Developing Markets

Here’s a question for all of you real estate savvy folks out there. Do developing real estate markets such as Ecuador behave in the same ways as real estate markets in, say, the United States or the UK? The answer is yes, no and maybe. Yes, GDP and population growth effect the market. Yes, the perceived financial state of the country and region affect the market. No, mortgage interest rates do not affect the prices (mainly because you can’t get a mortgage). Maybe because there isn’t enough information to exactly know what affects the real estate markets in developing countries.

Rental Income Tax

Say you own real estate in Ecuador that you live in half of the year and rent out the rest of the time. You may be wondering how much, if anything, you owe in taxes on that rental income. The basic answer is that the Ecuadorean government charges 25% of the gross rental income as tax. If you are a United States citizen, for example, that rental income also gets counted as income on you tax return. You are not double taxed, however, because the amount you paid to the Ecuadorean government gets deducted from the amount you own to the United States government.
As with all things tax related, there is also a complex answer which involves the various means of reducing the tax burden such as owning the real estate through an offshore corporation. To get the full story about that, you will need to talk to a skilled accountant who specializes in international real estate.

Step Seven: Moving in

It is now time to move into your new home. Congratulations! You can definitely feel good about yourself. Buying real estate in Ecuador is no easy task, but the rewards can be very fulfilling. The are several good moving companies that can make your life easier, and there is an array of skilled craftsman in Ecuador that can make beautifying your home fun and cheap.

Step Six: The purchase process

There are a lot of small details involved in buying real estate in Ecuador. The property purchase process involves both a real estate agent as well as a lawyer, and of course a property you want to buy. Your real estate agent will be able to walk you through the step by step purchase process. Come prepared with a lot of patience and perseverance.

Step Five: Find a place to buy

Congratulations! It is now time to find the house or condo you want to buy. Although buying real estate in a Ecuador may seem like a daunting task, after having worked through steps one through four, you’ll feel confident and ready. You will have a good sense that you’re in the right place, will know real estate agents and lawyers there, and you will know the area. Buying a property will seem like a natural next step.

Sparse Data

As you will quickly find when trying to find out about real estate trends in Ecuador, information is sparse. There is no central database you can go to. In fact, even the United Nations does not seem to have pricing trend information on Ecuador. This issue is not just particular to real estate in Ecuador, but all of Central America as well. I recently came across a report that compares twelve popular markets in Central America (http://www.revealrealestate.com/snapshot) that illustrates this point. Instead of hundreds or thousands of properties used for comparison as one would see in the United States, only one property was used from each locations. Although one data point from each location might not be particularly meaningful, it is better than no data points and I commend Reveal Real Estate putting that report together.

Step Four: Get to know the place

You’ve done the research, talked to the experts, taken a trip or two to Ecuador and found a perfect place to move. It’s time to find a house to buy, right? Now quite yet. Now that you think you know where you want to live, it’s time to make sure. Spend some time there, wander the streets, talk to people, meet with a real estate agent or two. We would suggest even renting a place for a few months. You can’t really know if a place is for you until you’ve lived there for a time.

Step Three: Identify where you want to live

Now that you know what you want and how much you can afford, you can start to narrow down where you want to live. You may already have some place in mind, or not have the faintest idea. Either way, keep an open mind and keep the faith. Ecuador is full of beautiful places and wonderful people. The perfect place for you is out there just waiting for you to come and find it.