of this page:
Buying Property in
Costs and Taxes
Property for Rental Income
How do I avoid paying
Anyone in the world can freely buy property
in Ecuador. You can arrive in the country, and
buy real estate the very same day using only
your passport as identification. This is not
just a policy of the current administration
that can easily be changed – the Ecuador constitution
guarantees the right to buy and hold property
for everyone, citizens and foreigners alike.
In fact, once you are in the country with a
valid visa, the Ecuador Constitution guarantees
that you have the same legal rights as Ecuadorian
citizens, with the exception that you can not
Additionally, there are no restrictions on
owning beachfront property as there is in some
other countries. There has never been a case
of the government "seizing" foreign owned real
estate (and to be fair, even in other countries
(i.e. Mexico) the problems have mostly been
the result of buying property that the seller
did not have the right to sell – a proper title
search, or buying title insurance, mitigates
The one caveat in Ecuador is to be wary when
buying property that is "Derechos y Acciones"
– basically, the rights granted to heirs when
a property owner dies and leaves the
property to his or her estate. The risk
is that unknown heirs could potentially file
a claim on the property in the future (see
While title insurance
is available in Ecuador, it is not always necessary.
Just don't let a seller
rush you into any transaction without having
a lawyer do a proper title search.
Many people are understandably wary of international
real estate investments. Laws vary from
country to country, even within one region (i.e.,
South America), and you need to understand the
local market and analyze the properties that
are for sale. Ecuador real estate is very
secure from a legal standpoint - the property
ownership laws are very well written, understandable,
and constitutionally guaranteed. If you
are thinking of living overseas, Ecuador is
a perfect country for International Living.
In theory financing is available in Ecuador,
but in practice it is difficult to arrange.
The Ecuador constitution guarantees free access
to the banking and credit market to locals and
foreigners alike, just as it guarantees the
free right to own and hold property.
However, there is no "credit rating" system
in Ecuador, and the default rate is high - so
it's hard to qualify for a loan without a local
employment history or a co-signer. A good
credit rating in the US does not mean
anything here. Interest
rates are typically 12% or more, and 30% to
50% down payment is standard.
You can sometimes get the sellers to provide
financing, but they will typically require at
least 50% down payment. Another option is with
new construction - the builder/architect will
often provide financing, especially for "pre-construction"
Your best bet, however, is to get financing
from your home country - family, friends, or
even tapping a HELOC will often be a better
choice than trying to get local financing.
Costs and Taxes
The buyer pays almost all costs in a real
estate transaction in Ecuador. The seller
needs to ensure that the property taxes, utility
bills, and any building maintenance fees are
current, and may owe capital gains tax on the
sale, but the buyer pays for everything else.
The costs typically include:
fees for drafting the contract and performing
the title search
• Notary fees
of documents and translator at signing (this
is a legal requirement if the buyer doesn't
• Transfer and registration
• Real estate agents commission
While it is hard to generalize, as every
transaction is different - typically the agents
commission is 5% of the agreed up price, and
all other costs (legal fees and taxes) are typically between $750 and
$1,500 for a regular condo or house purchase.
Annual property taxes are based on the municipals
"Assessed Value" - not on the actual purchase
amount. The assessed value can be anywhere
from 5% to 50% of the real value of the property.
Depending on where you live, the property tax
may be up to 1% of the assessed value.
So, for example, if you purchase a property
for $100,000 and the assessed value is $30,000,
the maximum property tax would be $300 per year
- usually it's much less.
Property taxes are due on January first of
each year, and are not "past due" until December
31 - so you have a full year to pay the tax!
Property taxes are not pro-rated when a property
is sold - so if you buy a house on January 3rd,
the seller needs to pay the property tax for
the entire year.
Capital Gains tax is based on any increase
in the assessed value during the time that you
owned the property. So if you sell the
property in the above example, and the assessed
value has gone up from $30,000 to $35,000 you
will owe $1,250 (25% of the increase in the
assessment). It does not matter if you
actually made a gain of $100,000 on the property
- or if you even lost money on the investment
- you will pay a tax of 25% of the increase
in the assessed value (the tax due is reduced
on a sliding scale if you own the property for
more than 5 years.)
