After years of watching the Colombian real estate market, I have finally bought myself a place in South America. And, it’s in Peru!
I got tired of dealing with wave after wave of new regulations and requirements in Colombia to purchase property. Money transfers into and out of Colombia for property purchases are difficult, and they require specialized transfer services. Airbnb is regulated in Colombia. And Airbnb is getting banned in cities like Medellín. Crime targeting foreign born residents is once again on the rise in Colombia.
Unlike Colombia, Peru is the land of opportunity. Peru not only offers cleaner streets, greater safety and a stronger currency, it provides a higher quality of life. And, as you’ll see after reading this article, Peru is where you should buy property in South America.
What I learnt from buying property in Lima Peru
Why I Bought Real Estate In South America!
As a perpetual traveler, who has been traveling non-stop since the ‘big C’ hit the world, I’ve been trying to find myself a home base. Living out of a medium sized suitcase was fun at the start. Yet, it grinds you down after a while.
After more than 4 years on the road, I needed a ‘home’ I could travel from and somewhere I could return, at the end of my trips. I needed somewhere I can accumulate, store and leave my stuff, so as to make traveling easier and enjoyable once more.
I also needed an office space. Somewhere I could return to and ‘work’ from, when a particular trip ended. I needed somewhere I could set myself up a permanent desk space. Somewhere I could make the perfect creative space, to write articles for the site and to edit videos for the YouTube channel.
What I’ve discovered over the last 4 years, is that most of what I carry with me in my suitcase, I rarely need on each trip. What I actually use in each destination I visit, could easily fit into a small backpack.
But I was constantly traveling with too much. And that’s because every 3 months, I would be in a different country and in a different climatic zone. And this excess stuff, was slowing me down and reducing the places I could travel.
Now, with a home base, I can get on with the trips that I want to undertake, but that I’ve been putting off. I can finally start doing those trips that I know, from chatting with my regular readers, they really want to see!
I’m going to start doing things like fishing in the Amazon and visiting remote or inaccessible places. I’ll start taking bus trips up and down the South American coastline and up into the Andes. I’m also going to start hopping on any one of a number of cheap return flights, with nothing but a small backpack, to explore more cities in Latin America.
What Type Of Property Did I Buy In Peru?
I bought myself a two bedroom apartment. After living in so many Airbnb accommodations over the last 4 years, I knew exactly what I wanted. I knew that I needed just over 50m². And I knew that I needed two (2) primary rooms, so I could have a separate bedroom and an office.
I opted to buy a property with only 2 ‘bedrooms’ and that was around 50m², because I could fit in everything I needed without a wasted excess. Larger properties come with larger annual taxes and monthly maintenance costs. They also require more stuff to fill them and require more time each week to keep them clean.
But after 4 years actually living in a different Airbnb every 1-3 months, I knew that I wouldn’t need or use that extra space. It would just cost me more time and money, that would ultimately be wasted.
I also knew when purchasing the property, that I needed to find one with big windows and lots of natural light. I’ve rented so many Airbnb accommodations that looked amazing in the staged photos, but when I arrived they were small, dark and felt cramped.
Large window let in abundant natural sunlight into an apartment. And they make the space feel bigger and airier than it otherwise would. Buying a property in Peru, or anywhere else in Latin America, that has no external view or sunlight, is a fools errand. Why buy a property in Peru, or any other foreign location, if you can’t see the outside world?
So, with my criteria of 50m², 2 bedrooms and large windows with abundant natural light, I started looking. And when buying the property, location was my final deciding factor!
Where Did I Buy A Property?
I looked at many different suburbs and neighborhoods in Peru. And I walked the streets and I flew my drone over them, by both day and night. I researched the crime statistics and I sat myself on park benches with a beer in hand, at peak hour.
Sitting on a park bench in each neighborhood, I watched the world go by. While also listening for the traffic and to see if I would be accosted by pan-handlers asking for spare change. And Pueblo Libre with it’s iconic Plaza Bolivar, won me over.
Pueblo Libre is a small suburb measuring no more than 4.38km² (1.69 sq mi). Yet, it’s the second most historically significant district in Lima.
Pueblo Libre is not only the district with the most parks and green spaces in Lima, it’s home to two major museums, the oldest restaurants and breweries (cerveceria), 2 archaeological sites, the ‘cross of the traveler’ erected by Francisco Pizarro and, Simon Bolivar’s former home in Lima.
