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Francoise Lerusse
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Username: Franleru

Post Number: 2
Registered: 1-2008
Posted on Monday, May 19, 2008 - 2:57 pm:   Edit PostPrint Post

For investors and especially Europeans, real estate in Buenos Aires and Miami seem quite interesting.

Which are the pros and cons of the 2 cities?

Which are the perspectives for short term renting?

Is it still time to buy in Bs As, will it (soon) be time to buy in Miami, especially considering the dollar depreciation?
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Roberto
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Username: Admin

Post Number: 1672
Registered: 12-2004
Posted on Monday, May 19, 2008 - 6:53 pm:   Edit PostPrint Post

Francoise, glad you made this thread.

Not even close to be an expert in real estate but there is one thing that jumps at you when considering both places. In Miami, you can evict a tenant easily with little damage to your unit... if it comes to that. In BA, this can turn into a major headache. Mike (apartmentsBA) suggested many times that for this type of business choosing a prime location is the ONLY way to go in Buenos Aires.

And following your inquiry about Miami in the other thread, I would add that you will find very few -if any- 100 m2 1 bedroom units. In Miami Beach for example, most 1 bedroom apartments will range from 650 sq ft (60 m2) to 800 sq ft (75 m2) and the latter will be big.

There are some scattered pieces of data out there about inventories being sky high in Miami condo land, perhaps as much as 36 months but this is unheard of and it will be brutal for the local economy if true. Official figures are of 10 months and rising. I see many discounted properties here but I am still not seeing -or I may not be aware of- distressed mortgage markets. If anyone has any information please share. It appears Banks are holding the foreclosed properties keeping prices steady... for now. As a reference, I am seeing single homes in Miami Beach going for $450,000 for 3 bedrooms (1954 - ran down, no marble, no granite, notin); 2 bedrooms apartment of 1100 sq ft for $290,000 but I am also seeing some smaller recycled 1 bedrooms (no parking) going for $140,000 about three or four blocks from the beach.

Renting in Miami appears to be on the rise, as expected.
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Apartmentsba.com
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Username: Saint

Post Number: 484
Registered: 5-2005


Posted on Monday, May 19, 2008 - 7:20 pm:   Edit PostPrint Post

It's all about location, location, location as Roberto mentioned. I don't care if you are in London, Hong Kong, New York City, Miami, Buenos Aires or Lima. I think in any city the 3 most important things in real estate are location, location and location.

Buenos Aires has a LOT of issues to deal with renting. I won't go into all of them here. As Roberto mentioned, here in Buenos Aires on long-term leases it's very problematic as it's impossible to kick out a deadbeat tenant if they stop paying or even if they destroy the place. You must go through the legal system which can take up to 3 years to get in front of a judge. For that reason I almost never do long-term leases.

Even when someone has a guarantor (co-signer) that doesn't always mean that you will avoid problems. I know from experience as I've been a guarantor for some friends on properties that I own. When they rented they had to have a "guarantia" (co-signer) when they rented for 2 year lease. This had to be someone that owned property in Buenos Aires (Capital). I co-signed with a property I own but within a year into my friend's lease I sold the property. So I know from experience even if you had a co-signer it's possible that the property they used could be sold therefore not protecting the owner. Also, I've heard of other property owners where they had a co-signer and had issues/problems so I'm staying away from the long-term lease unless it's a corporation I know or an Embassy leasing (both of which I've done longer term leases before or the person is prepaying 100% of their entire lease upfront plus deposit.

Short-term rentals can still work out but keep in mind you really have to think about all the issues. There are many including having someone dependable to manage the property and pay your bills and watch on things. I know from experience it's alot of work. We get about 10 calls/emails EACH and every day of people that want us to manage their properties. We do NOT. We only do on properties that we buy ourselves or for our clients. So I do know that there are LOTS of people that are having problems with local management. It's not an easy business.

