Ahem...ok...are we ready to rumble? I have thought about writing on this topic for some time. Fortunately, prudence and commonsense had previously prevailed. However, in a blind search for vicarious thrills, I have decided to throw caution to the wind and pontificate on the subject of...Ecuador...real estate...and the very generic "you". Real Estate is a subject which has occupied my life for 26 years. Why have I reached this decision? Because like the proverbial glass that can hold only so much water, two statements I keep hearing over and over again have compelled me to write. Sans actual attribution, I will simply say that the two statements are generally framed like this: "Don't buy real estate in Ecuador. Only rent. Buying is bad. Renting is good." The other statement is, "Use only Ecuadoran Nationals for real estate Agents. All foreign real estate agents are crooks. All Ecuadorian national real estate agents will take better care of you and know the market better." I...ahem...thought I'd weigh in and finally really comment.
Point #1: Folks, the laws of investing, prudence and rational thinking do not cease to exist when you cross into the Ecuadorian border. Here in the U.S. - a major frame of reference for me - and across most of the so-called First World (still so hate that term), we are taught from a fairly early age that buying is better than renting. Invest in yourself, not others. This is an especially astute adage to follow when real estate markets are normal or good. It becomes a little harder to accept when real estate markets are bad...or in a chaotic plummet as in the U.S. right now. Still, I am attempting to be a beacon of reason - yes, I really did just say that - by suggesting that the "buy, rather than rent" mentality is the most financially sound over a period of time. The fact that your feet may be planted on Ecuadorian soil, instead of U.S., UK or Australian soil, for instance, should not invalidate the sage wisdom of the "buy rather than rent" perspective. When you rent...there is one thing you can be sure of...you are contributing to someone else's wealth, rather than your own. In fact, if you took that same rental money and just burnt it in the fireplace, it would all be the same to you (Don't try this at home, as I assure you that your landlord and his/her attorney will have a dim view of this action). Point is...you end up with nothing. Let's look at a worst case scenario. Hey, so long as I said "worst case", let's look at the U.S. market. So you bought real estate at the peak in 2006-2007 and now your $300,000 home is featured on E-bay and you're looking to exchange it for the "prize" at the bottom of any assorted Cracker Jack box. Not good. I get it. But even if that condition were to persist for the next 20-years (a historical first and, therefore, not likely), at least at then end of the term, all that money you wasted would at least yield a place that you wholly own and that you can liquidate and receive *some* of your money back. Sort of the real estate version of a tax refund. Great? No. Better than throwing money at a landlord for twenty years, not a dime which you will ever see back in your pocket? Yep, that's what I am saying. Definitely better. Remember, that was "worst case scenario" territory. Even in that example, at least you also get the benefits of a tax write-off in the U.S. and various other nations across the globe. Now, admittedly, you won't enjoy the latter in Ecuador, because you are not likely to be paying interest on your purchase. Why? Because there is no mortgage funding, for the most part, for real estate acquisitions in Ecuador. Well...isn't that a horrible situation, you might ask? No...not really. Let me explain. The biggest reason why so many "Americans", for example, are hurting in terms of their existing real estate is that they leveraged it to the hilt. No...no...I am not simply talking about the fact that they financed at 95% of loan-to-value...no....that would be too easy. On top of that many refinanced...several times...took out second mortgages...I could go on. In essence, they took their home as adults and treated it the way a child might treat a piggy bank. Turned it upside down and shook it for cash. If you buy in Ecuador, you won't get the honor of this self-destructive behavior. You will pay in cash for your home purchase. Lenders won't line up outside your door and ask you to refinance every third Tuesday, of even-numbered months... because...well...refinancing assumes there was original financing, which you are not getting in Ecuador. Much harder to self-implode. So, if anything, it is a more sound and safer investment in real estate, except for the whole nasty "country-risk" and "economic-risk" factors. But that is truly a very distinct and different dialog. One much too detailed for this forum. Closing point is that if you do not have the cash to buy in Ecuador...no big deal. Go ahead and rent. Rental rates will be significantly cheaper than in First World countries. There is no crime in renting. There is no sin in renting. However, if your life affords you the option, please *do* consider buying and question those that tell you not to do so. I assure you the laws of investment prudence and financial soundness have not been suspended in Ecuador. Btw, the best argument I have ever heard in favor of renting is "What if you have to get out quick?" For the "doomsday crowd" that argument will have traction. For everyone else, best solution for not having to get out quick is to do extensive homework before embarking on *any* relocation. Do your homework and there is likely not to be any regrets. However, this is not a good reason for renting...it is an excuse for poor decision-making. There *is* a difference.
Now, the second issue. Go with the local, not the Gringo, in helping you locate real estate. Btw, why is it always "The Gringo"? Keeping with the consistency of my previous citation, are the Brits and the Aussies anymore predisposed to honesty and fairness? How about the Swedes, Chinese and Brazilians? I am just asking. While mired in general observations, here are some reasonable expectations, of a positive nature, as to what what you might expect if you go with a local real estate professional:
1) Might have greater depth of local market knowledge;
2) Might have greater access to the local "off-market" real estate opportunities;
3) Spanish fluency can be counted on and this will prove useful in communicating with other real estate process professionals in Ecuador;
4) They might charge you less in upfront commissions and fees, because wage structures are very different in Ecuador, than say the USA or UK.
Here is what going with a "non-national" real estate professional - Gringo or otherwise - might get you:
1) A greater knowledge of real estate in general, as opposed to just the local market, since many locals are only part-time real estate agents;
2) A greater understanding of *your* specific expectations and requirements when it comes to housing, due to greater "cultural affinity" with real estate as you know it. Doubt me? Outside of the newer condo buildings targeted at us Gringos and other foreigner-types, just try to engage an Ecuadorian home-owner or local agent on the importance of a clothing dryer;
3) The ability to speak and communicate with your representative fluently in *your* native tongue. When in Rome...so, eventually I hope to have all you Ecuadorian Expats speaking Spanish...but in the meantime...communicating your very important real estate desires in broken Spanish and having responses furnished in, *perhaps* not a completely fluent version of your native language, may prove rather daunting.
4) While you may pay less in commissions and fees to a local agent upfront...and I did say *may*...you might also wind up paying $75,000 for a home which the owner only sees $65,000 and the local pockets the other $10,000. It's a cute little ruse they like to practice on us goofy foreigners. Oh, come on now...are you going to judge? Your native country, nowhere in its history, has ever treated foreign immigrants unfairly? Duped them in any way? Please! Those in glass houses...and...since I did say "houses", back to real estate.
So, as you can see...there are pros *and* cons to going with a local and a non-local real estate professional. Why some choose to bias this in favor of one or the other, I do not know. However, at the end of the day, it is a choice that must be made based on personal preference and the consideration of many factors, just some of which I raised above. It's like anything else, find someone that makes you feel comfortable. Someone you can believe in and trust. And if he happens to be Ecuadorian...or Russian or French...or...yes...a "Gringo"...then that is perfectly fine. Ask a lot of questions. Address your concerns. Discuss their professionalism and experience. Check...double-check...and then vet again to assure your comfort zone is reached. But whatever you do...don't be guided by those that say you *must* use a local...or you *must* use a non-local real estate professional. The only thing you *must* do, if anything at all, is recognize that the laws, of commonsense, good reasoning and basic real estate investment principles are not suspended, just because you find yourself house-hunting in Ecuador.
HGQ
They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. - Benjamin Franklin
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