Written By: Jacquelyn Annete García Vadnais
El Salvador is a country that has a fantastic culture and beautiful natural sights. This is what attracts many visitors to El Salvador each year to enjoy its natural beauty with very low prices. Due to the affordable cost of living in El Salvador, the market has attracted a great deal of attention from prospective real estate investors, particularly the capital city of San Salvador. If you are considering in investing in San Salvador, El Salvador, it is wise to review the information below:
History of El Salvador
El Salvador has a unique and diverse history. There is a great deal of debate about the first settlers of El Salvador. A variety of ancient civilizations reaching as far back as 2,000 B.C. appear to have laid claim to the region. However, in the eleventh century A.D., a nomadic community known as the Pipils migrated to El Salvador from what is now modern day Mexico. The Pipils drew on regional culture, and knowledge. They utilized both Aztec and Mayan calendars for agriculture and rituals. They also appear to have had the ability to perform complex mathematical computations in a 20 number system that incorporated “zero.” The kingdoms that existed cwhen the Pipils ruled were divided into Izako, Apanecatl, Apastepl, Ixtepetl, and Guacotecti regions. In 1524, Spanish forces invaded near what is known as modern day La Hachadura. The Pipils resisted the Spanish forces, but were ultimately defeated. In the late 1800s, an oligarchy known as “Las Catorce” controlled half of the land in El Salvador. Production was concentrated on coffee, sugar cane, and cotton in order to gain profits through exportation. In the 1970’s many years of dictatorship were followed by a Salvadorian Civil War from 1980 – 1992. Modern times have seen pockets of stabilization, as well a significant amount of political turmoil. However, modern day San Salvador, the capital of El Salvador, is known for its urban renewal, driven by a new change driven political party, with recent moves to redevelop the historic center. Furthermore, San Salvador is famous for its ideal location, accessibility to the ocean, and the mountains, and surrounded by green-tipped volcanoes. The city also boasts beautiful architecture, two mosques, many churches, two synagogues, various colorful markets, shopping centers, and cafes.
Top Reasons to Invest in Real Estate in San Salvador, El Salvador
Supportive Environment to Businesses
Aside from El Salvador’s political instability, the country does offer incentives for companies to invest there, which does mean that there will be international employees sent there for work. This tenant market is unique and exists in San Salvador where there are more secure fences around properties, particularly where expats reside. Investing in a property in San Salvador and targeting the expat tenant market could be a steady source of income while the conditions in the country are improving.
Low Cost of Living
The cost of living is quite low in San Salvador. For example, a four-person family can live there on approximately $2,100 USD per month without rent and a single person can live there for approximately $600 USD per month without rent.
Potential for Conditions to Improve
For a more seasoned investor that is a risk taker, El Salvador may be the place to consider investing. For investors that do not have enough capital for higher markets, El Salvador could be a place to buy up a bunch of real estate and then see how the political situation improves in the next few decades. It is quite common in Latin America, and in emerging markets in general, to take a wait and see approach to how the political conditions change because if they do, it will be possible to have bought extremely low and then rent to tenants in the long-term for significant returns.
Things to Consider Carefully When Investing in San Salvador, El Salvador
Political Instability
Ever since the Salvadorian Civil War, El Salvador has had a great deal of political instability that has led to widespread lawlessness and insecurity. The lack of rule of law also led to massacres, and gang violence.
Gang Violence
Mara Salvatrucha (MS -13) is one of the most dangerous gangs in El Salvador. There are some areas in El Salvador where the violence is so severe that the local police are not even able to enter. There have been many refugees into the United States that are children whose parents are trying to have them escape the gang violence in those impacted areas. The gang violence in El Salvador is something serious for prospective real estate investors to consider in order to make the best possible decision regarding whether investing in El Salvador is a good choice for them.
Market Volatility
Due to the political instability and gang violence, there is an impact on real estate prices in El Salvador. Prices can change rapidly due to fear from the violence of the gangs or overall political instability. Real estate investors have to consider carefully whether they are purchasing the right property with a price that will have gains for them in the future.
30% Tax on Rental Income for Foreign Residents
Foreign residents who decide to purchase property and then lease it to tenants will be taxed heavily on their rental income. 30% of the rental income will be taxed, which is quite expensive given the low amount that will be charged in El Salvador due to the security issues and political instability.
Final Remarks
While El Salvador may have a great deal of potential in the long-term, there are still several present threats that may impact a real estate investor’s portfolio and prospective gains. It is wise for prospective real estate investors to consider whether they are looking for short-term or long-term gains when deciding whether El Salvador is the ideal fit to consider for their investment portfolios. The status quo with gang violence and political instability is absolutely something to watch even though it may provide a lower buy in price for newer or more daring investors. It will be fascinating to see how El Salvador’s political stability changes in the years to come.