In the USA you have the advantage of using leverage. Even today with good credit, you can get financing for about 80% of the property at very low rates. 15 year mortgages are 5.8% or so. 30 year mortgages are about 6%. In Argentina you must pay 100% non-leveraged in CASH.

I've always wanted to try this business in the USA because of the leveraging it's possible to buy up a lot of properties using financing thereby improving the ROI since you only have to put down 15% - 20% or less. Still, I imagine in Miami some of the buildings or condos might restrict against short-term rentals but you should look at the condo rules before buying. I've always thought of doing it with nice houses in a nice town like Miami where there are both tourists and businessmen.

The key when looking at short-term rentals in either city is to key in on where the demand is for the rentals. For example in Buenos Aires the ONLY areas I'm buying in are Recoleta and Palermo, and Palermo Soho/Viejo/Hollywood. But you have to look at the areas carefully and see trends. For example, Hollywood has less demand than Soho. Puerto Madero is nice but keep in mind prices have already skyrocketed quite a bit. Remember you can't charge more per night just because you paid more for the property. Puerto Madero gets very little demand compared to other areas and the demand that is there is mostly from businessmen that must be in that area.

In Miami, I'd look at the same thing. Where is the demand for rental guests? Where are the areas people want to be in? What kind of properties do they want to be in?

Francoise - the best thing is to go to each city and see the areas/market. NO ONE can guarantee any type of occupancy rates so keep that in mind. The best thing is to make a spreadsheet for each city and include the monthly operating costs including taxes (rental taxes), property taxes, utility bills, insurance, laundry/cleaning, as well as ANY possible expense like management fees, etc. Then make a worst case, middle case, best case scenario for the rentals.

Most people investing in real estate have more than one reason for investing overseas. Sure, many look at the cash flow but especially when investing internationally, many look at different reasons including tax reasons, asset diversification, asset allocation, getting funds/investment to another country, estate planning/inheritance issues and many others including capital appreciation potential as well.

It's best to look at all these different criteria when investing overseas. I wish I made my income in Euros like Europeans or Sterling like the Brits.....USA property is incredibly affordable with the stronger currency.

Good luck.
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 248
Registered: 7-2007


Posted on Monday, May 19, 2008 - 9:27 pm:   Edit PostPrint Post

The real problem with standard 2 year apartment leases in Argentina is the low ROI of aprox 5% or so ..often times less- just unappealing from the ROI point of view, although a 2 year tennant is indeed monthly income vs. occupany rates which is more often a target than reality.

For those who hear non-stop horror stories abot eviciting tennants, there have been several improvements to the leagl system in the recent years, that can cut an eviction down to 3 or 4 months, or less, instead of a year or more. It's all about how you you engage the law. But combine that with the low ROI and it's just not a shiny investment candidate.
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Gloria Melgar Estevez
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Username: Glorita

Post Number: 86
Registered: 12-2007
Posted on Tuesday, May 20, 2008 - 11:02 am:   Edit PostPrint Post

There was an article about foreigners coming to Miami for buying opportunities in this past Sunday's Sun Sentinnel. There has always been a large Canadian population that comes during the Canadian winter(snowbirds) and most congregate in the area of Hollywood Beach. I don't know what percantage own their own place versus those who rent. One con I see to owning a property in Miami is the high cost of insurance. The closer you get to the beach the more expensive. Evicting non-payers is not difficult here in Miami(my mom had to do it once many years ago), as oppose to what I have heard to evicting someone in Argentina. This can be such a problem in Argentina that there is even a term "los ocupas" to those who take possession of properties.
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Francoise Lerusse
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Username: Franleru

Post Number: 3
Registered: 1-2008
Posted on Tuesday, May 20, 2008 - 3:48 pm:   Edit PostPrint Post

Thanks to all for your posts. I really appreciate. If I understand well it seems we should still wait for an investment in Miami although by reading this it things seem to be moving.

http://www.sun-sentinel.com/business/realestate/sfl-flzcondos0518sbmay18,0,2844854.story


I read that ROI can reach 10 to 12% on 80% credit financed properties rented on long term basis. I wonder if the short term game is still worthwhile ?

