Last week, I talked about what $250,000 to $1m can get you on the Guatemalan property market. It was a long post so I split that second part about the specifics of Guatemalan real estate.
Guatemalan real estate is a bit different from other parts of the world I have lived in. Being a small country with even fewer places that live up to expat standards, the small market calls for higher prices than similar houses of the MidWest and other rural areas. And there are a few things to know before you make an offer on a property:
1. Finding out the true value of a place is hard
Unlike markets like Ecuador, there doesn’t seem to be a “gringo price” for expats, higher than the market price, but people who can afford to own a place are usually pretty rich, so they set a ridiculous “if I can sell for that much, I will, otherwise let’s wait” price. In some cases, you can negotiate as much as 40-50% of the asking price. We got 50% off asking when we bought our place, as the seller had medical bills to pay and hadn’t been on site for a couple of years.
Realtors generally take a 5% commission, and don’t expect them to do much more than showing you around for that price. So if you like a property, the best way is to ask them to put you directly in touch with the owner, so they can mention they referred you and still get paid, and then negotiate directly.
2. Cash is king
Most people pay cash for properties, and if you can afford to, you can get a serious discount on the price. Otherwise, you can negotiate the terms directly with a seller and get them to offer financing plans. For our land development plots, we offer seller finance over 12 months so people don’t have to get a mortgage.
3. Mortgages are hard to get and expensive
Mortgage can be taken in dollars or the local currency, the Quetzal. A good rate in dollars is around 7.5% and in quetzales 9%. That is pretty high. If you do need a mortgage, as a foreigner it will be hard to get, unless you have a Guatemalan source of income, or can prove that you have a regular foreign income such as a pension. Some banks require you put down 50% of the price of the property.
4. Apartments are great… for the first 10 years
Maintenance costs in buildings are fairly high (see below) but don’t include building up a repair fund. So if the elevator breaks down, you need to fork out extra cash. That means co-owners often forego cosmetic repairs, and a building that looked really sharp when you moved in starts looking quite old pretty soon. If you buy off plans or move in pretty early, you should see appreciation in your property the first few years, when the place is fancy and everyone seems to want to move there. Then it plateaus and eventually starts looking unappealing to potential buyers. Houses are a safer bet, although common parts like the gardens, gym or social area can also look decrepit if the HOA foregoes repairs.
5. Beware of maintenance costs
In some high end buildings, with a pool, social area for parties and neatly maintained gardens, maintenance can be as much as $400 a month. That is almost the cost of rent in a lower key building. Sure, labor is cheap but you pay a lot of insurance due to Guatemala City being a seismic zone. Read the maintenance contract well to be sure it does include insurance. Also, expect to pay extra maintenance if the building needs repairs (see above).
6. It is hard to resell an old property
People want to christen a new place. They don’t like old kitchen countertops and aren’t very likely to see the potential of an older place. It is still a market where people move to entirely new developments and leave the old once to die a slow death. The epicenter hasn’t seen rejuvenation efforts yet. So your place may go out of fashion and be hard to sell.
7. Rental yields are low for new properties
I have seen a $250,000 2 bed property rent for $600 a month, a weak 2.9% yield. There is a large rental market but few people can afford to pay much more than $700 and for that price you can get a nice 3 bed townhouse a bit further away from the center. You can still get good yields if you buy a cheap old property and fix it up though. I paid $500 for a 3 bed condo in a desirable part of town including maintenance, but I am pretty sure the owner bought it for less than $50,000 15 years or more ago.
8. You often declare a much lower sales price
This is a sneaky manoeuvre so the seller doesn’t have to pay much capital gain tax and you as a buyer don’t have to pay much property tax, which is based on the property value (0.9% a year). You often declare about 60% when you buy new and as little as 10% if you buy bare land to build on. That can backfire on you if the council re-evaluates your property down the road, and if you declare the real resell value, you will pay a lot of taxes.