As far as the potential for Airbnb goes, you can’t go past Pueblo Libre in Lima. It has all of the touristic attractions and the added safety of also being home to the Bolivar military barracks, housed in a large art-deco complex.
Yes, you read that right – even the military barracks in Pueblo Libre is historically significant. And a tourist attraction in it’s own right!
Why Did I Choose Pueblo Libre Over Miraflores, Barranco Or San Isidro?
Miraflores and San Isidro are noisy beyond belief. And Barranco is to a lesser degree. Lima hasn’t completed it’s metro mass transit system and traffic congestion is a permanent problem in the city.
Anywhere that there are main thoroughfares you will find unofficial taxis and collectivos. And along with these unofficial and collective taxis, comes a lot of honking. And when I say a lot, I mean you’ll hear it 24 hours a day, 7 days a week. You will get no rest!
Miraflores, San Isidro and Barranco are home to many major arterial roads. And they’re extremely commercial. In these locations you’ll find the majority of the hotels, backpacker hostels and current Airbnbs.
With all the tourists and foreigners packed into 3 primary districts, all the panhandlers, scammers, thieves, drug dealers, sex workers and pimps converge on them. As an obvious foreigner in these 3 locations, you can’t just sit on a bench and expect not to get approached by somebody wanting spare change or trying to sell you something.
In Barranco, Miraflores and San Isidro, you should also be prepared to pay 30-50% more for everything. And I don’t mean the apartment itself, but groceries, transport, food and drinks on a night out.
Everything you do on a daily basis will cost more in Barranco, Miraflores and San Isidro. Plus, you’ll have the added annoyance of being approached by all the unsavory types and the constant traffic and honking. And it will be all for naught, as you’ll still need to go to places like Pueblo Libre, if you want to visit a museum or see some of Lima’s historical sites.
Why Did I Choose Peru Over Colombia (Bogotá Or Medellín)?
Basically, it’s far easier to do business in Peru than it is in Colombia. Plus, as an added bonus, Peru doesn’t have anywhere near the problems with Venezuelan migrants, that Colombia does. And in Peru, you don’t have the criminal enterprises targeting foreigners, that are a major problem in Colombia.
You don’t need to worry about your drink being spiked in Peru. And you don’t need to worry about express kidnappings. You can use Tinder or Bumble in Peru to meet people and in fact, it’s quite common in Lima!
Peruvian’s also don’t lump every foreign born person into the ‘gringo’ category. The Peruvians you meet in Lima are not only more likely know the difference between different nationalities, they’re also more often recipients of higher levels of education and are more likely to speak foreign languages, including english.
Yet, the main selling feature for me was the ease of doing business. At the end of the day, after 2 years of going backwards and forwards in Colombia with paperwork, I gave up. In contrast, when I decided to buy a place in Peru, it took less than 12 hours for me to get permission to sign documents, hire a lawyer, open a bank account and transfer money into the country.
There’s a lot less restrictions and bureaucracy in Peru. And apps like Airbnb and Uber are unregulated. You don’t need any special registration or permission to rent your place on Airbnb in Peru. Unlike locations such as Medellin in Colombia, which is moving to ban apps like Airbnb, just as they tried to do with Uber.
Oh, and just in the event that you need more convincing, just go and have a look at the lists of the world’s best restaurants or the lists for the world’s best cocktail bars. Peru, and Lima in particular, have far more than most other countries, including Colombia.
Is Airbnb Profitable In Peru?
With less restrictions and bureaucracy, comes greater opportunity for profit. If you’re saving money on legal documents and lawyers, you’re already at a benefit. But, in comparison with Colombia, Peruvian property costs roughly similar amounts to purchase and the rents for small properties are higher.
For the last 4 years, I’ve booked my own Airbnb accommodations as monthly rentals. And a similarly equipped Airbnb in Lima costs me 20-40% more to rent each month, when compared with stays in Bogotá. Yet, this is despite the underlying cost to purchase the apartments being roughly similar.
So, to directly answer the question, yes! Airbnb is extremely profitable in Peru. And it’s more profitable and has less risk, than Colombia!
What Should I Look For When Buying Property In Peru?
You really need to do your due diligence on properties in Peru. And you absolutely must use a trusted lawyer to check your contracts before signing!
In Peru, anybody can be a real estate agent. You shouldn’t trust the person selling you the property or the builder, if it’s a new build. You need to have every minute detail checked and then double checked by a lawyer you trust!
Now, the big ticket items that my lawyer checks for me, are the price, the inclusions, the payment terms, the contract cancellation provisions and the penalties associated with the real estate agent or builder not delivering as promised.
