Real Estate in Latin America

Article and photo by Tim Leffel
The Resourceful Traveler Columnist for Transitions Abroad
9/2009

Houses in authentic and colorful Mexican towns such as Guanajuato can be bought for a fraction of the price of what you will spend at home.

Many a traveler has wondered, as they found a city they liked, “What would it be like to live here?” Many people who spend their days working remotely anyway start thinking, “Why don’t I just work from here and cut my expenses by half?”

In most of Latin America, residents coming from the U.S., Canada, or Europe can live on a fraction of what they spend to get by at home. This fact hasn’t been lost on retirees, who have flocked to Mexico in the past decade. Some half a million U.S. citizens are living there full time or close to it. Other sunny spots have seen a huge influx of retirees, including Costa Rica, Belize, and the highlands of Panama.

More intrepid adventurers have ventured further south to Ecuador, Argentina, Uruguay, or Brazil to take advantage of great buys on real estate and cheap salaries for domestic help.

In recent years these retirees have been joined by younger and younger expatriates who are taking advantage of a relatively new phenomenon: the ability to do their job from anywhere with a high-speed Internet connection. These younger residents don’t receive the same incentives that retirees do, but with the cost of living a fraction of what it is in more developed countries, they still come out way ahead.

Here are some of the factors to consider and resources to check into when thinking about a move to Latin America, either on a sabbatical or as a full-time residency.

Retiree Incentives Starting at Age 45

The country of Costa Rica came up with the brilliant idea a few decades ago: offer incentives to rich (by their standards) gringos and watch the foreign investment flow in like a river. It worked so well that they finally stopped offering the incentives and didn’t even grandfather in the people already living there. But the construction crews didn’t miss a beat. The momentum kept going. So some parts of the Pacific Coast of Costa Rica are now more expensive than parts of the U.S., fed by a property bubble caused by “crazy California money” flowing down south.

Many other Latin American countries still offer great incentives to expatriates though. There is usually an age requirement—though this can be as young as 45 in some cases—and residents must prove an ongoing income over a certain amount per month. This amount is high by local standards but low by first-world standards: $1,000 a month in Panama and Nicaragua, $1,500 in Honduras, and $2,000 in Belize for instance. Nicaragua will actually waive the age requirement if your income is high enough and Honduras will waive it if you invest $50,000 in a business that employs locals.

If you can meet the official requirements—including a letter from police stating that you haven’t been convicted of a felony—you get a whole basket of goodies. These may include a fast-track residency permit, duty-free importation of household goods, reduced or eliminated property taxes, a tax waiver on construction materials, cheaper medical care, and even discounts on travel and entertainment.

These vary from country to country. Panama has long had the most generous program, with a 20-year property tax exemption that can be passed on in a sale and a whole range of discounts: 50% discounts off movie and event tickets; 25% off domestic airline tickets; 50% off at hotels; 15% off hospital bills; 20% off already-inexpensive doctor’s consultations; and 50% off closing costs for home loans. Ecuador’s retirees get 50% off all domestic airline tickets as well as international tickets on certain specified carriers.

Other countries may not offer anything; you’ll have to go beyond a quick Google search to find out what’s on offer and to get the fine print. Others—such as Mexico and Guatemala—may put special requirements on the purchase of waterfront real estate. See the resources section at the end of the article for places to turn. 

A Lower Cost of Living in Latin America

Many people move to somewhere in Latin America because they like the pace and culture, but the reduced cost of living is a major factor as well. Even if you are too young or your income is too low to receive incentives, you can easily cut your monthly cost of living down 30 to 60% without making a lot of sacrifices. I can’t keep track of all the articles I’ve read about a couple living on less than $1,000 a month in Ecuador or Nicaragua, having a great time. Bump it up to $1,500 or $2,000 a month and they’ve got a maid, a gardener, and one or two restaurant meals a day.

The cities of wealthier countries such as Argentina, Chile, or Mexico can cost more than those in less developed countries, but you will still spend less overall for a better quality of life. Living in vibrant Buenos Aires doesn’t cost what it does to live in vibrant New York or London: the cost is more in line with living in Des Moines or Tulsa—but with a lower tax bill. 

Even in nearby Mexico, only those who live in fancy beachfront penthouses or in gated American-style housing communities are paying anything close to what they would at home. Away from the coastal tourist zones, finding a nice two-bedroom apartment for less than $500 a month is not difficult, and usually that’s with utilities included. A typical locals’ lunch will be two or three dollars. In most areas you can easily do without a car.

I can’t tell you how much a month you will spend yourself anywhere though: it depends on your expected level of comfort, whether you like the countryside or a city, and how much living space you need. Even just saying, “I’ll live like a local” doesn’t mean much. Dirt floors and an outhouse…or a walled-off mansion with two armed guards? You’ll see plenty of both from Mexico down through the tip of Patagonia.

In general, if incentives aren’t a factor but costs of living are, here are the countries that are cheapest overall, while still being attractive places to live. In Central America it would be Guatemala, Ecuador, Nicaragua, and Honduras (apart from popular Roatan), while Panama is less expensive as a renter than an owner. Prices there have risen rapidly in the past decade. If you just heard about buying in Costa Rica, you’re about 20 years too late. An ocean view building lot that would cost a half million dollars in Costa Rica, for example, would be more like $50,000 in Nicaragua. There’s a similar differential in home and condo prices. Subtract a zero when you cross the border.

For South America, the least expensive countries with a sizable expatriate population are Ecuador, Peru, Uruguay, and Argentina—in that order. Brazil’s currency fluctuates like a small boat on a stormy ocean, so it’s a tough one to classify. Chile gets more expensive each year, but has the best infrastructure.

Remember that Panama and Ecuador use the U.S. dollar as their currency, so you don’t have to worry about exchange rate changes in either of those. The Belize rate is pegged at a steady 2-to-1 exchange. Mexico’s rate can vary 30 or 40 percent from year to year. In many Latin American countries with their own currency, rents are usually listed in local pesos, but if you buy property it will be negotiated in dollars. 

Moving to Latin America For a Different Way of Life

Many move to Latin America for reasons besides just the financial savings. They like the relaxed atmosphere and living amidst a culture that’s less obsessed with work and consumerism. There’s less government intrusion, fewer lawyers making things difficult for everyone, and—despite what the popular media would have you believe—lower crime rates.

The atmosphere differs from country to country of course, which is why it makes sense to follow the advice you hear so often: live in a place for a while before you buy real estate there. Places that seem perfect on vacation may not be perfect for an entire year.

Weather itself is a key factor for many expatriates. Panama City and parts of Mexico can feel like the inside of a sauna several months a year. It can get downright cold and damp though in some mountain regions. Some prefer the “eternal spring” climate you get in the highland mountain areas of Panama or Ecuador, venturing down an hour or two to the beach a couple times a year. Others want a permanent beach life, with sun and sand every day of the year. Still others want to be in ski country of Argentina or Chile. If two of you are moving together, make sure you discuss these preferences when picking out potential destinations. 

Tim Leffel owns a second home in Mexico and is the author of classic several books, including Traveler’s Tool Kit: Mexico and Central America. He also writes about real estate for Luxury Latin America.