All Forum Posts by: Andres Duque

@Arpan Patel Thank you for taking the time to point out this potential risks. 

Concerning the insurance, in our country it is mandatory to take a life insurance and a real estate insurance in order to get a loan from the bank for real estate. In the case of this apartment, there is a collective real estate insurance that every owner in the building has to pay that covers the building, the commons areas and the unit itself. It is around $50 a month for apartments worth 130K, not sure if this is much worse as insurance costs in the US. 

Regarding the macroeconomics of the country, it is true that there is poverty as in any third world country. However, I am investing in the capital (San Salvador) where you can find all the multinationals (Walmart, Unilever, Avianca, Sherwin Williams, Bayer, 3M, Banks, etc...) so there is a middle class that has stable good jobs and income that is interested in living in good neighborhoods and having a 24/7 security in place in the building. 

In conclusion, I am certain that building a real estate investment portfolio in here is not nearly as profitable as in the US. But in my case, moving away to build a portfolio is not in my interest as I am happy living near family, friends and I like my city. Taking this things into consideration, I believe that paying down10K for an apartment + 5K in closing costs and taxes and rent the it out, and the rent is able to pay for mortgage, insurances, capital expenditures, vacancy and maintenance costs so that the net cashflow is 0 in the first year, at the end of 20 years I would have an apartment fully paid worth 189K (taking into consideration a 2% appreciation and 2% increase in rent for inflation) that I only really paid 15K. 

If anyone experienced in RE reading this see some flaws in this analysis I would appreciate if you comment, as I am planning on making one or two of this deals every year for maybe 5 years, thinking in the long run for them to be paid when I am 45 years old. I know it is a bumpy road but that would be the big picture. 

Hello Godofredo! Good to see some investors in El Salvador. I have been reading books and studying a lot in order to be prepare for REI, I managed to get an apartment at a 25% discount after making multiples offers and looking at many options, so we are closing it this month and planning to rent it out and see how it goes.

Looking at your deal, I see that you decided on a more complex structure. However, if you manage to pull it out you can expect a great cashflow for our city. A 50k mortgage to 25 years can have a monthly payment of arround $350-$450 including insurance. If you manage to rent each unit you can expect around $500-$600 cashflow a month after vacancy and maintenance costs. 

I would be interested to know if it works out for you. I wish you all the luck, I believe that REI is a good way to grow your net worth. 

Thank for your answer Michael. I have not found a REI club as yet. I have seen many investors that have 1, 2 or 3 houses as investment already paid and having that extra income from rent, but I having seen anyone actively buying real estate with leverage in order to cashflow and built equity over time. I understand the concept, I am just not sure if it can be applied in here.

Hello Everyone! I am Andres Duque, 25 years old and I live in El Salvador, Central America. I have a good job, I am a Product Manager for Industrial Coatings at Sherwin Williams Central America. I have read Robert Kiyosaki's Rich Dad Poor Dad and other books and I am certain that focusing on acquiring assets and passive income is the key to financial success. 

However, my country has very different conditions for investors compared to the US conditions, so I wanted advice and see if you think it is a good idea to start a RE portfolio with the following conditions:

Cons:

- The ratio house price / rental income is much worse here as it is in the US. A $110,000 house might rent at $800, a $60,000 can rent at $400. 

- Bank loans have a 7% interest

Pros:

- There are no tax for real estate ownership. 

- Nearly zero competition in the market for real estate investors at starting level actively buying houses. 

- Our economy is not good, so there are a lot of people in need to sell their houses which i believe can present the opportunity to buy houses at a discount. 

I am certain that it will not be as quick or profitable as in the US, but do you still believe that it is a good idea to invest in RE in here? Any comments will be appreciate. Thanks a lot!!