Buying versus Renting a Home in Ecuador

Buying and renting a home in Ecuador both have their pros and cons.

Buying con: it's difficult to sell your home fast

Except when you give a considerable discount, it will be pretty difficult to sell your home. There are at least three reasons for this: 1) there is a large supply of homes in Ecuador, 2) there is not much money available among Ecuadorians to buy homes, and 3) the market is not transparant.

There are stories of expats who had to wait for year until they were able to sell their home for a fair price.

To mitigate the risk of not being able to sell your home fast, you may consider buying an apartment in a popular beach cities like Manta and Salinas. These markets are much more liquid.

Buying con: you may encounter the wrong neighbours

The problem in this case is that Ecuador is a so-called 'live and let live' society. If you get noisy neigbors (a loud family of maybe even a nightclub), there won't be much that you can do about the nuisance they cause. If you rent a property, you can relatively easy decide to relocate to another place. When you have bought a property, this will be more complicated.

Buying con: low direct en indirect returns

The direct returns are the rental income if you rent out (a part of) you property. These returns are low in Ecuador. A $100,000 house can usually be rented out for $400 per month or $4,800 per year. That's a direct return of 4.8%. In North America and Europe, investors usually want to see a direct return of at least 10% per year. The indirect returns consist of the increase in value of a property. There are regional differences, but in the last couple of years, the indirect returns in most markets was negative or slightly positive.

Renting pro: renting a home is relatively cheap compared to buying home

A home with a value of $100,000 will typically cost $400 per month to rent. In many other countries, you will probably have to pay at least $800 per month to rent a $100,000 home.

Buying pro: you are free to do what you want

This is a very obvious pro: if you own your home, you don't have to ask a landlord for permission to make modifications to your home. This is the main reason for buying a home in Ecuador as an expat.

Renting con: you are not free to do what you want

As a renter, you will need to ask your landlord to make modifications to your home. Whether you get this permission from your landlord depends on the landlord and your proposal. There are expats who have made succesful proposals and have even succeeded in convincing their landlords to share the costs.

Buying con: Ecuador's capital outflow tax

If you bring more than $1,350 outside Ecuador, you will need to pay the Ecuadorian capital outflow tax. This tax - an almost unique tax in the world - is sometimes also called the money exit tax. The current tax rate is 5% (2024).