Investing Overseas (Uruguay)

6 Replies

Quick disclaimer. This is my first ever post and so my thoughts may not be all that clear. With that being said.

Hi, how are you?

Are you interested in investing in South America?

Let me tell you alittle about myself. I moved to Uruguay about 6 years ago, I started a small family remodeling company and started learning about real estate and the likes because of my father. I am very passionate about it and love it, most of all learning and doing everything I possibly can in the field. From building houses to land-lording.

The market here in Uruguay is very good. Yes true in some places the prices are ridiculous, but in other places they are just amazing. Let me give you an example; a 1 family house in one of the nicest areas in Montevideo (Capital) go from anywhere in the 150k to the 500k and even higher.

On the other hand a piece of land by the shore side [Costa de Oro] (Lots of tourism) goes from 10k to 40k cash.

To build a nice place to rent out is not that expensive either, you can build a 3 or so small apartments maybe 2B/1B for about 10k, or you can buy Steel Framing prefabs from 5k to 30k depending on sizes and deals.

Now for the good part. The rentals in the summer for this houses go anywhere from 40 to 120 a day. Or you can build them to rent all year round (3/4, 2 floor houses 2 2B apartments each) and rent them for 500 each. (3000/4000 a month)

If we look at the numbers (40k for land + 40k for construction and 10k for permits and more) the Cap Rate for the second option is 40% / 53.33%. The actual Net Income would probably be somewhere in the 200 per unit (To be extremely conservative) X 6/8 units is 1200/1600 per month total. ROI = 16% / 21.33%

This are real number and anyone can get the same returns easy. Uruguay is an amazing place for investing and I hope people take advantage. The only problem here in Uruguay is trying to live here and investing since the cost of life is very high and monthly job income is very low also banks/private lenders have two many restrictions on loans. (Not an excuse, just a slower start)

Personal note: After saving for a while I bought a piece of land (500 Sq Mt) in Parque del Plata (North) it cost me 30k total and I am paying it as a loan would work in the US. After I am able to build 10 units I can easily rent them out for at least 2.5k a month and Net more than 1k. This will be small 1B apartments, I have talked to many in the area and have a lot of potential renters just waiting for the units.

All number are in US Dolars. All links are from the main listings site in Uruguay. If you want more information feel free to ask I would love to help out and learn more in the process.

Hope this gives you an idea of investing in Uruguay and really hope you jump in on it.

P.S. Prices keep going up so appreciation is also amazing. You could probably sell this rentals in a few years and make anywhere from 2 to 5 times more on your investment. 

Updated almost 3 years ago

Do to the high level of insecurity being felt all over South America I can no longer in good conscience advocate for anyone to invest in South America mainly in Uruguay.

Hi Jonaton

I invested in Brazil, Ecuador and Mexico during my intl travels w Dell which got me to these intetesting countries 5 yrs ago.  I did not get to Uruguay but did get close stopping in Buenos Aires and we had a factory in Porto Alegre, BR. 

I've posted before that in general, I highly discouarage intl RE investing into LA countries unless you are accredited and can withstand significant loss. REI stateside is challenging enough but add in currency risks, political risks, natural disasters, distance risks, partner risks, language challenges, legal costs higher, tax comolexities, and it truly becomes an aggressive, complicated, high risk, high cost asset class. An investor can stay stateside and avoid most of these issues while capturing similar returns in carefully selected growth markets.

My examoles: Brazil, currency crashed 40%, totally unforeseen w World Cup and Olympics coming its way. Corruption and low commodity export prices has stalled economy. Ecuador, buyer purchased our lot in installment payments, oil crisis collapsed Ecuador economy, his construction biz went south then a massive earthquake recently leveled the town near our land.  Weve waited 1yr for our final balloon payment. Mexico, currency has fallen 25% and local govt sold protected land developer said would remain a preserve which devalued our lots.  I rest my case. Just too many variables, why expose oneself to all that.