Does anyone know a good management company ( as good as Mike's one) for luxury apartments in Miami. What I see on the web seems rather cheap.

Thanks to all.

(Message edited by admin on May 20, 2008)
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Roberto
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Username: Admin

Post Number: 1674
Registered: 12-2004
Posted on Tuesday, May 20, 2008 - 6:01 pm:   Edit PostPrint Post

Uh... if someone has hard numbers on an ROI 10%+ on Miami properties please post them asap!

I have a strong feeling this is off. There is a huge disparity between rents and property values. Properties can certainly be cheap and be bought by foreigners who may be temporarily benefitted by the rate of exchange BUT tenants are going to be locals and will not be paying such high prices on rent to favor a 10+% ROI, unless as Mike said in specific locations. Not even long term as the convergence on salaries, rents, property values has such disparity. Don't forget what was mentioned by Gloria. Adding to your costs > expensive real estate taxes, insurance and repairs... and last but not least high maintenance fees. Although you can still find a few properties with $175/$200 dollars a month, expenses for 1 bedrooms most likely will fall in the high $200's and above. If recently built, much higher.

At current prices and current rentals you may be looking at something like 5% on fully owned units. Goes way down on financed properties.

Others, feel free to post your figures.
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 250
Registered: 7-2007


Posted on Tuesday, May 20, 2008 - 7:56 pm:   Edit PostPrint Post

Gloria, those stories are indeed mostly from the past or current old situations, and are probably true, but with the laws in effect over the lat 8 years, and much lower tolerance and higher and proper screening of renters, it is simply a 3 to 4 month headache in most cases, on a long term "2 year contract". It's like getting robbed, if you are on alert it just probably won't happen because of the pre-actions you should take. If I were to buy something and engage a two year rental program for renters, I would do my best to operate within the "new" usual and customary, and logical.

Robert good stuff - what kind of rental period are you talking about - on Miami rentals?
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Apartmentsba.com
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Username: Saint

Post Number: 488
Registered: 5-2005


Posted on Tuesday, May 20, 2008 - 7:56 pm:   Edit PostPrint Post

Roberto,

In order to make a high ROI you need to really really set up a proper model and it can't be done on long-term rentals. It should be a short-term really high end luxury market that competes with 5 star hotels and their high prices. By targeting a select group of people. The parity if you can target this audience and get high rates like a 5 star hotel are pretty good by using leverage.

The wild card in Florida is the hurricanes and the cost of insurance there on insuring properties. I think it needs to be a really special business model and special target audience. I think it can be done if you are in the right areas, buying the properties at good prices, low interest rates, etc.

Still, I think it can be done in better areas and overall ROI with capital appreciation and cash flow potential are better in other areas. I'm always traveling around the world and looking at different areas, rates of property, laws, taxes, etc.

There are better areas. It's interesting. I really love real estate and always look at it whenever I travel. The next spot I'm looking at buying a property or a few properties is in Lima, Peru. Property prices are pretty low in good areas compared to other areas. I just sold a franchise there. Business travel is pretty high and 5 star hotels there are still pretty expensive.

The property prices there are almost half of what they are in swanky areas of Buenos Aires. It will be interesting to see how that market does.

Francoise - I don't think on long-term leases in Miami you can get NET 10% - 12% after all expenses, taxes, property management fees, monthly utilities, etc. Not even close. If so, let me know and I'll buy it. There are a glut of properties in Florida and many owners can't sell them so they are leasing them out on long-term leases so I'd be surprised if the rental rates are going up....in fact I think they have gone done. (Roberto can probably confirm). If you buy there is no guarantee you will get a long-term lease. LOTS and LOTS of competition and the situation in Florida I don't think will improve until next year or the end of this year at the earliest.

No, I haven't found a company in Miami that does really high end rentals. I have toyed with the idea of starting a company in Miami doing the same thing I'm doing in Buenos Aires but I'm far too busy right now. Maybe a future project. I have LOTS of investors/clients that will buy in Miami if I do it however. I still think the time to start buying in the USA is end of 2008 and beginning of 2009. I've held that belief for a long time now. So far it looks to be correct.