When I was handed the first version of my own contract to sign, the price was s/13,000 higher than the final price. The payment terms in the contract stipulated that full payment was upfront. And the real estate agent and builder had set all the contractual provisions in such a way as to hold themselves completely harmless and devoid of penalty, if they failed to deliver.
Now, what my lawyer did was set the payment terms in 3 installments based on milestones, fixed all the inclusions in the contract, knocked the price down further and wiped all the provisions that sought to hold the builder and real estate agent harmless, if they didn’t deliver as promised or meet the deadlines they had stated.
In the end, I’m collecting interest on my own money by paying in installments and I pay less. And if the build isn’t completed on time, the builder has to negotiate with my lawyer to pay me a daily penalty rate to cover my cost of renting elsewhere. So, using a trusted lawyer has already paid itself back to me threefold!
Beyond the somewhat slippery real estate agents, you also need to make sure that the property meets a few criteria, covered below. But they are:
- Is away from main roads;
- Has metal ducting for external vents;
- Has a dedicated laundry space;
- Will not be affected by natural disasters.
Avoid Main Roads!
Whatever property you buy in Peru, it needs to be away from a main road. It needs to be at least one block back. Properties in Peru rarely have double glazing. And, moreover, properties in places like Lima will often have gas and a legal requirement for natural gas, is that each apartment in the building has built-in venting in the walls and doors, that cannot be closed off.
If you’re near a main road, you will hear the constant traffic and honking. But to make matters worse, everything in your apartment will get covered with a thin film of black soot, from the exhaust pipes and brake-pads of passing cars. Because, with natural gas, you can never entirely close out the world outside.
So, unless you want to be constantly inhaling soot and cleaning it off your furniture, while never getting any rest, you should absolutely avoid properties on main roads. I’ve rented quite a few Airbnb’s in Lima that were on or near main roads; Particularly in places like Barranco, Miraflores and San Isidro, and the traffic was enough to ruin my stay!
Check The External Venting!
Items like water heaters aren’t often included in new builds. And when building new apartments, builders do often install venting in the utilities closet. But the venting is more often just a hole in the concrete structure with a small electric fan.
Now, in Peru there’s two primary types of hot water systems. There’s instant gas hot water and there’s the conventional boilers. And these go in the utilities closet within the apartment.
The conventional boilers are near useless. In an apartment setting, often the largest you’ll be able to fit is about 50 liters. These boilers run on electricity and it’s far more expensive than natural gas in Peru.
I’ve stayed in a few apartments that have had these small electric boilers and, well, I would want to live with one. Because after a week or two of running out of hot water in the shower, I find that they start to become extremely annoying.
The alternative to the small electric boilers is instant gas hot water. And these are by far the most common type of hot water system in Lima. They’re cheaper to buy, cheaper to operate and they don’t run out of water.
Yet, to run any instant gas hot water heater that’s capable of more than 5.5 liters, you’ll need external venting. And the venting will need to be made of metal.
In a new apartment, you can’t just cut a hole in the wall and run a pipe out the side of the apartment building. And if the vent in the utilities closet doesn’t have metal piping, well, you’re stuck with the small 5.5 liter items. These small 5.5 liter gas hot water systems are designed for RVs and they don’t do well with apartment water pressure.
In the absence of metal vent ducts, and with a 5.5 liter instant gas hot water system, you’ll need to choose between water pressure and water temperature while taking a shower. Because you won’t be able to have both at the same time, with these tiny units.
You need to either turn the water down to the point where it’s barely a trickle in the shower to keep it hot. Or you can turn the water pressure up and make do with water that is barely above room temperature. So, do check that the exhaust vents in the utility closet have metal ducting!
Ensure That There Is A Laundry Space In The Apartment!
There are a lot of newer buildings in Lima that don’t have a space for a washing machine in the apartments. And this is particularly common in the newer buildings around Barranco, Lince, Miraflores and San Isidro.
Now, I’ve stayed in some of these buildings. And I would balk at staying in one of these places again. They’re often large apartment buildings with many residents. And the communal laundry in the basement isn’t worth a damn.
In these types of buildings, without laundry facilities in the apartment, there will be maybe 3 machines in the basement to be shared by up to 300 residents. The cost to wash and dry your laundry will be in the vicinity of $6-7USD per load.
You can’t wash your clothes, towels and sheets together. So, you’ll need to budget for at least 2 loads of laundry a week. And thats $12-$14USD per week minimum, or from $620-$730USD per year in laundry. But a single machine that can both wash and dry your laundry (lavaseca) in Peru, only costs $200-$300USD to buy!
