Cuenca Is The Top Income Market You’ve Probably Never Thought Of
If you’re interested in generating a dollar-based income from an overseas property investment, then Cuenca, Ecuador, deserves your serious consideration. This city may not come to mind as a top option for a rental investment. It has built its reputation as a top retirement choice. It’s that, too. However, Cuenca is also a market where you can earn decent or better net returns from rental cash flow. Further, that cash flow would be in U.S. dollars, meaning no currency exchange risk.
What’s more, in Cuenca you can earn as much renting long-term, unfurnished as you can renting short-term, furnished. This is very uncommon.
In most markets, furnished, short-term rentals are considered a necessary evil… the only way to get a good return. They also, though, require outfitting and furnishing and much more management. The hassle factor is far greater and includes having to babysit complaining short-term renters. When you find a market where you can get the same return from a no-hassle, unfurnished, long-term rental, you should pay attention. That’s the case in Cuenca right now.
Cuenca has been one of the world’s top retirement destinations for 10 years now. However, its property market is almost never talked about… even though it’s one of Latin America’s top and steadiest performers. Over the past 10 years, well-located properties in Cuenca have appreciated 10% to 12% per year.
A friend sold a property here recently for an impressive 125% gain. That translated to a return of 13.9% per year for the time he’d held the place. Cuenca was virtually unaffected by the Great Recession and U.S. property crash of 2008-2009. Expats have continued to migrate to the city in growing numbers, hoping to grab a great lifestyle on what’s left of their retirement funds and keeping the property market buoyant.
The rate of increase, however, seems to be cooling off. Ecuador Correspondent David Morrill reports that appreciation is running about 5% per year currently.
But there’s more to the real estate picture in this city than capital gains. Some North Americans relocating to Cuenca are buying places of their own, but the majority of new expats are more interested in renting. For their getting-a-feel-for-the-place phase, they prefer to stay in furnished, fully equipped, turn-key, short-term rentals, and it’s this market specifically that has blossomed over the past three or four years.
A two-bedroom, two-bathroom condo convenient to El Centro that sells for US$75,000 would rent for about US$750 per month, fully equipped. After expenses (property taxes, which are almost negligible; utilities, which are also low because you need neither heat nor air conditioning in this city; and condo fees of, say, US$100 per month), this place could net better than 8% per year. You’re not going to get rich off 8% per year, but it’s a solid return… and, in this market, reliable.
That same US$75,000 condo would rent for about US$500 per month on an unfurnished long-term contract. You (the owner) would still pay the taxes, but the renter would pay for furniture, the HOA fees, and utilities, leaving you, again, with a better-than-8%-per-year return… without the hassle of managing a short-term rental.
The rest of the very good news here is that it’s possible in this city to buy a well-located and very rentable apartment for less than US$100,000. Further, a place that you might buy for rental income would also likely be comfortable for personal use.
You could invest in a property today, then rent it long term and unfurnished until you’re ready for your own retirement. This would be a relatively hassle-free way to store value in the market and earn a decent return while counting down to the day you’d be able to move in yourself.