Best.
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Arial
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Username: Arial

Post Number: 217
Registered: 10-2006


Posted on Tuesday, May 20, 2008 - 8:36 pm:   Edit PostPrint Post

It depends of course on the original investment but in the US, landlords have traditionally looked for 1% of the purchase price per month in rent. Many based their decision about what price they would pay for the real estate on those figures.

It doesn't always work this way plus my information is now dated, but that has been a rule of thumb on normal, annual rentals. Plus prices here are now so skewed that I don't know if that would hold. But it is possible that you read something based on those figures and the writer came up with the 10% after expenses. Does not apply to temporary rentals of course.

I don't know about Miami but in my area of Central Florida a manager will handle your rental for 10% a month plus 50% of the first month's rent if they find you a tenant. Again, I don't know about temporary rentals but if you read those figures, it is for the average rental. Of course additional expenses for repairs and so on are covered by you.

It is true that insurance here can now be phenomenol (in my opinion) since the last hurricanes. But there is another factor to consider.

There is considerable legal risk in the US. Stats that I have read are that one business in every three will be sued in any given year. If you can find a good manager, they should be knowledgeable and able to make your risk minimal, but never remove it completely.

As always you need a good attorney, preferably specializing in real estate. You would probably need to place each property in an LLC. This gives you some protection in limiting any suit to the property itself and not suing you based on all your rentals. So that is a certain amount of protection. An attorney should know how to advise you on this.

I want to give you two exampes of what I mean.

In our landlord's association there were two legal catastrophes, in my opinion. One landlord didn't realize there is a law that makes it illegal to charge a deposit on a "companion animal" owned by a handicapped person. They don't have to blind (not talking about a guide dog here), a "companion" animal.

One of our landords who routinely charged a deposit for dogs insisted that the man pay the deposit for the dog. A handicap advocacy group came in and sued him for I don't know how much. The judgment against him was $90,000 and since liability insurance here will not cover such things as discrimination and other things of that type, this landlord had no help from the liability insurance. For him the judgment was out of pocket.

Another one did something similar with a handicapped tenant that wanted to install a hot tub in the apartment. The landlord said no. Same scenario.

And there are other legal issues. Also it doesn't take forever to bring a lawsuit against you here as it does some other countries. In Panama if you want to sue, might as well forget it. It will cost you more than it is worth. Not here.

Juries here are known for granting ridiculous judgments if they think someone has deep pockets. Well I don't know if that's the reason but that's how I interpret it.

I don't want to discourage you because rentals can be very good income but I think it is important that you understand before you do it. However, I have a very knowledgeable and experienced family member who just made an offer on a small repo in our area that he plans to rent. He fully knows the risks. But he decided to buy at least one of these houses in foreclosure. You can't avoid all risk.

Of course since you are from Europe, having the bulk of your assets in another country makes it very difficult for anyone to get at them. So you have that advantage.

I hope this will explain some things and be of help.
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Roberto
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Username: Admin

Post Number: 1678
Registered: 12-2004
Posted on Thursday, May 22, 2008 - 1:53 am:   Edit PostPrint Post

> Robert good stuff - what kind of rental period are you talking about - on Miami rentals?

Sean, the figures I've seen are on yearly rentals. I kind of suspected what Mike said. That the only way -these days- to achieve such high return is on prime properties on excellent locations and by short term rentals. Arial's remark should be stressed. This is litigation nation and if there is money to be made, you are on a list... The situation here remains delicate with the downtown condo market being a complete, serious mess. And last information I got from a meeting with city officials (miami beach) last night is that foreclosure fraud is rampant, almost epidemic. But I didn't get quite right what the fraud/scams were about.
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Francoise Lerusse
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Username: Franleru

Post Number: 4
Registered: 1-2008
Posted on Thursday, May 22, 2008 - 3:17 am:   Edit PostPrint Post

About the insurances
Mike, insurances are very expensive for houses on the beach, but in a condo you pay less. If you buy a condo, you charge less but you have paid less, so cannot you get the same ROI ?

