Last week, I discussed what $250,000 to $1 million can get you on the Guatemalan property market. The discussion was lengthy, so I split off a separate part about the specifics of real estate in Guatemala.
If you’re interested in buying my place, feel free to contact me!
Guatemalan real estate has its unique characteristics compared to other places I’ve lived. Being a small country with limited areas that meet expat standards, the market is small, which pushes prices higher than those in the Midwest and other rural regions. Here are some things to consider before making an offer on a property:
1. Determining the True Value is Challenging
In contrast to markets like Ecuador, there isn’t a “gringo price” in Guatemala. However, property owners, who tend to be wealthy, often set high prices with the mindset of “if it sells at this price, fine; otherwise, I’ll wait.” It’s possible to negotiate 40-50% off the asking price. For instance, we bought our place at half the asking price because the seller had medical bills to pay and hadn’t visited the property for years.
2. Cash is Preferred
Paying cash can get you a significant discount. If you can’t pay upfront, you can negotiate directly with the seller for financing options. For our land development plots, we offer seller financing over 12 months to avoid the need for a mortgage.
3. Mortgages are Difficult and Costly
Interest rates are around 7.5% in dollars and 9% in the local currency, Quetzal, which is quite high. Foreigners will find it challenging to get a mortgage unless they have a Guatemalan income source or can prove a steady foreign income like a pension. Some banks require a 50% down payment on the property price.
4. Apartments are Attractive for About a Decade
While maintenance costs are high, they often don’t cover major repairs. After initial years of appreciation, the value plateaus and can decrease as the property ages and looks less attractive. Houses might be a safer investment as shared amenities in buildings can deteriorate if not properly maintained.
5. Maintenance Costs Can Be High
High-end buildings with amenities like pools and manicured gardens can have maintenance fees up to $400 a month, almost the cost of rent in more basic buildings. Read maintenance contracts carefully to ensure they include insurance.
6. Reselling Old Properties is Difficult
Buyers often prefer new properties, disliking older features like outdated kitchen countertops. The market leans towards new developments, leaving older properties less desirable and harder to sell.
7. Low Rental Yields for New Properties
A $250,000 property might only rent for $600 a month, yielding about 2.9%. While there is a rental market, few can pay above $700 a month. Better yields come from buying cheap, old properties and renovating them.
8. Underreporting Sale Prices is Common
To avoid high taxes, sellers and buyers often declare a much lower sale price. This can reduce capital gains and property taxes but may backfire if the property is reevaluated for taxes later.
9. Using a Company to Own Property
Setting up a company to own the property can help avoid capital gains tax. This costs around $2,000 plus $50 monthly for an accountant. As a foreigner, you can’t own 100% of the company, so a Guatemalan must hold at least one share.
10. Variable Property Measurements
Unlike standardized measurements in some countries, Guatemala includes any paved area like balconies and even garages in the square footage. Measurements can vary, so it’s essential to clarify whether areas like parking are included.
11. Building Flexibility Outside Antigua
In regions outside Antigua, which has strict building regulations due to its UNESCO status, you have much more freedom in constructing your house. In other areas, you often only need approval from the local homeowner’s association, if even that. This flexibility allows for custom designs but also means neighbors might build unsightly structures.
In summary, buying property in Guatemala comes with its own set of challenges and considerations. Understanding these can help you make a more informed decision.