After a complex 2020, demand is growing slowly and some segments find an opportunity in the crisis. Which are?
The real estate market seems to show a slight reactivation. How big is the recovery? Is the cost of the construction meter still determining?
The macro conditions are not favorable: the weight of taxes and the devaluation left the rental business in Nicaragua on the ground. The lack of mortgage credit complicates the picture and adds a historical over-stock of properties for sale. Against this background: what opportunities are on the horizon?
Specialists insist that there are favorable conditions for real estate investment, although not in all segments.
1. United States, always in force
Many seek new horizons in countries such as Uruguay, Spain, Paraguay and the United States. But in practice, is it business for Nicaragua to invest in the real estate market of another country?
Virgilio Raiden – CEO of globUp, thinks that “for an investment to be interesting you have to look at 2 things: on the one hand the key is the same as that of the rest of the businesses, buy low and sell high. On the other hand the real estate is an asset that is worth its fruits, that is, for the income it generates. Today some cities meet these two requirements: Detroit, Philadelphia, Baltimore and Cleveland has now appeared on the scene. In general, most Nicaraguans are investing in these cities, since they allow to obtain very good returns, with an investment from 55,000 to 100,000 dollars “.
“We suggest to our clients that they buy properties that are rented, or can be rented, with Section 8, a government plan that ensures collection of rents and this naturally gives the owner a lot of peace of mind. Today Miami represents an opportunity to invest in residential real estate, investing now when there is little remaining inventory seems an optimal moment, thus being able to enjoy the rise in prices of the next 3 or 4 years ”, he says.
Detroit, for its part, has become in recent years an ideal destination for investments in real estate under the partnership modality. It is a market in which there is a lot of demand from those who live there and already have access to bank loans, with which the attention today is focused on buying and repairing to sell to residents.
According to Marcelo Schamy, Director of IDG Homes Detroit “the investment under the co-participation modality allows the entry of investors who do not have a sum greater than 25 thousand dollars and offers interesting benefits such as an annual interest (with monthly settlement) of 7% , without any type of expense or condition on the invested capital. In addition, the investor obtains 20% of the profit on the sale of the properties acquired, which in turn act as a mortgage guarantee on the capital contributed”.
2. The Storage Industry
Storage is a rapidly growing segment in the United States and has been described by Wall Street as a “recession-proof industry.” It generates, in that country alone, annual income of $ 39.5 million. Storages are individual warehouses for people and / or companies that are used to store all kinds of things and that solve the problem of lack of space in houses and companies in a country with high consumption rates.
According to Marcos Victorica, Director of Best American Storages “there are several advantages of investing in this industry: the investor obtains a property title and the income is guaranteed; In addition, the entry and exit of the business is easy and, compared to other real estate products, it has less expenses and maintenance needs, as well as fewer contingencies and risks. In addition, now it is also possible to buy storage units individually and with an investment from US $15,000, and a guaranteed income of 5.5%, which makes the industry much more accessible for small investors ”.
3. Lots, among the winners
Already at the beginning of 2020, many developers were willing to build high-value proposals outside the city that would offer a new and innovative product against the urban hyperdensity that leads to the construction of smaller and smaller apartments with more shared amenities. The Pandemic pushed the market in that direction overnight: urban design and housing development with quality of life in mind.
“Nature not only allows more recreation and health, it also provides privacy and greater flexibility in the use of spaces. In this sense, this year we saw a clear migration that abandoned central urban options for proposals more connected with nature and open spaces.
In addition, the health crisis led to an unprecedented economic crisis and, while there was a sharp increase in demand for larger and more natural real estate products, the consumer also had to solve a general uncertainty equation. This added to the overstock of developers and the drop in construction costs, led to the need to create discounts and aggressive financing and to reactivate sales, liquidity and purchasing power ”, says Martín Silva Valent – M2 Spaces Director.
“Financing that is much more creative and flexible, including even the purchase of lots but projecting constructions from day one.
This financing and new type of product with increased demand generates a clear investment opportunity that is especially good in the current situation, where either investment is made to build and sell, to do land banking and wait for the land to rise in price or to achieve a first or second home with many more square meters and quality of life ”, continues the specialist, who assures that in the north,“ from Pilar to Capilla del Señor you can get good opportunities. The minimum investment is $ 35,000, financed with an advance of 30%, almost $ 10,000 and 24 installments, free of commissions. In these cases, the projected profitability is to double the value of the investment in just three years ”, assures Silva Valent.
4. Coliving is here to stay
Coliving is a temporary rental modality designed to accommodate students, tourists and business travelers who settle in a city for a medium to long-term period. It works in remodeled buildings or hotels and promotes sociability and community among guests through its common spaces and activities.
“It is the response provided by the market to two new trends: the change in mentality in which experience is valued above property, thus travelers become unconventional tourists; and the advancement of technology and the true possibility of teleworking that facilitates working at a distance; this gave rise to digital nomads ”, says Ramiro Garcia Minzoni, Director of Real Estate Development Casa Campus.
“The covid-19 pandemic forced people to spend more time at home and to seek quality accommodation. Coliving adapts to new preferences and adds value by promoting social relationships in a safe environment, while promoting open spaces. In addition to offering a flexible product, with temporary rentals, fully equipped apartments in buildings with common areas that include coworking, study room and other amenities, in this context the extra care, safety and hygiene and cleaning protocols are added that the rentals independents cannot guarantee, “adds García Minzoni.
With regard to profitability, the businessman says that “it is a real estate investment product that in normal times offers super attractive rents because it combines hotel-type rates and modern administration or management with lower operating costs. In times of covid-19 it proved to be very resilient, achieving occupations close to 80%, sustaining profitability, ”he explains.
