Last week, I discussed what $250,000 to $1 million could get you in the Guatemalan property market. It was a lengthy post, so I split it into two parts to cover the specifics of Guatemalan real estate.
If you’re interested in buying my place, feel free to reach out!
Guatemalan real estate differs a bit from other parts of the world I’ve lived in. Being a small country with limited areas that meet expat standards, the market is small, leading to higher prices than you’d find in the Midwest or other rural parts of the U.S. Here are some key points to consider before making an offer on a property:
1. Finding the true value of a property is challenging.
Unlike in markets like Ecuador, there’s no specific “expat price” that’s higher than the local market price. However, property owners in Guatemala are often wealthy and set high “if I get this price, I’ll sell” prices. Negotiations can sometimes bring the price down by as much as 40-50%. We managed to get a 50% discount because the seller had medical bills and hadn’t visited the property in years.
Realtors typically take a 5% commission but don’t do much beyond showing you the property. If you like a place, ask the realtor to connect you directly with the owner, mentioning that they referred you so they still get paid. This way, you can negotiate directly with the owner.
2. Cash is king.
Most property transactions are done in cash, which can get you a significant discount. If paying cash isn’t an option, you can negotiate terms directly with the seller, who might offer financing plans. For instance, our land development plots offer seller financing over 12 months, eliminating the need for a mortgage.
3. Mortgages are hard to obtain and pricey.
Mortgages can be in either dollars or the local currency, Quetzal. Interest rates are about 7.5% for dollars and 9% for Quetzals, which are quite high. As a foreigner, securing a mortgage is tough unless you have a local income source or proof of regular foreign income, like a pension. Some banks require a 50% down payment.
4. Apartments shine for the first decade.
Initially, apartment maintenance costs are high but don’t include a repair fund. If something like the elevator breaks, additional money is needed for repairs. Over time, buildings often start to look worn out as co-owners skip cosmetic repairs. Early buyers might see property value appreciation initially, but this often plateaus and begins to decline. Houses tend to be a safer bet, though common areas like gyms or gardens may also deteriorate if not maintained.
5. Maintenance costs can be significant.
In high-end buildings with amenities like pools and well-kept gardens, maintenance can cost as much as $400 a month, similar to rent in a more modest building. Even with cheap labor, high insurance costs due to the seismic activity in Guatemala City can add up. Read the maintenance contract carefully to ensure it covers insurance. Be prepared for extra maintenance costs if repairs are needed.
6. Reselling older properties is difficult.
Buyers prefer new properties. They aren’t keen on outdated kitchens or seeing the potential in older homes. The market favors new developments, leaving older ones behind. Areas haven’t yet seen rejuvenation efforts, so an older property may become unfashionable and hard to sell.
7. Rental yields are low for new properties.
For example, a $250,000 two-bedroom property might only rent for $600 a month, yielding just 2.9%. While there’s a substantial rental market, few can afford more than $700 a month, and that amount might get you a nice three-bedroom townhouse further from the center. However, fixing up an old property can yield good returns. I pay $500 for a three-bedroom condo, including maintenance, in a desirable area, but the owner likely bought it for under $50,000 over 15 years ago.
8. Declaring a lower sales price is common.
This tactic helps sellers minimize capital gains tax and buyers reduce property tax, calculated at 0.9% annually. Often, about 60% of the sales price is declared for new properties and as little as 10% for bare land. However, this could backfire if the council reevaluates the property, and declaring the real resale value later will result in higher taxes.
9. Creating a company to own the property can be advantageous.
This approach circumvents capital gains tax, as the company owns the place and you transfer shares when selling. Setting up a company costs about $2,000 plus around $50 monthly for an accountant to handle tax reports. As a foreigner, you can’t own 100% of the shares, so a Guatemalan shareholder will need to hold one share while you own 99. An accountant can fulfill this role for a small monthly fee.
10. Property measurements vary.
In some countries like France, measurements are standardized, but in Guatemala, square footage often includes paved areas like balconies, porches, and even garages. Some buildings exclude parking areas. For bare land, although titles use square meters, local terms like varas, manzanas, and brazadas are common. Take your own measurements or clarify what’s included, especially parking areas.
11. Outside Antigua, you have more freedom to build.
Antigua is a UNESCO World Heritage site with strict building regulations. Outside of it, you can build almost anything. In developments, you’ll need HOA approval, usually straightforward unless your building obstructs views. In our village, no permits were needed, allowing us to build freely, with only approval from the protected areas bureau due to the lake shore location. This flexibility means your neighbor might construct an unattractive building, and there’s little you can do about it.