“Make your dream of having your own home come true”, “acquire the house of your dreams”. These two phrases are, in general, the most used by real estate agents to try to generate interest in potential clients in Ecuador. It is that in the imagination of many Ecuadorians, having their own house to live in is one of the main goals or objectives..
Josselyn Encalada, 33, is about to receive her home located in a private citadel on the coast. She affirms that she paid her down payment for two years and that the Bank of the Ecuadorian Institute of Social Security (Biess) has already approved the loan. Her house costs $72,000, but she made a down payment of $27,000, so the mortgage is $45,000 and has a fifteen-year term.
She indicates that having her own “home” was her dream since she was a child, since together with her mother she lived renting “all her life”. However, she admits that the process to acquire her home has not been easy and that it is a constant financial sacrifice.
“I assumed the expenses of the notarial papers and taxes so as not to lend more to the Biess, but I have canceled about $5,000. Also, according to the Biess table, I will end up paying more than $20,000 in interest on the mortgage loan, that is, the house will end up costing me more than $90,000. But I will have the peace of mind that no one can throw me out because it is something of my own“, it says.
The expenses commented by Josselyn plus the interests that are in the monthly installment of the loan (which in her case is close to $400) and aliquot payments, repairs or remodeling rethink the idea of whether buying a house to live in is really a good investment.
For the economic analyst Héctor Delgado, if the financial parameters are observed strictly and “being quite square”, the fact of acquiring a house to live may not be the most financially advisable.
“This is said because the money that a person would be paying or using to acquire that house could be used for some investment or a business that generates profitability, because in the end the house as such will not generate any flow, it will not generate money to come in, but rather is taking money because I have to pay taxes, aliquots and the loan“, it says.
Now, if it is not financially advisable to buy a house, is the option to continue renting? Yes, but some kind of advantage must be taken from it, adds Delgado. It recommends that while you are renting you have to take advantage of a credit or capital that you have.
“Because the person is paying the rent for years and in the end they do not keep anything. Although I am renting, I have to see the possibility of acquiring capital to invest and have a flow of money”, he points out.
Meanwhile, Daniel Adler, a financial expert, indicates that when someone acquires a house to live in, it becomes a liability, since the moment the property is inhabited, “it takes money out of our pocket.”
“In countries like the United States, people are not looking to buy but to rent, but in Latin America having your own home gives you a feeling of security. I am part of that segment (bought a house) and I am because I have additional capital to invest in assets. But we are aware that the house is a liability, although it adds to our personal wealth.“, Add.
Although Delgado points out that what moves Ecuadorians to buy a house is the personal and family aspiration to be calm and have “a home already paid for.” Which cannot be questioned.
The Biess plans to allocate 752.4 million for mortgage loans in Ecuador throughout this 2022, 26% more than in 2021. The increase is due to the need for homeownership that is observed in the local market.
Is capital gain a factor to consider?
According to Josselyn, buying a home is a good investment because of the added value. Some of his relatives have bought houses at relatively low prices and after living in them for several years, they sold them at a higher price than they bought it: “For me it is an investment.”
However, both Delgado and Adler affirm that the analysis of this topic is deeper and more complex, since projection, time and patience are needed.
“I project that the city will grow on this side and people will go to live there, buy cheaply and I have to wait a while to be able to sell at a higher price. We have to be clear that it is money that will not be received immediatelySlim says.
Meanwhile, Adler affirms that he is not “such a believer in surplus value”, since there are “few” cases in which a person buys a good and manages to triple its value. He indicates that the depreciation of the dollar must be taken into account.
“That is why a house ten years ago could cost $100,000 and now its value is $130,000. It’s not that the house went up in value, but that the dollar depreciated. If we compare the price of gold, silver or copper with the value of the property, we will see that the fluctuation of the value of the property is almost nil”, he points out.
Buy a house in cash
For experts, buying a house in cash is not recommended if the money used for the purchase was going to be used for investments or businesses. In addition, you do not have to decapitalize yourself to make this acquisition.
“If I have the money to buy cash and I’m not going to start a business, I’m not going to invest because it’s going very well, I could buy a house in cash,” adds Delgado.
Adler asserts that a person should always weigh all of their options before buying an asset for cash, because if we allocate “everything we have” how will we hold onto the asset later?
Acquire real estate for rent
The purchase of real estate to rent is a good option to generate cash flows for a person’s retirement, but it must be taken into account that there are advantages and disadvantages when entering this type of business.
Although there is a flow of money that comes in monthly, this will also depend on the relationship with the tenants so that they pay well, on time and keep the property in optimal condition. In addition, the owner of the property has expenses such as repairs and every time a tenant leaves, they must invest in improvements to the property so that it is quite attractive for a new tenant.
“The rental of goods is a good business as retirement insurance. If I am at an age where I am producing and generating income, it is time to invest in properties through credits and rent them. The amount received for the rent pays part or all of the credit installment. So, once the credit is paid, the flow of money that I receive monthly for the rent will be until I die.”, says Delgado. (I)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
