There are 9 replies in this Thread which was already clicked 207 times. The last Post () by UK Man.

House hunting... again!

    I have been keeping my radar on an investment property here in Soho since the tourism is back to pre-pandemics level. We have visited one property, excellent location overlooking Plaza Serrano, old building with architectural features that was renovated 30 years ago. The unit is a duplex with a balcony on calle Serrano. Nice size -- 60 sq.m (ground floor) + 30 sq.m (upstairs) - i.e. 645 sq.ft + 320 sq.ft.

    It is in bad shape because the owners have relocated abroad a few years ago and it has been rented since then, with minimal maintenance. There are loose cables and the wooden floor in the living room is worn out. The kitchen needs some serious updating since it is pretty basic.


    I had spotted it a while a go and it caught my eye because it has excellent architectural features, unlike modern aseptic apartments that are being built by the tons right now (we have work sites going on Mon to Sat 7.30 AM to 6 PM all around us!)

    However... it has been on the market with 3 agencies for over 1 year, and now I can see why.


    The monthly expenses are 71,000 ARS (seventy-one thousands pesos) or 188 USD at the current exchange rate.

    The gas has been cut off and they are working to restore it (additional expenses...) and in the meanwhile they had to replace the gas oven with an electric one. It also means that the only tiro balanceado (gas heater) is not working and that the AC units that provide cold air only needs to be replaced.


    Now, there are a few red flags but the property is really unique and we're seriously thinking to do an offer anyway, albeit much lower than the asking price.


    Issue #1 - The expenses are huge because there is an encargado on staff 6 days a week, full time. Which is ridiculous because our building has the same number of units (12) and we do fine with a guy that cleans twice a week. It makes no sense to have a person working there 8 hours a day. the real estate agent said that if they change the arrangement, the expenses will reduce to half. We have the expenses sheet and this is true, but I wonder it hasn't been done yet... Firing an encargado smells like a sure lawsuit, so more money!

    When we asked about expenses, they said 35,000 ARS, but when we asked for the statement, they came out at 71,000 ARS,.


    Issue #2 - The gas is cut off. This is pretty common in older building due to compliance. The real estate agent said that we can put all electric appliances (stove, oven, heating). I am personally a fan of this because teaching to foreigners to turn on the gas oven and the gas heater was complicate. Pushing a button to turn on an electric appliance is easy. Plus... safety! However, gas is much cheaper than electricity in Argentina.

    When we first went to the real estate agency, I asked if the utilities worked because I saw an excavation in the street. They assured me everything was okay, but when we visited the unit on the next day they were replacing the stove+oven with an electric one...


    Issue #3 - The building rules do not allow "visitantes" and I suppose this means no AirBnb or short term rentals, which are those leading to higher revenues that could make this investment viable with 188 USD of expenses per month. The real estate agent said that short term rentals wear off the furniture much sooner and they are not that lucrative... WHAT? He also added that half the units are rented to long term tourists.


    I am crossed about this and we have been discussing this place so much, that one second we would like to go for it and the next we think we are crazy. My approach is: if it doesn't look lucrative, make it lucrative. We can't tweak the expenses nor utilities, but we can negotiate the purchasing price. We should consider it for longer term rentals (monthly and not daily), which leads to lower revenues. The real estate agent said that the owners want to sell it (I can see why) and they will do for a "reasonable offer". This real estate agent is also a developer and estimate 15k USD of renovation works to bring the place to the top and rent it for its fullest potential (1000 USD/month in net revenue from rental). However, given how good he is with numbers, we are estimating twice as much of expenses (old building = many surprises, plus new furniture!)

    My questions for you are:
    1) How doable it is to remove this encargado and bring in someone coming twice a week? It would save us a lot.

    2) What do you think about the fact that we can't do daily rentals and we could do monthly? Should we go for short rental and hope our higher target clientele won't be noticed?


    Any advice welcome!

    Quote from serafina

    My questions for you are:
    1) How doable it is to remove this encargado and bring in someone coming twice a week? It would save us a lot.

