This interview was originally for a newsletter published by Domenick Buonamici of EcuadorRealEstate.org. Domenick’s questions are italicized.
This week I asked 8 juicy questions to a property developer on the Northern Ecuadorian Coast, Larry Pioli, hoping he’d spill the dirt (no pun intended) on Ecuador land banking, property developing and investing for all of us…
1Q. First off Larry, tell us about yourself and any services you offer the expat or foreigner in Ecuador (or any projects you have for sale)?
I have been an entrepreneur most of my life, have had many varied interests and investments throughtout the years. I am a gemologist and master goldsmith (my first career), and owned 4 custom jewelry stores. I built and operated a Dairy Queen, built and operated an executive suites business named Smart Suites, built and operated an industrial office/warehouse complex all the while investing in real estate, mainly residential homes. I got into real estate investing in the early ’80’s which evolved into developing residential and commercial sectors.
I have been developing larger specialized medical/professional office parks in Florida for the last 8 years and am currently developing a resort styled residential Pacific Coastal community here in Ecuador aptly named Vista Pacifica, www.vistapacificahomes.com on the most pristine piece of Ecuadorian coast. Vista Pacifica is being built to USA standards with each lot being large to Ecuadorian standards (from our smallest at 1/3 rd acre to our largest at 2.45 acres) with magnificent Pacific Ocean views.
We have been doing infrastructure development for only 1 year and have all of our roads cut and topped, electricity is to site, and we have 3 fresh water wells (one of the most important parts to any development is the availability and accessability of water) of which one is a deep drill to reach the aquifer that sits 60 meters below ground at 0 elevation.
Our guard house has recently been constructed along with our entry area and our first large water reservoir is finished. Our sales office and guest house will be built next along with 2 clients homes. Each and every home within Vista Pacifica is being custom built to exacting USA standards. We have a complete set of CC & R’s which is administered by our HOA.
Our entry gate is 600 meters to the Pacific Ocean at our beach area in Tasaste Ecuador, a small village right of the Ruta Del Sol highway. The beach is lovely and mostly deserted with only a few locals every now and then, and a new restaurant is being built there. We have a new hospital in Jama which sits 15 minutes to our south, the new highway is up to our entrance road, new electrical upgrades to the countries grid and new fiber optic cable that comes right by us.
I did massive amounts of research before deciding to invest in Ecuador while I was looking for a place to retire to as I saw that I would not be able to retire in the USA and live the lifestyle that I wanted. I began the research 4 years ago and developed a set of criteria that I considered important to my retirement destination. Some of the criteria consisted of….Cost of Living, Cost of Real Estate, Governmental regulations of Real Estate ownership for ex-pats, Government stability, Currency and or currency fluctuations, Culture, Weather, Ease of travel both in and out of country, Medical care, Medical insurance, Retirement or Pensianado programs, Visa requirements and the ease at which one could get one, Business climate and regulations, Infrastructure, GDP, Inflation, and one of the most important to me was…how was I treated and received as a foreigner since that could have a profound effect on my life.
I developed a list of countries (some I had lived in before, more on that below), and began the task of sourcing all this information. The list quickly came down to 3, and I visited each one and stayed for a time to see for myself. I scored each item on a scale of 1 to 10 on my list and Ecuador came out on top for me. I have since seen others do similar lists and was glad to see some of the research that I had done validated by others.
I lived in many parts of the world as a young man since my father was a career officer which included, Spain, Italy, Germany, Greece, Egypt, Turkey and Japan. I had a small export business in Turkey specializing in Merschaum pipes and puzzle rings.
3Q. What’s one thing you hate (or strongly dislike) about investing in Ecuador?
The worst thing I have found is the lack of financing and the interest rate that is charged. Basically there is no financing for the foreigner and if you could find some institution that would loan money the down payment would be high as in 35% to 45%, the term would be short as in 10 years or less and the interest rate would be high as in 16% to 19%.