Dave

Hi David,

Great points, please let me address some of your concerns.

See in the case of Uruguay things are much different than our neighboring countries. For example, Brazil is under a crisis because the people want to overthrow their president, so yes it was unexpected to the rest of the world. 

Unlike Ecuador, Uruguay does not suffer from any types of natural disasters, it is one of the only South American countries that does not have any. I don't really understand why Ecuador's earthquake is worst than Hurricane Sandy that devastate the whole East Coast or the 2015 North American Storm Complex that cause Billions in damages. (We don't have natural disasters, we are not even plagued by snow.)

Mexico is way too far, too large and too dependent on the US to be able to compare it. With that being said, Mexico is over-run by drug cartels and gangs. People are not able to go to the groceries store without risking their own life. I am not saying that there is no violence in Uruguay, but honestly ask yourself, is there any country that doesn't have any? Also ask your self, who controls the Mexican government? If I had to guess I would say "the money" and who has that there? Cartels. Point made.

(Currency risks - Almost everything in Uruguay is bought and sold for in US Dollars) (Political risks - Uruguay has one of the most stable political governments in South America for the last 7 years) (Natural disasters - No natural disasters) (Distance risks, partner risks - You have this same risks anywhere in the world and most of all in your own back yard [If not willing to risk why bother]) (Language challenges - The second main language is English and the number of people who speak it fluently is rising) (legal costs higher - Didn't understand this one) (Tax comolexities - Uruguay is somewhat a tax haven, the government offers many benefits for tax deductions for investors because they want more and more investors to come in and do business here) (and it truly becomes an aggressive, complicated, high risk, high cost asset class - (aggressive and high risk - yes it is not argument there) (complicated and high cost - if you call a US $90.000,00 investment that yields between US $1000 to 1500 in net profit a month expensive than you are definitely correct)

Just keep in mind, investing overseas is never easy, even when everything is favorable it is hard, doing this kinds of investments is not for the faint of heart. 

Stay strong, have exit strategies, always look for back-doors and always, always prepare for the worst case scenario. That's my modo. 

Very soon Brazil will be stable and the prices will go back up and your assets will most likely grow ones more, I would say to be patient. I wish you the best of luck with your Overseas properties, I hope this helped clarify a few things.

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Thanks very much for this exchange.  I think we can be successful investors in many countries as long as we look at the long term and build exit strategies. 

I live in Queretaro, three hours away from Mexico City and the local economy is growing north of 5% for the last five years. GE has a global aerospace Research Center 15 minutes from where I live and Nissan has its largest investment outside of Japan in the town of Aguascalientes.  It is common to see large capital investments by car manufacturing companies in the Bajio Regio ( Central -Western Mexico) including Ford, GM, Chrysler, VW, Nissan, Mazda etc..   Just in the last couple of months,  Ford announced an investment in another brand new plant in San Luis Potosi and Met life just announced it will set up their service center in Queretaro... Mexico  is the home to BBVA's ( the financial group ) largest business unit in the world , including Spain.. If this was a country just run by cartels, I am not too sure why these kind of companies would invest in Mexico. 

The point is we cannot control things like the overall strengthening of the US dollar, but the current situation can also bring an opportunity to buy at a further 'discount'  before the dollar goes back to more reasonable levels.  

If anyone is interested in investing in Mexico, more than happy to explore ways to collaborate protecting you from any external or local risks that you might be concerned with.

Best Regards, José Luis Candela

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Hi Jose,

Thank you very much for that information. My personal comment about Mexico was only related to what is seen on the news and heard of from friends that live there. 

I have never been to Mexico but hope to someday. Sounds like your area will have a huge boom very soon. might as well take advantage of it will you still can.

I also believe we all have a change to make wealth and get ahead worldwide, we just gotta be smart about it and pick and chose what fits us personally.

Again thanks for the feedback. I wish you the best of luck!!

Regards.