Another point : maybe the high end properties will never be at good prices because the owners don’t need to sell.

Thank you Roberto for your point about the frauds. The condos and foreclosures are a risky business but maybe you can make good deals if you find serious realtors and a good lawyer.

Thank you Arial for your remarks, it is important to know and keep it in mind.
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WTMendoza.com
Advanced Member
Username: Welcometomendoza

Post Number: 255
Registered: 7-2007


Posted on Thursday, May 22, 2008 - 6:26 am:   Edit PostPrint Post

Roberto - here is just one example:

http://www.youtube.com/watch?v=QYiYlc3W-F0
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WTMendoza.com
Advanced Member
Username: Welcometomendoza

Post Number: 256
Registered: 7-2007


Posted on Thursday, May 22, 2008 - 6:29 am:   Edit PostPrint Post

another example:

http://www.youtube.com/watch?v=MPwm6HbQd4g&NR=1
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 495
Registered: 5-2005


Posted on Thursday, May 22, 2008 - 10:52 am:   Edit PostPrint Post

Francoise,

You have to plug everything in on a detailed spreadsheet accounting for ALL the expenses as I mentioned. I don't know enough about what the insurance rates are. In some articles I read it said the average cost to insure a property in Florida was about $1,600 per year but I'm sure that it's more in areas close to the ocean.

I believe they took the Statewide average and I'm sure it's much higher in Miami. Also, I was shocked as it said the prices has doubled in the past 4 years. So things like that you have to take into consideration when you do your planning. A definite expense that has the potential to increase 25% or more each of the years you own the property.

Yes, everyone makes good points about the liability mess in the USA. It's one of the reasons so far I've stayed out of it. I still think if you set it up right there could be a business there.

The thing about rentals at least in Buenos Aires is your expenses are VERY predictable. Even with this mess with oil and gas prices going up tremendously...here in Argentina the government has subsidized to an extent utility companies so the monthly expenses are insanely cheap. Electricity, gas, water, telephone are all dirt cheap. You have your monthly condo fees which has gone up a bit but not too high. You have your ABL bill, your annual asset tax, maid/laundry. Everything is pretty predictable.

In the USA in Miami you can have huge flucutations with insurance rates, worrying about hurricanes, liability, big swings with electricity/gas prices, etc. Then also add in property taxes in Florida are high as well.

Each city has it's advantages and disadvantages as an investment. You have to look at all your motivations for buying and your time frame and go from there. You have to look at each and every one of these expenses. On your spreadsheet you must account for it all.


As far as the fraud risk in foreclosures.....really your best friend in ANY deal is going to be a solid lawyer. In any deal that I do no matter where in the world I am.....it always pays to have a GREAT lawyer.

It's sad to see some of these people getting scammed but on the other side of the coin you have to blame them as well. In many cases not only did they make a serious error not reading what they were signing when they bought their house and they didn't understand the payment terms or the loan, etc. They only want to blame their realtor, the bank, the mortgage company or the government. They are blaming everyone but themselves.

Not only that but it seems they never learned their lesson. You figure that someone makes a monumental mistake like that once and it will never happen again. But in many cases they are signing another document on their home without understanding it or not getting a lawyer to review the document. There needs to be some personal responsibility that comes into play.

Never sign a legal document without understanding what you are signing.
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Roberto
Board Administrator
Username: Admin

Post Number: 1689
Registered: 12-2004
Posted on Thursday, May 22, 2008 - 3:59 pm:   Edit PostPrint Post

Sean, thanks. That is horrible.
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Francoise Lerusse
New member
Username: Franleru

Post Number: 5
Registered: 1-2008
Posted on Friday, May 23, 2008 - 3:30 pm:   Edit PostPrint Post

Mike,

Thank you for your input about the fluctuations of the expenses in Miami. Regarding this point, Buenos Aires seems exceptional because of the government’s politics. In any other country you have to face to fluctuations.