Some of the beauracracy that one has to go through is troublesome sometimes, but investing in Ecuador has been pretty straight forward and having a good attorney or two is paramount to success I have found. I was surprised at some of the interest rates that were being paid by some firms and banks. I have found interest payable at 7% to 8% which is very good considering what is being paid by banks in the USA and other parts of the world. Of course there is a flip side to that which is the high interest rate charged on credit or loans as I mentioned. Ecuadorian banks never got involved in the global real estate spike and credit was not a big item as it was in many other parts of the world.
4Q. Where do you see as the best places to invest in Ecuador, or those places with the highest growth potential entering 2011 and why?
I think someone said it better than I ever could “Buy coastal property as they are not making anymore of it”. The part of the coast where Vista Pacifica sits is pristine and not heavily developed as some of the rest of Ecuador’s coastal and beach areas. The reason this coast stayed so pristine was its difficulty to get here which has drastically changed over the last couple of years with the new highway from Quito being almost complete (we become the closest beach area for Quito), the new bridge that linked Bahia de Caraquez and San Vicente (cuts the time down to just 2 minutes instead of having to wait in line for the car ferry which took from 45 minutes to 4 hours some days), and the airport that reopened in San Vicente (we expect an announcement of what airline will fly into it from Quito soon).
The best and highest growth potential for investment, in my opinion, is within a path of progress which our area certainly qualifies for. The coast is gorgeous and the views spectacular!
As our area attracts more natives and visitors alike the prices have started to rise as interest does, this is a basic rule in any real estate thought process…the earlier in, the more equity rise in an upcoming area. Now is the best time to make a move when it comes to investing in coastal real estate. We have seen rises just beginning to effect other property as owners become more cognisant of what is happening on our little piece of paradise on the coast. There is a shortage of rental property both short and long term and prices for what is here has risen steadily over the last two years, which is a very good indication of what is to come.
Make sure there is clear title, use a good attorney, if buying coastal property make sure of the availability of water and electricity. I find talking to many expats that these are thoughts that never enter their minds since where they come from those things are givens if buying into a development or town etc. Not so in foreign countries and Ecuador is no exception.
I know of two expats that bought land that have had problems…one was and still is a title issue which means, until the dispute with a neighboring property is resolved they cant do anything with it like build their house, and the other one can hook up to the electric but it sits up on a high ridge across other peoples property and he will have to have someone with high tension skills string wire, buy a transformer and a pole..and since its beach front property (and small), he has no place to get water except to go across the street and ask a property owner if he can drill a well. It’s very difficult and very expensive to drill a well in the sand.
I am not trying to scare anyone but you MUST know what you are getting into as a cheap piece of property could wind up costing you a lot more than you bargained for. If you do buy a piece of property that is not in a development make sure you fence it immediately…don’t wait and don’t let anyone tell you differently. Squatters rights are different here and you don’t need the headache. If you are not going to be here on your land, it is wise to hire someone to watch over it too.
I read different blogs and find that most of the angst comes from either false expectations or not doing enough research or asking the right questions before making a purchase decision. Ask as many questions as you can think of, don’t be shy about it, if whoever you are working with has nothing to hide they will be answered to your liking, if not, then don’t do it.
The one basic business principle that I have found especially true here is…not all professionals in their field are good and trustworthy, so you must interview better, ask for references (and check), get referrals from as many people as you can. There are no business regulation departments to complain to, very few professional regulation deparments and even less sanctions. You must also keep in mind you are dealing in a foreign country and the laws are going to be different than what you are used to, so take nothing for granted as you would where ever home might have been.
8Q. What’s one tip you can give someone who wants to build their own home (or development) in Ecuador?
Make sure whoever you hire or buy from has the experience necessary to do the job. You will find that almost anyone you ask will tell you they can build you a house, and I do mean ANYONE.
If buying into a development make sure they have fresh WATER on site, not off site that could be turned off by someone if a dispute arises, or not the community well that services the entire town and outlying areas that is shallow and by the river. Water is the most necessary component of life. We can live without electricity (generators or solar will work), but we can not fabricate water out of nothing.
If you buy a larger piece of property and want to develop, the most important thing is to have the best professional people on the job that you can hire, preferably those with good experience working with the size of development you wish to do.
Thanks Larry for the great, useful info from all of us.