Work Abroad but earn in USD

Saturday, April 02, 2005

Argentina Investment Ideas: Update

I had several great comments over the past few days and I'm going to be addressing them in a series of new posts. The first will address the old investment ideas post from back in May 2004. I was considering two ideas for investment in Argentina: taxis and apartment rentals. Two readers, both Argentine citizens, pointed out some key issues with these ideas. Their comments are below:

Taxi Comments From Readers

"I have a lot of friends who got caught on the "taxis money-making-machine deal" and I can refer to them if you like. Things look very good from outside, but it is when you get into the business that you start to see the reality. Just check other "trustable" sources and you will find the other "truth". I would recommend that expats stay away from the Taxi business."

"I will not delve into the details of why the taxi business (did anyone mention mafia?) ... may fail to meet expectations, but just think how the heck one of the richest countries in the Planet -resources wise- had not one, but 2 hyperinflations in the last 15 years and declared bankruptcy in 2001. That will give you a jump start on what means to be an argentine.

My Research Into Taxis

Like any good investor, I started by getting a second opinion on the taxi business. I spoke to several people "in the know" and they told me the same thing that this reader did... the taxi business is controlled by the mafia and it is not a clean business -- certainly something I would not want to involve myself with. And so I didn't. I decided not to pursue the taxi business any further.

Apartment Rental Comments From Readers

Many decades ago, while under Peron's protectionist laws, we were paid coins ANNUALLY by one of our tenants. Yes, that is correct. Our annual proceeds from our investments were less than a dollar a year. It took us 27 years to get rid of that and other tenants. More recently, we still have to face headaches in this dpt., with our 2003/4/5 tenants. In addition, we lost properties by the handful in litigations with mortgage owners. Not to mention the suits we had to face in the business world and lasted not 10, not 20, not 30 but 40 years and that outlived both my grandfather and my father.

My Research Into Apartment Rentals

After researching apartment rentals, a lot of people told me the same thing that this reader did... it is very difficult to evict deadbeat tenants. I spoke to one person who owned apartments who told me that he didn't rely on the courts at all to deal with deadbeat tenants... he relied on off-duty cops with billy clubs.

Again, this is not something I wanted to get involved with. I can just see the headlines now... "Yanqui Businessman Puts Family Out On The Streets". I fully realize that Argentina does not respect the rights of foreign investors. If a court won't evict an Argentine family when an apartment is locally owned, they're sure not going to evict them when the apartment is owned by a foreigner.


I'm still not giving up on the idea of apartment rentals, however. Since the beginning, I was always looking into renting to other foreigners on vacation or on company assignments, not locals. As an American, I realize where my expertise lies -- marketing products and services to fellow Americans, a culture I know and understand.

With my own Internet company, I do most of my selling to American businesses. If we have interest from a local firm, my Argentine manager takes care of the sales call. I don't even speak enough Spanish to have a conversation above the 4th grade level, so I'm certainly not going to try and sell products and services in the local market on my own.

I was in Honduras about 8 months ago and signed-up for a snorkel/kayak trip on the island of Roatan. Once I arrived, I found that the business was owned by Americans and the guide was a New Zealander. As I've traveled it seems like I always run into travel businesses that are owned by Americans or other expats. They're doing what they know -- selling services to people like them, people they understand.

I would recommend the same to other expatriates who are looking for business ideas or investments. Stick with what you know. As a foreigner, you're going to have difficulty selling to a local market that you don't understand.



Anonymous Anonymous said...

About Appartment Rentals:
It depends on with who your work.
Let me give you an example: if you are going to deal in the business with part-time rentals for short periods and you have contacts in the market, then there is nothing to worry about!
If you are going to deal in the market with Serious Real Estate Company, then no problem will be found out.
Because you search for a good candidate. The Real Estate Co. does this for you,and this is what you pay for to them.
Also because they will request a guaranty of a 3rd party and this means that this 3rd party will need to show a title of a property etc.
So: of course if you handle this being a foreigner by your own by simply publishing an ad in the newspaper... probably you will loose whatever.
Just be aware of contacting the right person in the right business.
For all the things you have mentioned in your blog, I am sure your friends in Argentina have a lot of information to help you out with this.
It is not that you cannot do anything in Argentina. You can do everything, just being aware of with whom, where, how, and what.
Good luck!
Hopefully I will be back in Argentina very soon!

Katherine, from New Zealand

4/04/2005 09:25:00 AM  
Blogger said...

I think the comment about the properties investment is far too pesimistic. There are good deals, bad deals, etc. Investing in property for business use might something you want to check as opose to letting to regular tenants.

4/04/2005 05:10:00 PM  
Blogger said...

Funny that you also thought of apartment rentals. People tell me I should write a book about my life. Here is my story.

I was a Partner in a successful company, made the big bucks, lived in the huge house, drove the BMW, etc. One day I asked myself, "what would you honestly do if a doctor told you that you only had 3 years to live"? The answer was I'd travel and see the world.

