I’ve been eyeing a lovely piece of land recently, and since I have some money to invest, I’m considering it. I already spent $100K on a beach access share in a 90-acre land development up north, including some road work and digging a well. So, I have $100K left, which is exactly the price of this parcel.
In Guatemala City, the best neighborhoods are in private condominiums, and this one is no exception. It’s on a green hill with many nice houses, about 6 miles from the historical center and 2 miles from busier parts of town with malls, supermarkets, bars, and restaurants. You don’t walk much in Guatemala City, similar to the US, so being 2 miles away from a supermarket is reasonable. Although, when I lived in the city center, I enjoyed having the supermarket just a block away. As a European, I’m not used to driving for basic necessities.
Now that I live in the jungle, I have a car, and the supermarket is 20 miles away, so it’s not a big deal. The land measures 18 meters by 45 meters, allowing for 5 parking spaces, maid and handyman quarters, and a house at the back with a beautiful view of the volcanoes and a nice garden. At night, you can see the city lights, which I love.
My neighbor to the left has a 12,000 sqft house he’s trying to sell for $1,500,000. I doubt he’ll get that much, but the property could be worth $1M. The land is relatively flat, which means fewer expensive earth movements. It’s already built on three sides, so no worries about neighbors blocking the view with tall buildings, and it also means free perimeter walls.
I really like this land, and my plan is to build a 300-400 sqm house (3,000-4,000 sqft), either for myself as a city pied-à-terre or to rent out and eventually sell for a profit. Construction costs are around $400/sqm, so building the house would cost about $160,000, or $200,000 to be safe. Adding the $100,000 for the land, the total investment would be $300,000. If done well with a practical architect, the house could sell for $450,000-$500,000, yielding a $150,000-$200,000 profit. Older houses in the same area with 350 sqm but half the land size are selling for $400,000. It would take a year to get the permit and another year to build, resulting in a $75K profit per year.
The Pros:
– It’s relatively cheap. In nearby developments, land costs $125-$150 per vara (roughly 70cmx70cm), but this one is $90. In the town center, 2 miles away, land costs $350-$500 per vara, four times more! This price gap is likely to narrow in my favor.
– It’s a safe neighborhood with a gate and security guards, so the land won’t be invaded if it sits empty for a while.
– The view is impressive, giving a countryside feel while being in the town center.
– The city is expanding, and this location is convenient, situated between three dynamic zones (zona viva, Vista Hermosa, and Pradera Concepción).
– Space is limited, and people are moving further from the center due to a lack of affordable housing.
– It’s an exclusive area where people want to live.
– Many new big houses have been built recently, indicating the area is picking up.
– I could potentially build two units or one unit on half the land and keep the other half.
The Cons:
– The road to get there is busy during office hours, with people commuting to the city. It’s already a 2×2 lane road, but it’s not enough, and expanding it is complicated due to the hilly terrain. This doesn’t affect me much as I don’t have a 9-5 job, but it’s a problem for others.
– Being high up means low water pressure, so a cistern and pump are needed for adequate shower pressure.
– Real estate in Guatemala is tricky; people prefer new houses over fixing old ones, so reselling might be difficult if I use or rent the house.
– Guatemala is in a seismic zone, and a big earthquake hasn’t occurred since the late 70s, so one might be due. Modern construction is quake-proof, but there’s still a risk. Expensive insurance or taking the risk are the options.
– There are no shops around; it’s purely residential.
– The climb to the area is tough on cars, consuming a lot of gas.
– Investing here would lock up most of my available cash, meaning I’d miss other investment opportunities and put a lot of eggs in the Guatemalan basket. I’d have to wait months, if not a year, before building, so the cash wouldn’t be productive in the meantime. It’s a long-term, illiquid investment.
What do you think? Should I buy it or invest elsewhere?