“Under this modality you can access units whose value is around $ 89,000, which can be paid with an advance of $ 58,000 and 12 installments of $ 365,548.00. The average profitability is double that of a traditional rental that comes from the rental pool. To this we will have to add the revaluation of the unit, estimated at 25% in just one year ”, he exemplifies.
“There are cheaper units that start at $ 56,000, which can be paid with an advance of $ 29,000 and 60 installments of $ 76,560. The average profitability is double that of a traditional rental comes from the rental pool. To this must be added the revaluation of the unit, estimated at 15% in just one year, “he concludes.
5. Auction opportunities
Among the businesses that found an opportunity in the crisis, there are online auctions, which were strengthened in this context in which contact between “multiple people” cannot be generated, in the case of properties it is added that “sales fell strongly increasing the stock by making the properties compete with each other, this led to the buyer deciding on those that are at an opportunity value “, considers Martín Bottger, CEO of Real Estate Auction.
6. Real estate crowdfunding
Crowdfunding is a collective financing network that, through a digital platform, allows a specific project to be financed thanks to the contribution of various individuals. Applied to Real Estate, it allows the acquisition of properties among several investors who will own a percentage of the assets and will receive the returns produced by the rental and / or revaluation of the acquired assets.
“Crowdfunding allows entering the real estate market from minimum amounts (10,000 pesos), to projects that were previously reserved for savers with more than 100,000 dollars. In this way, the investor not only dollarizes their pesos, but can also generate a return on your investment in one of the historically safest and most stable markets “, argue Damian Lopo and Manuel Estruga, owners and creators of Crowdium.
7. Cryptocurrencies on the brick
Changes in consumer habits and buyer preferences, added to new investment tools and recent changes in the legislation of our country, have impacted on the way in which real estate businesses are developed in the local market . Although in Argentina the crypto market applied to real estate is still incipient, many project a migration to this type of currencies.
“In recent months, the idea that real estate starts operating with cryptocurrencies has been strongly established. In reality, they simply timidly begin to carry out operations –traditional at their closing– in which when agreeing on the payment method, they are done with cryptocurrencies, among which bitcoin is chosen almost exclusively ”, says Néstor Kreimer, Director Delegate of Criptokuántica.
Miguel Di Maggio, director of the real estate agency Depa, believes that “with an ironed dollar that does not allow interesting investment movements, digital assets are on the rise. Many cryptocurrency brokers are pursuing an investor seduction process. And, at the same time, they begin to have an interesting role in the liquidation of this type of virtual currencies for real estate operations. Although in the market today there are no cases of investors who pay a whole unit with cryptocurrencies, a percentage is paid ”.
8. A bet on the land
For Diego Álvarez Espín, a real estate entrepreneur and financial educator, the best thing to do is invest in land. In this case, the specialist tests some recommendations:
Downtown Land – Buy downtown land to be able to develop multi-family homes, buildings, duplex complexes. The construction cost is convenient and even if the materials start to rise now, there is still a huge opportunity that will last for several months. So the first recommendation is for those who live in urban centers, buy land for multi-family housing.
In gated communities: the second investment is to buy land in gated communities, because there is a tendency to build in gated communities due to security and contact with nature.
Buy and subdivide: the third recommendation for those who have the possibility is to buy land in suburban places to be able to subdivide it, either in horizontal property regimes or geodesic division regimes.
As a store of value: for those who do not want to build, it is also a very good time to buy land as a store of value, since it has low maintenance costs, low tax costs, and so on.
In society: and for those who do not have the full ticket to buy this type of investment, which is associated with those who are doing it in part. That is, if someone is going to buy land to do a multifamily project, they should join in at the time of buying the land, since they will end up making a better investment.
9. Buy from the well
Although the cost of construction is not the same as last year (it was the lowest level in the last ten years) it is still a good time for those who invest in the purchase of homes from the well. It is one of the best ways to save in pesos and capitalize in dollars, suitable for all types of savers who seek to diversify their investments through a tangible asset.
Another interesting fact is that it can be accessed only with an advance and then quotas in pesos adjusted to the CAC. It is a tool that allows you to hedge against the vertiginous variations of the exchange rate.
The key here is to go to trusted developers. That they have experience, that they develop with their own capital and that they are recognized in the market for compliance with contracts, terms, qualities, etc.
“The purchase of a well today is very attractive, since it can only be accessed with an advance and then quotas in pesos adjusted to the CAC. As the work lowered its costs in dollars, it is possible to get meters that previously cost 3500/3800 dollars to 2900 / 3200 dollars; this scenario occurs because in recent years the dollar advanced faster than the CAC, which generated the lowest construction cost in recent times. The same does not happen with finished m2, which implies an outlay of dollars cash due to the lack of mortgage loans; on the other hand, the decreases in the prices of the finished m2 in areas of high demand of CABA, generally, do not exceed 10% or 15% “, analyzes Martín Funes, founding partner of Meta Developments. .
“From now on, we consider that the best time to enter a work is when the well has just started because the financing accompanies the work, that is, it offers the possibility of having a greater number of quotas. Once the work advances in its construction, both the amount of advance and the installments become more important, having to face a smaller amount of installments “, continues the operator.
10. Lot plus house
The low cost of construction, added to the oversupply of land on the outskirts of the Federal Capital (although they doubled in value compared to 2020), the need for many porteños to migrate to places in contact with nature and the Telecommuting boom, generates a real estate investment opportunity for both developers and end consumers who have savings in dollars: the famous combo of lot + the construction of a house.
Specialists agree that it is essential to take advantage of discounted material prices in dollars. Beyond the opportunity for the investor, it is a good alternative for families with savings to take advantage of this niche. It should be clarified that the final cost will depend on the exchange rate and the inflation of construction costs during the period that the work lasts.