9. You can create a company to own the place
This is actually a good way to go around capital gain tax, as the company buys the place, then when you want to sell, you just transfer the company shares to the new owner. Setting up a company costs about $2,000 plus around $50 for an accountant every month to take care of tax reports and obligations for you. As a foreigner, you can’t own 100% of the company shares, so you will need a Guatemalan shareholder who can hold one share while you own 99. Your accountant can be that person for a small monthly fee.
10. Measurements differ with every property
In France, there is a law to unify measurements, and the square footage of a house is taken inside the walls, excluding built in wardrobes and any place you can’t stand on your feet, like attics under 1.80 meters. In Guatemala the square footage includes any paved area, that means balconies, porches and even garage areas. But some buildings will exclude parkings. And if you buy bare land, even though the property title is in square meters, they talk about other scales like varas, which are about 70cm, manzanas, which are 10,000 square varas, and even brazadas in rural land, which is the width between your open arms, and can obviously vary a lot. You should take your own measurements or at least ask if parking areas are included or just the area inside the house.
11. Outside Antigua, you can pretty much build anything you fancy
I know I said 10 things but #11 has its importance if you plan on building a house. Antigua is a UNESCO World Heritage town where it is very difficult to get planning permission, and if you do, you will have to build a house that looks exactly like the other colonial houses of the town. Outside of it, you can build pretty much anything. If you buy land within a development, you will have to get approval from the HOA, which should be a breeze as long as you don’t build a huge building that will hide everyone’s view. In our little village, there were no permits needed so we built what we wanted with no trouble. We just had to get approval from the protected areas bureau as it is on a lake shore but that was about it. You can design your own house, then have an architect validate the sketches, and that’s it. But that also means your neighbor’s house can be an eyesore and you can’t do much about it.
Jayson @ Monster Piggy Bank says
Guatemala is one of the place I really want to visit. Knowing how the real estate is at the Guatemala makes me want to settle there. I wish I really could. Thanks for the advice Pauline.
Elena Hofferber says
Antigua Guatemala, San Lucas and Atitlan are beautiful places to live. The area of Izabal too, but winters can be bad sometimes..
Mrs. Frugalwoods says
Interesting. I like that you often negotiate directly with the seller. I’ve often felt like having realtors in the middle of a transaction slows things down and, in some cases, occludes the clear communication of what the seller wants and what the buyer is willing to give. On the other hand, it might be daunting to navigate a sale on one’s own.
Daisy @ Prairie Eco Thrifter says
I find it fascinating reading about real estate in other countries. We were recently on our honeymoon in Nepal and then in Indonesia, and I think learning about real estate and how one goes about acquiring property (locals, expats) is one of the best ways to learn about an area.
Bill says
Hi Pauline,
Thanks for this great information! I hope to link to it with a webpage I’m developing to help expats find houses here in Guatemala. I’m hoping to just do publicity – a website with social media – and cut out the realtor altogether, saving everyone else some money (and giving me a little). It’s not the site I’m including in my registration, though, as it’s not live yet!
I couldn’t find a date on the page; do you know if the info is still relatively current? I’ve had a number of locals tell me that realtors charge 10% – but then, that could include everything (except the VAT, obviously). Thanks so much for the valuable info!
Pauline says
Hi Bill, yes, the info is current, maybe 10% is for realtors with an office, 5% is for comisionistas for sure. I haven’t dealt with Re/Max and the like. Good luck on your launch!
Peter Moffatt says
Hey Bill, did that website you were talking come to fruition? If so I would love the address? Any other suggestions on resources for moving to Guatemala from the US? Thanks and be well.
Bill says
Hi Peter,
Unfortunately, the plan didn’t come to fruition. I actually had a website set up but got caught up in other projects and never tackled the real estate idea. I’m hoping to convert the site into just a blog about life in Antigua and other places, perhaps going into more detail than other sites. The site is at http://yourhomeantigua.com, but it’s really just a shell right now. Just last week I started writing some articles but haven’t published them yet.