I made a list out of all the places in the world I always wanted to visit but never did because I was too busy working. I made a list of cities/countries all over the world. I followed through on my plan. I acted like I only had 3 years to live. Argentina was the first place on my list. I fell in love with Buenos Aires. I felt like coming back, quitting my job, selling my house and cars and moving here. The only problem was that I was about 25 years from retirement and I couldn't speak Spanish.

I gave up the dream but I kept traveling around the world. I would travel to Switzerland come home to work for a few weeks. Travel to Peru. Come back and work a few weeks. I hit almost every country in South America. Traveled around Cuba, Mexico and much of Europe. Still, Buenos Aires was always in my heart.

I came to Buenos Aires almost every month. I was staying in expensive hotels. I was spending a fortune. I stayed in apartment rentals and I had a horrible experience or got cheated almost every time. One time I sat in this old chair and it fell apart. I hit my head on the wall. The company had the nerve to take u$s 200 of my deposit. I told them in any other country not only would I get my deposit back but they probably would have gotten sued! Ha, ha.

Anyway, I kept coming down so I decided it was cheaper to lease an apartment vs. stay in a hotel. I went out and found a posh luxury apartment. The problem here is that you can't pay month to month for the most part without a "guarantor" that will basically put up their property in case you stop paying. Good luck finding that. I had to prepay a 2 year lease with cash. Plus security deposit. I'm talking like u$s 25,000!!!

Before signing the lease, I asked the owner if I could sublet. He was hesitant. I never thought about making money or a business out of it. I just wanted to cover my expenses of the u$s 1,000 per month. I figured I could rent it out to friends that came down. I started a website – I was amazed with what I found out. People were really looking for a luxury apartment that was larger than a hotel room and more comfortable with more privacy. I not only was making my monthly rent but I was making money. I was amazed. I furnished it nicely, got a US style expensive mattress and it was in a luxurious building. I charged about $100 a night and it was still about $200/night cheaper than the Four Seasons.

I quickly went out and subletted 3 more apartments. All in a nice section of Recoleta. My apartments stayed full year-round and I built up a reputation of nice apartments, honest service and not ripping people off.

I never seriously thought about moving down here. Still, I put together a business plan for a few years and told myself maybe someday 10 years from now, I’ll quit my job and move to Argentina.

Basically, after about 47 international trips and 3 years. My “doctor told me I have 3 years to live” scenario played out. 3 years had passed and I traveled the globe. Buenos Aires was still in my heart. Without really thinking about it, I quit my job where I was making big bucks, had 4 months of vacation a year (yeah….I know I know), sold my house, sold my cars and decided to move to Argentina.

I knew that I had a solid business plan. I moved to Argentina and I started looking for property to purchase. I had already researched the laws here. I knew that I had a business model that would work. I built up a network and paid for surveys from foreigners that purchased here. A funny thing. Almost all of them made mistakes or were cheated, lied to or worse. I paid about $150 per survey and I did dozens and dozens. I was spending a few thousand dollars but I figured that it would be worth it if I didn’t get cheated.

I have been posting publicly on various message boards since 2002. So far, I have been dead on target on (1) tourism, (2) real estate and (3) the exchange rate. I continue to see real estate and especially apartments rentals to be a viable business. I see real estate rates here exploding in the next several years. There is more foreign interest. Also, keep in mind the locals can’t trust the banks so the one stable investment for them is real estate. All the wealthy people I know here in Argentina have one thing in common. They ALL own multiple properties and they all are renting them out.

Those that are thinking about investing in Argentina might do well to think about real estate. I believe that conventional type mortgages will come into the picture in the future. When that happens, real estate here will be like anywhere else in the world. Property rates will explode. Also, keep in mind once you establish rentals in your property, you are turning your real estate into a business. I have apartments that I charge about u$s 130/night and they stay booked about 25+ days a month and they are booked solid 3 or 4 months in advance. Why? I put about u$s 25,000 into each one in high end furniture, mattresses, bedding, high-speed Internet, USA phone lines, cell phones, lighting from Italy, etc. The locals can’t and won’t do that. The majority of my clients aren’t looking for the cheapo apartment. The backpacker type isn’t my clientele. I figured out a long time ago that there are hundreds and hundreds of cheap apartments with furniture that has been passed down from family to family. However, there were no real luxury property rentals.

I went after the people that usually stay in the Four Seasons or Alvear Palace, the Loi Suites Recoleta, etc.

Moving to Argentina was the best decision of my life. I’m working much much harder here. In the USA I never worked more than an 8 hour day. Here I routinely work 12-14 hours a day but I find it rewarding. The biggest challenge is that the business environment here is difficult. Many people/companies are totally unethical and you have to know and understand the laws or you will get taken advantage of.

Those thinking about real estate should consider it. It’s a safe play here if you do your homework. Good luck.


5/12/2005 10:20:00 PM  
Blogger Cristian said...

I also believe in real estate investments especially in fluctuating markets where normal mortgages are not common.

As the postings are more than two years old, is it still the case that normal mortgages do not exist?

I am also interested in buying one apartment in Buenos Aires, upgrading and renting it out. Still, how did the prices go over the last two years?

Thanks in advance, Cristian

5/15/2007 11:03:00 AM  

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