On the other side, the real estate prices in Buenos Aires are not the ones of 2001. After 7 years of appreciation, what will happen ? It seems to me a bit late to invest there.

Lima as you were saying may be a fine place. As a matter of fact, Peru is improving a lot. I had a look on apartmentslima’s prices and on real estate offers and it seems quite interesting. Let’s see how the rentals will develop. There are also the questions of the security, of the development of tourism in Lima ( ?) and also the dynamism of the real estate market in the case you want to resell your properties.

I am wondering where you can get the better profit: in places where the market is falling like the USA and some European countries. Maybe there will be a 20-30% fall. In Buenos Aires it was much more. Or in « arising » countries in South America, e.g. Peru.

Roberto, maybe the name of the thread should become « Where to invest now ? » ;-)
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Roberto
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Username: Admin

Post Number: 1692
Registered: 12-2004
Posted on Friday, May 23, 2008 - 5:25 pm:   Edit PostPrint Post

Francoise, Peru has been upgraded by Moody's and its growth seems to be much firmer -on stronger footing- than the one Argentina had due to devaluing its currency. I am only hearing good things about Peru.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 498
Registered: 5-2005


Posted on Friday, May 23, 2008 - 6:22 pm:   Edit PostPrint Post

Francoise,

Yes, property prices have risen drastically here the past few years. I can't say yes or no if you should invest here. I think you have to look at all your motivations for buying and also at your exit strategy. I am still buying here but I'm only buying smaller properties in new buildings as the occupancy rates are higher (I'm talking personally for myself). The shift has certainly changed from a short-term standpoint and more people now are looking for rentals that have more "hotel like amenities" like 24/7 security, pools, gyms, saunas, etc.

For that reason for myself and most of my clients I'm buying in high end new buildings in great areas. They are easier to rent out and more closely resemble a hotel which I've always thought was the best target market in any major city. Honestly I don't think the capital appreciation will be as strong as the last few years rate of appreciation.

Yes, Peru has potential and I think property prices will appreciate there much faster now in the future. That's why it's the next market I'm looking to personally buy a few flats in Lima. The prices are almost half of Buenos Aires and the rental potential is good. There isn't much competition there for high end apartments as that market isn't started yet but it wasn't in Buenos Aires when I started back in 2002 either.

I just sold the franchise so they are getting started now but the owner just bought 10 units. I'm looking to buy there as well. As Roberto mentioned, Moody's just upgraded Peru and the growth prospects are strong.

Again, Francoise.....I think you must look at all your personal motivations of buying as no message board can answer those types of personal questions. Also, look at your exit stategy and your time horizon for the investment. Argentina is NOT a good place for "flipping" or for those that want to enter and exit in a very short amount of time. Why? The costs are so high here. On the buy side you have real estate fees of 3%-4% + iva, legal fees and closing costs of up to 2.5%, now all non-residents don't get any stamp tax exemption on their first properties so that's another 2.5% (or 1.25% if the seller splits it ---which they often do NOT), you have money transfer fees of 2% or more. Then on the sales side you have realtors fees again, you have a transfer tax of 1.5%, a partial legal fee for closing costs, and as a non-resident you must get an AFIP permit to sell which accountants will charge you for.

So needless to say while you can still make money on a short amount of time..it's not ideal. Add up all those fes above and you have to first clear all those fees to break even.... Most investors in Argentina have more of a longer term investment strategy.

As far as the USA....I still think it's too early to buy there. LOTS of problems still on the horizon there and more foreclosures coming. There is only so long the government and banks can hold off the foreclosures there. I'd say closer to the end of the year or early 2009 if you are not buying to live in and it's JUST an investment. I plan to pick up a few properties there but not until end of the year or early 2009 at the earliest. Buying now is still like trying to catch a falling knife.