A guy named Rich Polanco has a really good site although I don’t think it has tons about moving here. It does have a lot of info about the town and doing “visa runs”. His site is here: https://www.okantigua.com
The political situation is getting “interesting” again. Actually the president is having a press conference about 25 minutes from when I’m writing it, presumably about the ongoing conflicts with the UN’s anti-corruption group.
And Pauline – I apologize for never thanking you for your response! I thought I’d done that.
Karen M Lydon says
Thanks Pauline. I have some ideas about buying some land suitable for agriculture and having it be a cooperative with the local people. Do you have any thoughts i that?
Karen
Groen says
This is very interesting, thank you. I am just in the process on desiding to sell my marina/ hotel in the rio dulce area, im trying to put a price on it too. This is almost impossible because of all of the above. The problem is that brokers reach the prospective clients, however brokers do not need to be licensed for what i understand, so with that you dont know what you get.
purchase closings NJ says
Planning on getting a title insurance? Then I suggest you do all the necessary home work for safer transaction.
Frank says
Images of GUATEMALAN is really nice and the tips you have mentioned in the post is also great.
Hector Hernandez says
I was wondering if in Guatemala uses the USA credit reports or if they have their own system. I would rent first before setting my eyes and heart on one location. I live in Winter Springs, Florida but, thinking to retire to Antigua, Guatemala
pak villas says
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Bilal Alvi says
Before signing any document, consulting your Notary will enable you to know your rights on the matter under consideration, to pinpoint those items capable of affecting your personal and financial situation, to evaluate the advantages and disadvantages of the various solutions proposed and to choose the form and type of legal action best suited to your needs. Your Notary’s advice is your guarantee of security. The information received when you consult a Notary will allow you to better identify the rights and obligations attached to the legal action you are planning to take.
As an authority in commercial matters, your Notary will advise you on the advantages of setting up a company, the requirements for forming a partnership, the procedures to be followed, the tax benefits and the possible agreements between partners or shareholders in the event of death or the dissolution of the business.
Realestate says
Hey, Thanks for the information. good and useful information.It’s a good idea to invest in a commercial property. It’s a great way to make some money. Not only that, but you can hire someone to manage the property for you, so you don’t have to spend too much time taking care of it!
Sonnie Mendizabal says
Thanks for all the tips and advise. I live in Miami and I own a commercial property in Guatemala is a very big and well built warehouse.. I am thinking on selling or renting it. I hope o can do it on my own with the guide of a well known commercial realstate lawyer.
Thanks again.
Carol G Henry says
I heared so many times about Guatemala that it’s a nicce place to invest but I never had a chance to visit US. Living in Dubai and just looking to forward my commercial real esate business all around the world. I also have United States in my list and for now also adding the Guatemala in this list just because of this post. Nicely written and fantastic information that you have. Thanks
Rifat says
THE INFORMATIONS ARE VERY HELPFUL AND INFORMATIVE..
eatfrysmith says
Great article and meaningful
Evan Fisher says
I appreciate the information given in this article about the factors while should be taken into consideration while purchasing a property. I agree that direct contact with the owner of the property could be very useful to evaluate the cost of the property. Realtors play a detrimental role in any kinds of business and an investor should hire an experienced and trusted realtor to make a profitable deal.
omia says
The 1st thing caught my eye you did was the living room curtains with black I thought was ruffled to now looks like striped far apart. I love these can you tell me where they came from? This is Adorable as the Living area in love to lighten mine as well. I’m in an old Farmhouse my Mom redid in 89. Honest Air Fayetteville
Afton Jackson says
I like how you suggested using cash on purchasing real estate in Guatemala. It seems like a nice vacation and retirement spot, my wife and I plan to look for a retirement home. We would love it if a realtor helps us out on looking for one.
Alessia Aniston says
Hey!
Terrific Information for everyone of all ages!
Thanks for sharing.