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Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
El Salvador is a country that has a fantastic culture and beautiful natural sights. This is what attracts many visitors to El Salvador each year to enjoy its natural beauty with very low prices. Due to the affordable cost of living in El Salvador, the market has attracted a great deal of attention from prospective real estate investors, particularly the capital city of San Salvador. If you are considering in investing in San Salvador, El Salvador, it is wise to review the information below:
History of El Salvador
El Salvador has a unique and diverse history. There is a great deal of debate about the first settlers of El Salvador. A variety of ancient civilizations reaching as far back as 2,000 B.C. appear to have laid claim to the region. However, in the eleventh century A.D., a nomadic community known as the Pipils migrated to El Salvador from what is now modern day Mexico. The Pipils drew on regional culture, and knowledge. They utilized both Aztec and Mayan calendars for agriculture and rituals. They also appear to have had the ability to perform complex mathematical computations in a 20 number system that incorporated “zero.” The kingdoms that existed cwhen the Pipils ruled were divided into Izako, Apanecatl, Apastepl, Ixtepetl, and Guacotecti regions. In 1524, Spanish forces invaded near what is known as modern day La Hachadura. The Pipils resisted the Spanish forces, but were ultimately defeated. In the late 1800s, an oligarchy known as “Las Catorce” controlled half of the land in El Salvador. Production was concentrated on coffee, sugar cane, and cotton in order to gain profits through exportation. In the 1970’s many years of dictatorship were followed by a Salvadorian Civil War from 1980 – 1992. Modern times have seen pockets of stabilization, as well a significant amount of political turmoil. However, modern day San Salvador, the capital of El Salvador, is known for its urban renewal, driven by a new change driven political party, with recent moves to redevelop the historic center. Furthermore, San Salvador is famous for its ideal location, accessibility to the ocean, and the mountains, and surrounded by green-tipped volcanoes. The city also boasts beautiful architecture, two mosques, many churches, two synagogues, various colorful markets, shopping centers, and cafes.
Top Reasons to Invest in Real Estate in San Salvador, El Salvador
Supportive Environment to Businesses
Aside from El Salvador’s political instability, the country does offer incentives for companies to invest there, which does mean that there will be international employees sent there for work. This tenant market is unique and exists in San Salvador where there are more secure fences around properties, particularly where expats reside. Investing in a property in San Salvador and targeting the expat tenant market could be a steady source of income while the conditions in the country are improving.
Low Cost of Living
The cost of living is quite low in San Salvador. For example, a four-person family can live there on approximately $2,100 USD per month without rent and a single person can live there for approximately $600 USD per month without rent.
Potential for Conditions to Improve
For a more seasoned investor that is a risk taker, El Salvador may be the place to consider investing. For investors that do not have enough capital for higher markets, El Salvador could be a place to buy up a bunch of real estate and then see how the political situation improves in the next few decades. It is quite common in Latin America, and in emerging markets in general, to take a wait and see approach to how the political conditions change because if they do, it will be possible to have bought extremely low and then rent to tenants in the long-term for significant returns.
Things to Consider Carefully When Investing in San Salvador, El Salvador
Political Instability
Ever since the Salvadorian Civil War, El Salvador has had a great deal of political instability that has led to widespread lawlessness and insecurity. The lack of rule of law also led to massacres, and gang violence.
Gang Violence
Mara Salvatrucha (MS -13) is one of the most dangerous gangs in El Salvador. There are some areas in El Salvador where the violence is so severe that the local police are not even able to enter. There have been many refugees into the United States that are children whose parents are trying to have them escape the gang violence in those impacted areas. The gang violence in El Salvador is something serious for prospective real estate investors to consider in order to make the best possible decision regarding whether investing in El Salvador is a good choice for them.
Market Volatility
Due to the political instability and gang violence, there is an impact on real estate prices in El Salvador. Prices can change rapidly due to fear from the violence of the gangs or overall political instability. Real estate investors have to consider carefully whether they are purchasing the right property with a price that will have gains for them in the future.
30% Tax on Rental Income for Foreign Residents
Foreign residents who decide to purchase property and then lease it to tenants will be taxed heavily on their rental income. 30% of the rental income will be taxed, which is quite expensive given the low amount that will be charged in El Salvador due to the security issues and political instability.
Final Remarks
While El Salvador may have a great deal of potential in the long-term, there are still several present threats that may impact a real estate investor’s portfolio and prospective gains. It is wise for prospective real estate investors to consider whether they are looking for short-term or long-term gains when deciding whether El Salvador is the ideal fit to consider for their investment portfolios. The status quo with gang violence and political instability is absolutely something to watch even though it may provide a lower buy in price for newer or more daring investors. It will be fascinating to see how El Salvador’s political stability changes in the years to come.
--
Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
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