The True Cost of Real Estate in Ecuador

The True Cost of Real Estate in Ecuador

The real estate values in Ecuador are amazing: $50,000 buys you a penthouse suite in a colonial mountain town, a condo on the beach or even a cabin in private nature preserve.

But as you know, if you pay high property taxes—the buying price is only part of the true cost of a piece real estate.

You also need to figure the costs of buying, selling and holding your dream home. Ecuador comes up trumps in this measure, too. In fact, I know of no other country where the taxes and fees associated with your property are less.

Here’s how it breaks down in Ecuador. Some fees can vary by municipality, so I’ve based my numbers on the coastal city of Manta. Regional differences, when they occur, are generally pretty small.

In Manta you will pay a purchase tax of 1.6% of the sale price. Legal fees average 1% of the sale price (although for lower priced units you might pay a flat fee of $1,500).

That’s a total of $2,300 for one of those $50,000 condos.

Property taxes are paid on the assessed (municipal) value of the property rather than the sales price (as in the U.S.) Again, in Manta, you’ll pay 0.015% of the property’s assessed value. In some municipalities, you can have an assessed value that’s far below the sales price, which reduces your annual taxes. In others, the assessed value can be nearer the sales price.

That’s an annual property tax bill of $7.50 or less on the $50,000 condo.

When you go to sell you’ll pay 0.5% in capital gains tax. If your $50,000 condo doubles in value to $100,000 and you sell…the tax man will only take $250.

The condo fees for my penthouse in the mountain town of Cotacachi are $60 per month. Considering condo fees on an equivalent condo in the U.S. could run to several hundreds of dollars every month, this represents a major saving.

Of course we want to buy our real estate at the lowest price possible; but transaction costs can be as important a factor for us when deciding where and what to buy.

In Ecuador, investors don’t need to worry about profits being eaten in taxes. If you want to live in Ecuador you want to make sure your costs of ownership are manageable. You’ll find they are.

In fact, there are Americans living in Ecuador who’ll tell you their holding costs plus living expenses equal the holding costs of a nice condo in the U.S. It’s almost like they are living for free…and if they sell at a profit they will legally cut the taxman but a tiny check.

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Editor’s Note: Ronan McMahon is the Executive Director of Pathfinder (International Living’s preferred real estate advertising partner), which focuses on opportunity for gains in strategic pockets around the world-before most folks have even heard of them. He writes for Pathfinder’s real estate investment service, the Real Estate Trend Alert.

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