As far as where to invest....I think YOU have to determine that on your own based on all the factors that are important to you (some of which I mentioned). What may make sense for one person won't for another.

Good luck.
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Francoise Lerusse
New member
Username: Franleru

Post Number: 6
Registered: 1-2008
Posted on Monday, May 26, 2008 - 11:32 am:   Edit PostPrint Post

Thank you Mike, your advises help me a lot. Really great to have you on this forum!
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Post-it
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Username: Postit

Post Number: 23
Registered: 2-2008
Posted on Wednesday, May 28, 2008 - 12:59 pm:   Edit PostPrint Post

Very interesting and informative thread. Just one comment: Mike is of course right to point out that utilities are 'insanely cheap' in BA. And the intention is of course to keep it that way, but I'm convinced that sooner rather than later this will not work anymore.

Energy prices will continue to pose huge problems on a global scale (the world has not yet absorbed all consequences of oil at USD 130...) and particularly in Argentina. Kirchner gambled a few years ago on low international prices for energy, but instead of going down they have increased big time since then. This not only costs billions of dollars in subsidies, but the result is also:
- less investments than needed
- no incentives for energy efficiency
- no or less development of alternative resources

These are fundamental local inefficiencies that if not corrected will only get worse over time (+ the times of oil at less than USD 100/barrel will not return soon, if ever).

I know that low utility prices are important for Kirchnerism, but it will be impossible to sustain in the longer run. Higher prices will again boost inflation, but the current situation where power cuts limit production, is even worse:

http://buscador.lanacion.com.ar/Nota.asp?nota_id=1016346&high=gas

On the other hand, even if prices double in Argentina, utilities still look cheap to foreigners, just slightly less insane...

(Message edited by admin on May 28, 2008)
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WTMendoza.com
Advanced Member
Username: Welcometomendoza

Post Number: 260
Registered: 7-2007


Posted on Wednesday, May 28, 2008 - 1:25 pm:   Edit PostPrint Post

i'm going to step timidily out on a ledge and predict that the super spike in oil, that many say is still yet to come, has happened for the time being, and although it could surge a bit higher, I just can't see how it can sustain even at the worldwide absorbtion that has ocurred already.

It doesn't take much to alter market prices, especially if there is a fairly worldwide sentiment around it, by the everyday joe.

Now on the Argentine utilities question, yeah that sure is an issue, eh? Backed in a corner she is....
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Post-it
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Username: Postit

Post Number: 24
Registered: 2-2008
Posted on Monday, June 09, 2008 - 9:39 am:   Edit PostPrint Post

WTM,
Whether we have reached peak oil or not, I don't think that the world has absorbed higher oil prices yet. The adjustment from USD 20 to 80-100 (>300% in 6-7 years!) has been relatively smooth, thanks to a variety of reasons (lower energy dependency, positive macro economics, increase in low cost production thanks to Asia etc). This was already a minor miracle.

But the next spike from USD 80-100 to 120-130 (in less than half a year...) has certainly not gone through the system yet. Inflation will continue to increase, trade balances will alter, billions will be invested in infrastructure, exchange rates will adjust, margins and share prices will suffer etc etc

Many countries/regions will have serious problems to adjust, only a few will benefit (tremendously); most of this still has to materialise.

And all this because of underinvestement in the past, though less severe as in Argentina...
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WTMendoza.com
Advanced Member
Username: Welcometomendoza

Post Number: 262
Registered: 7-2007


Posted on Thursday, June 12, 2008 - 7:09 am:   Edit PostPrint Post

Hi Post it, that's my point, we have not even absorbed $140 oil, yet there is chaos already throughout the world and dramatic social strife caused by the semi - aborbtion that is already happening. I am not even close to an expert on this topic, juts a contrarian, and a realist, and so my first instinct when I see a chart like this, and hear the daily news news abiyt how it affects people worldwide, some very dramatically, that we are due for some alleviation to give things time to catch up. I am not against the higher oil price concept in general, it will cause the world to accelrate their plans to act accordingly like they should have years ago.

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