” climate you get in the highland mountain areas of Boquete, Panama or Cuenca, Ecuador, venturing down an hour or two to the beach a couple times a year. Others want a permanent beach life, with sun and sand every day of the year. Still others want to be in ski country of Argentina or Chile. If two of you are moving together, make sure you discuss these preferences when picking out potential destinations.
Latin America Real Estate Resources
There are several websites that are geared to those looking to live abroad, including Transitions Abroad. Others include EscapeArtist.com, ExpatExchange, and LiveandInvestOverseas.
If enough expatriates live in a location, you'll probably also find a local message board that's active with people who can answer your questions. Search, ask around, and look in guidebooks. I've personally used ones for several locations in Mexico and seen multiple ones for havens like Buenos Aires, Roatan Island, Boquete, and Ambergris Caye.
If you are serious about investing in Latin American real estate though, or even just putting down roots, sooner or later you should invest some money in books, country reports, and a scouting trip or two. You could surf the Internet for days on end looking for free advice and still not get a good feel for what hurdles you will face and what you’ll actually spend in specific locations. Many mainstream and high-end website will give you a very warped impression of what an average house will really cost you than if you take more time to make connections and look around. Some rah-rah sites are run by real estate agents, just glossing over the more unsavory aspects of the location. There’s no substitute for doing your homework and then taking your time on location before you commit to making a purchase.
Here are a few good places to start:
International Living been around since 1979. Their editors have lived in Mexico, Uruguay, Ecuador, and Panama. Many of their columnists live in other Latin American countries. Each issue offers insight into destinations, with real stories and real prices. They also sell books and e-books full of valuable information you can’t easily find elsewhere.
The free side of EscapeArtist.com has articles on moving abroad, but many from the archives have gotten dated and inaccurate. More reliable are the country report e-books written by expatriates already living in a location. See their eBooks for Expats section.
If you search around on the web, you can find country-specific or even city-specific websites geared to those interested in moving, including Transitions Abroad's expatriate websites by country.
Tim Leffel owns a home in Mexico and is the author of classic several books which you can see in his bio. He also writes about real estate for Luxury Latin America.