Buying Property for Rental Income
Is it a good idea to buy properties to rent
out? Absolutely! While there are
some homes and apartments that are rented on
a "long term" contract, the best strategy is
to rent furnished homes on a month to month
basis. Furnished houses and apartments
will usually rent for almost twice as much as
an unfurnished place. Tenants are typically
people who are coming to Ecuador for a few months
to study Spanish, on vacation or short work
contract, or people that want to rent a place
while they look for something to buy. While
you can get higher rents from high end beachfront
homes, you will also have more vacancies during
the off season. If you have a nice place
with good furnishings, it is likely you will
have very high demand in popular destinations
like Cuenca and Quito.
How do I avoid paying
We encourage foreigners to only pay "local
pricing" when buying property. How is this done?
While it is true that an initial quote from
a seller will probably be higher if they know
that the potential buyer is a foreigner, every
seller has his bottom line price and every property
has it's fair market value. We specialize in
finding out the sellers bottom line price (our
first contact with a property owner is usually
with a local "property scout" who gets all the
details on the property and finds out the "local
asking price" and we negotiate down from there)
and we use standard appraisal techniques to
estimate the fair market value.
Since we represent the buyers only, we have
no allegiance to the seller. We do not
take a commission from the seller and we will
not "mark up" the price of a property to give
a buyer the false sense of having negotiating
room - our mission is to find the absolute best
price possible for the buyer, and to advise
the buyer if that price is a good deal or not.
Following in the footsteps of Argentina,
Brazil, Mexico, and other Latin American countries,
the Ecuadorian currency collapsed in 1999. The
Ecuadorian President made an extremely bold,
unique, and politically unpopular move at the
time, adopting the US dollar as the official
currency of Ecuador in 2000.
This decision single-handedly saved the Ecuadorian
economy. Inflation fell from 96% in 1999 to
less than 1% in 2002, and has remained under
5% since then.
The dollarization has helped build a very
strong middle-class in Ecuador. The population
of most of the neighboring countries is either
very poor or very rich, with few people in the
middle. While much of the population of Ecuador
is still very poor (wages for the common laborer
average $250 per month), the percentage of homeless
people is among the lowest in South America.
Food is plentiful and affordable to all, and
overall standard of living is rising.
The strong middle-class has led to a housing
boom in the major cities. The number of higher
end apartment buildings under construction or
recently completed is astounding, and here in
Cuenca, well over 90% of these luxury condos are
Government relations with the US continue
to be cordial, despite some recent disagreements
about the ownership and management of oil reserves
in the northeastern jungle.
Major industries and exports are oil, mining,
textiles, metal work, chemical production, fishing,
lumber, bananas, coffee, cacao, rice, shrimp,
sugarcane, sheep, beef, pork, and dairy.
Many people write to us to ask about the
political situation in Ecuador. It is
true that Ecuador does have a history of ousting
the current president before his term is officially
up - but it has always followed a constitutionally
approved process, it has never been through
a coup or military takeover. The core of government
operations has been stable throughout.
In late 2006, the people of Ecuador elected
leftist Rafael Correa, a PhD economist. He
is a reformer who wants to make fundamental changes to Ecuador's
political society. The voters sent their leaders a clear
message by electing him: they've had enough.
A former university professor with a doctorate
in economics from the University of Illinois,
Correa may just be the man to put Ecuador on
the path to a sound economy for the future.
Correa gained voter approval to amend
some parts of the constitution in 2007, but no
changes to property ownership laws were considered
Ecuador's government publicly welcomes foreign
investment and offers a relatively open foreign-investment
regime. The constitution gives foreign investment
the same rights and treatment as national investment.
The country's most recent law governing foreign
investment, the Law on Promotion and Guarantee
of Investments of December 19th 1997 (Law 46,
Official Register 216), recognizes that Ecuador's
development requires the active participation
of both national and foreign investment (EIU
ViewsWire, New York: Dec 20, 2006)