My First Real Estate Purchase in Punta del Este, Uruguay

My First Real Estate Purchase in Punta del Este, Uruguay

I explained a little in the Real Estate Buying Process about my experience buying real estate in South America.  I'll include part of the same information here in case you didn't read it.

I am no stranger to purchasing real estate in South America.  In fact, I own one of the largest property management companies in South America and I purchased more residential real estate in Buenos Aires, Argentina the past several years than any single individual in the world.  I took several years to research the market in Buenos Aires before I started purchasing and it paid off tremendously for both myself and all my clients that I purchased real estate for. 

I performed the same due diligence before making my first purchase in Punta del Este, Uruguay.   I first flew to Punta del Este in 2004 to look at both apartments and homes that were for sale.  I was amazed with how beautiful the city was.  The city was incredibly clean and the properties were beautiful.  The lawns were perfectly manicured.   I was pleasantly surprised to see such wonderful properties.  If Buenos Aires is the Paris of South America, Punta is its Saint Tropez.  It is one of the world's most exclusive resort towns.

I came away from my first tour of Punta del Este impressed.  I looked at many properties in various neighborhoods.  I visited both in the high season (end of December to end of February) and in the low season.  I was surprised to see just how empty the city was during the off season.  The rental rates are insanely high during the peak season.  In fact, many owners are able to NET about 5% - 6% on their total investment just renting out their properties during that peak season 2 months per year.  

I was always amazed how tremendously expensive it was to vacation here, even by American/European standards.  That doesn't seem to bother the exclusive holidaymakers that come here during the high season.  In fact, everyone that I knew seemed almost to be proud to be paying so much to vacation here.  I talked to friends that would starve and "eat rice" for an entire year just to be able to splurge and vacation here in the summer months. 

I remember thinking what a shame such a beautiful city didn't get more tourism year-round and I proclaimed Punta del Este "the most underutilized city in South  America".   I kept returning to this beautiful city and each time I noticed more and more growth.   In fact, my first trip in 2004 I almost made an offer on a plot of land in the neighborhood of La Barra and I was amazed that not too long after that it has all been developed and the prices have skyrocketed in value.   I knew my initial instinct to purchase was correct. 

Typically, wealthy Argentines own the majority of the real estate in Punta del Este.  Something I noticed was the demographics of the tourism was changing.  There were less and less Argentines coming and more and more foreigners.  In fact, over 50 visiting cruise ships (including the 3,000-berth Queen Mary II) will have visited Punta del Este in 2006. 

I noticed that more and more foreigners were purchasing real estate here, which I consider a very positive sign.  Americans, British, Brazillians, Chileans, Europeans and Mexicans are all increasing their real estate portfolios here.  I watched this growth and decided to finally purchase.

As I mentioned before, I visited Punta del Este several times and each time I would look at real estate.  I looked at both land, apartments and houses.   There were advantages and disadvantages to each type of purchase.  For example, on raw land I could build my dream house exactly how I wanted it.  I noticed that there are many properties but many owners built very cheap properties using low quality materials in the flooring, bathrooms and kitchens.    I knew that there were advantages to simply buying land and building my own house on it.  The disadvantage was the tremendous amount of time that it would take building it.  

I live in Buenos Aires and I have built houses here and I know how long things take, cost overages and the tremendous amount of energy it takes to oversee the people building from scratch.  I have also done renovations and although less time consuming than building from the ground up, it's still quite a bit of work.

Each time I would come to Punta del Este I would build up relationships with local realtors.  Some were good but many were bad.  I noticed, just like in Buenos Aires, there are a lot of people in the real estate industry that have no clue what they are doing.  They want to make 3% simply for opening the door of the property they are showing you.  Luckily, I did end up meeting a good and honest realtor that showed me several properties over the past several years.  I explained in the very beginning that I was not in a hurry to buy and that I would research the market before I purchased as I always do no matter where in the world I am buying.  

In Buenos Aires I researched a good two years before I started buying.  I did the same thing in Punta del Este.  In both places, property prices went up during my "research phase" but it's always better to understand the market you are buying in before making such a big investment.  I'm not a multi-millionaire with money to burn.  Purchases in Punta del Este are in cash, just as they are in Buenos Aires so this is a major investment for most people to put 100% cash down at the time of the purchase.

I decided that for me the best type of property would be something that was already built.  I knew that almost definitely I would have to do renovations on the property but I was willing to do that with the help of trusted architects I was already working with in Buenos Aires.   I knew I could retain them to fly to Punta del Este and take care of renovating a house for me.

I'm a big location, location, location buyer.  There are several growing areas of Punta del Este but the area I liked the most was La Barra.  The trend seems to be concentrated growth going North along the Coast.  La Barra has a lot of activity in the summer months and has upscale beaches, dining and nightlife options, galleries and modeling agencies.  This was the area that I wanted to be in.  

I preferred an ocean view but was willing to give it up as long as I had good access to beaches in a 4 block radius and walking distance to good spots.   I also preferred something quiet with some greenery and mature trees around. I was willing to give up the ocean view if I also had a good size lot where I could build a swimming pool in the back yard.

I ended up seeing a 2 year old house that was nice in a nice part of La Barra that was quiet and close to the beach.  As most of the places I had seen, the owner didn't spend much money on the finish out of the flooring, kitchen, bathrooms or the furniture.   Like many houses, the price included all the furniture but I knew that I would be replacing ALL of the furniture and totally renovating the house including adding in new floors, adding totaly new bathrooms and kitchen and adding a temperature controlled pool.

The motivation for each person to buy is different so that would change what type of property you would purchase and how you would furnish and renovate the property.  If it's only an investment to rent out than it might not make sense to do expensive renovations or customize the property how you will use it.   I happen to live in Buenos Aires (which is only a 50 minute trip by plane) so I plan to use the house for long weekends to get away from the city.      I also plan to rent it out throughout the year when I'm not using it.  

For me, I knew that I couldn't have cheap furniture, bad decor, bad lighting, ugly bathrooms and kitchen.  I knew that I would want to renovate almost any place I puchased.   The house that I liked had 3 bedrooms, 2 full bathrooms, a small kitchen, a terrace and a BBQ pit with a very good sized back yard that got good sun most of the day.  I already could imagine the renovations I would do.

I put an offer on the property with my realtor and the offer was immediately accepted later that night.  I had flown in town to look at several properties but this is the one I knew that would work for me.  It helped that my realtor was also the listing agent on the property so communication was very quick and easy.   I put down the 10% required to make the offer and retained an Escribano and requested to expediate the closing if possible.  The closing was scheduled for two weeks later which I was really happy about.