    2) What do you think about the fact that we can't do daily rentals and we could do monthly? Should we go for short rental and hope our higher target clientele won't be noticed?


    Any advice welcome!

    My wife deals with all the business side of things regarding the apartment in BA so I'm sod all use to you I'm afraid. I always remember meeting the caretaker and wondered why they had one considering the expense. She said it was impossible to get rid of him.

    The lawyer guy that rents the apartment is a family friend and told the missus last week he'd like to buy it off her. She's not too keen on selling it though. She asked me what my thoughts on it were and I told her to do what she wants. I think I've only slept there about 5 nights in total over the 20 odd years.

    I appreciate your post, UK Man . Unfortunately the "encargados" is a powerful union and they are as pervasive as the Mafia in NY in the '30s. We were discussing today about our current apartment and the one we are interested into with an architect neighbor. Even in our building, the encargado comes to clean 6 hours a day, twice a week (previously 3 times a week) but we pay his social contributions like he worked 18 hours. It is the minimum threshold, anyway.

    I am still not understanding how it is possible to give so many protection to workers on the paper and end up getting the whole country poorer and poorer. File under: Argentina's mysteries.

    Quote from serafina

    I appreciate your post, UK Man . Unfortunately the "encargados" is a powerful union and they are as pervasive as the Mafia in NY in the '30s. We were discussing today about our current apartment and the one we are interested into with an architect neighbor. Even in our building, the encargado comes to clean 6 hours a day, twice a week (previously 3 times a week) but we pay his social contributions like he worked 18 hours. It is the minimum threshold, anyway.

    I am still not understanding how it is possible to give so many protection to workers on the paper and end up getting the whole country poorer and poorer. File under: Argentina's mysteries.

    You'll never win that one serafina

    Besides, it's taking your focus away from the project of renovation, for which you will need a trustworthy architect and a lot of money.

    I agree, so we are doing our math considering that 200 USD/month are gone and we have to accept it. If we consider the high monthly expenses, the limited rental options (no AirBnb, at least on paper) and the amount of renovation that would go into it to bring it to its maximum potential, we'd have to offer 20-25% less than the asking price.


    Even if in the US this would be not unusual for a place that has been sitting on the market for years and it is listed by multiple agents, I am afraid an Argentinian seller won't reason with their calculator in hand but by gut feeling.


    We will sit down with the realtor and explain why the number we can offer is that low. He has been listing this property for over a year, and he also has it up for rental. It is currently rented to a Venezuelan Rappi delivery guy, so I guess the owners are barely keeping up with the expenses. Now, if they really want to get rid of that property and retire, they should reconsider their asking price.


    For the right price, it could still be a deal.

    Quote from serafina

    I appreciate your post, UK Man . Unfortunately the "encargados" is a powerful union and they are as pervasive as the Mafia in NY in the '30s. We were discussing today about our current apartment and the one we are interested into with an architect neighbor. Even in our building, the encargado comes to clean 6 hours a day, twice a week (previously 3 times a week) but we pay his social contributions like he worked 18 hours. It is the minimum threshold, anyway.

    I am still not understanding how it is possible to give so many protection to workers on the paper and end up getting the whole country poorer and poorer. File under: Argentina's mysteries.

    Yes I couldn't believe it when the missus told me the builing had a caretaker. WTF for I asked and she said that's how things are done here. :rolleyes:

    Thankfully, the family friend renting ours pays all the expenses otherwise I'd tell her to get rid of it.

    Besides the monthly utilities plus the $200 for your encargado (who I agree has to be considered a fixed expense), then you’ll need to figure a pretty accurate estimate of renovation and furnishings and divide that total by the number of months (60? 120?) you estimate you’ll need to break even on your upfront costs.


    Once you’ve compared your average monthly costs to your anticipated income from longer-term rentals, you will know what kind of offer you are able to make. If the realtor wants to make the sale, he will make the case to the owners, to help them understand they are asking too much. If they don’t see the light, you’ll know to walk away from the table.