Ecuador Real Estate Reality Offers Real Realty Deal


Yesterday our friend Clayton Black, builder of the premier real estate development in this province, visited with an Englishman. This gentleman was interested in buying one of Clayton’s houses ($93,000) in Otavalo. As we enjoyed a “cuppa tea” and visited I could see he loved the realty but was really worried about loss of property due to Ecuador’s constitutional reform. So I shared my thoughts on reality.

First, we talked about the reform here. Ecuador’s new President Rafael Correa asked Congress to approve a referendum that could lead to amendments of Ecuador’s constitution. The referendum would be to decide whether to form a national assembly that would consider constitutional reforms.

The request was voted on in Congress and the motion was passed in the 100-seat Congress by 57-1. 42 opponents to the constitutional reform walked out before the vote. The referendum is set to be held April 15, 2007. If this is passed, then voters will be asked later this year to select 130 delegates to a Constituent Assembly. That assembly will then write amendments to the Constitution that would go before voters to be ratified. Changes in this constitution could then cause new congressional or presidential elections be held.

This constitutional reform is likely to make a lot of people nervous throughout the process, especially since Correa has buddied up to Venezuela’s Hugo Chavez. So many people say “hey, this reform is bad”!

Yet this process has enormous potential for good. There are a lot of very poor people here and a few very rich. This is not good. Perhaps some change will help. Yet people hate change and worry about what it will be.

My view is that it is highly unlikely that individual land rights will be affected. The reality is that Ecuador’s base of wealth is and has always been individual land ownership. It seems unlikely that the constitutional assembly would disturb this. My guess is it is even less likely that the public would vote for change that would reduce land ownership rights. If this thinking is correct, this year offers special opportunity!

Now let’s be really realistic about realty.

I asked this Englishman how afraid he really was of losing $93,000. Then I asked him to look at the real risk in buying a similar three bedroom house in England. A similar house would cost him between $400,000 and a million dollars. The risk of losing $93,000 in value when the overheated English real estate market dips seems greater than the chances of losing $93,000 in Ecuador because a house is taken due to constitutional change.

Prices are way overblown in England. Centuries of tradition suggest that the chances of a realty correction in England are great and real. Centuries of tradition support individual land ownership in Ecuador as a core of the nation’s wealth. Chances of this changing are slim. This is real realty thinking!

Yet people have fear and fear creates opportunity for those who are realistic and look at the facts of history!

Then we looked at the benefits of living here versus England. Start with $1.40 a gallon gas, lovely weather, sweet people, no capital gains tax on real estate sales, very inexpensive but good medical and dental help, ridiculously low property tax, almost no tort liability, inexpensive cost of living, low crime and better food. In England the cost of living is so high people can barely move!

Here is the really interesting realty part for us as investors. People hate change. So this constitutional reform is likely to keep the already low prices down for most of this year. This will create great real estate opportunity. If I am right.

I’ll be the first to say I could be wrong, but after all these years of watching, I am willing to make the bet. This is why I have taken profits in my emerging market equity portfolio and am plowing the money into Ecuador real estate instead.

Buying land in the US, England, Ecuador or wherever has some risk. In uncertain situations such as this, investors who are willing to take what is perceived as a risk are paid a risk premium. At times when few this premium creates exceptional value.

This was my argument on February 12, 2007 when Ecuador bonds were selling at huge discounts due to uncertainty of whether interest would be paid February 15. The interest was paid and bond values soared. I believe this is the case with Ecuador real estate here now. Uncertainty over constitutional reform will keep real estate prices low or even push some prices down. When the reform is through, real estate is likely to be safe and as the uncertainty ends prices will soar.

I am upgrading the photos at our website with the help of our friend, Todd Smith. Todd, a professional photographer, came down and has taken hundreds of pictures to help share in visual form the excitement of our courses in Ecuador. We began sharing these shots and look at a few pictures of our last group here inspecting Clayton & Elena Black’s new real estate project, Tierra Firme. You can learn how Todd can help you by contacting him at todd@toddsmithphotography.com

We began our inspection at the model home. There will be several similar models offered. A 1,500 square foot house like this will cost about $79,000 to build, with land you won’t spend much over $100,000. How much of a risk is that? What can you get for this price in the US? The views from almost every lot are exceptional, both of Mt. Cotacachi and Mt. Imbabura which each rise majestically over 16,000 feet.

Here is one view from the land.

Then we all jumped in pickups and toured the land about 60 acres in all.

Clayton is showing where the club house will be.

Our pumpkin patch hound, Ma, wants us to buy a lot just for the smells!

Here’s another shot of views from Clayton’s Tierre Firme project.

If you want to learn the real facts about opportunity in Ecuador, join Merri, Steve and me this March 16 to 21 for out International Business and Investing Made EZ course plus our real estate tour in Cotacachi, Ecuador! Details are at http://www.garyascott.com/catalog/IBEZec/ and http://www.garyascott.com/catalog/andeanext/

Until then, may all your deals be realistic and real!

Gary

We have created EcuadorLiving.com, an Ecuador internet research service. We are continually sniffing out what’s going on in Ecuador and reporting to our subscribers. Shortly we will be offering this service to the public at large for $119. This is a chance to enroll now at our old price of $49 and save $70. Go to http://www.garyascott.com/catalog/ecrep/

Here are several more shots Todd took for us.

Typical Ecuador Farm House.

Countryside near Tierre Firme project

Filled with happy sweet people!

Join us in the Land of the Sun!


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