Beyond the obvious waste of time trying to get a machine when one isn’t being used. There’s the hygiene factor, because the machines are often filthy. And then there’s the money. You’re paying more per year, than double what the machine costs to purchase.
So, do make sure that there’s a dedicated place in the apartment for a washer-dryer. And make sure that the space has the appropriate dimensions and plumbing.
Beware Of Nature!
If you’re going to buy a property in Peru, or purchase real estate in Chile, Colombia or Ecuador, you need to make sure that the building you’re buying is built with earthquakes in mind.
Peru, like Colombia and the other countries in the region, experiences earthquakes. And the last thing you want is a strong earthquake in an apartment building that wasn’t designed to deal with earthquakes.
Just take a look at some of the pictures from the Chilean earthquake in 2010. Where 15 story buildings and overhead motorways collapsed. You don’t want to own a property in Peru that can’t handle an earthquake!
The other major factor you want to take into consideration when choosing a property in Lima, is rain. And, as I know you’re thinking right now, but it never ‘rains’ in Lima. Well, that’s exactly the problem you want to avoid. Rain with actual droplets of water, as opposed to the garúa, can do real damage!
Lima has no systems for dealing with stormwater. So, if a freak storm comes out of nowhere, which happens every few decades and drenches the city, then you should expect temporary flooding. And if you’re property is on the ground floor, in a low lying area or it’s built in a substandard manner, you’ll have a real problem.
What Are The Requirements For Property Purchase In Peru?
To buy a property in Peru, you only need three things. They are:
- Permission to sign documents;
- A local bank account;
- The required funds.
In order to open a local bank account or enter into a real estate contract, you need to first acquire the formal permission to sign contracts. It’s a document you can apply for online, called a ‘Permiso Especial Para Firma Contratos’.
The ‘Permiso Especial Para Firma Contratos’ is issued by the ‘Superintendencia Migraciones Peru’. And you get it from the website for Peruvian Migration.
To open a bank account, take a printed version of the ‘permission to contract’ and your passport to the bank. Some banks won’t know what it is and they will give you the runaround, telling you that you can’t open an account. But they’re incorrect. So just walk from bank to bank and one will eventually say yes and open an account for you on the spot.
Once you have a local bank account, transfer your funds into Peru and go and look at real estate. But before saying yes to any property purchase or paying a deposit, I would suggest letting a trusted lawyer (like mine) go and negotiate the price on your behalf.
Property Tip: My Lawyer is Dr Lara. You can contact him here.
The Costs Associated With Property Purchase In Peru
Beyond the cost of the property, there are a few costs involved with buying a property in Peru that you should be aware of in advance. They are:
- Lawyer fees – s/2-4000
- Notary fees – s/1880
- Alcabala (property tax) – 3% per year
- SWIFT money transfer costs – which vary depending on your banks
- Currency conversion costs
Note: The ‘alcabala’ 3% tax does not apply for the first year on newly built properties. Real estate agents will try to make out it’s some discount that they’re giving to you. But it’s not. The waiving of ‘alcabala’ applies to all new build properties for the first year.
Expert Tip: Pay very close attention to the exchange rates that each bank is quoting. By using my Wise account to conduct the actual currency conversion, I saved over $5500 USD on my money transfer to Peru. I sent the money to Wise, had Wise convert it into USD and then I sent it from my Wise account to my USD account in Peru.
Can Foreigners Purchase Property in Peru?
Foreigners enjoy the same property ownership rights as locals in Peru. As long as you have the permission to sign documents, a local bank account and the funds, you can buy property in Peru.
What Does ‘Contract For Future Asset’ Mean?
If you decide to buy a brand new apartment like me, you need to be aware that the contract you’re entering into is for a ‘future asset’. What this means, is that once you’ve made your last payment and moved into the property, it may not be immediately transferred into your name.
When you buy a new property from a builder, they will need to sell all of the other apartments in the building and pass all of the relevant municipality checks and paperwork, before they can transfer the property title into your name.
Like my own purchase, your property will remain a ‘future asset’ until everything is sold and registered legally. And this is another reason why I would never enter into any deal or contract, without using a reputable local lawyer.
Does Property Purchase In Peru Lead To Residency?
Property purchase in Peru doesn’t automatically lead to residency. Yet, having a property in the country can be used to show ties to the country, which is necessary for residency and citizenship.
Personally, I’m opening a company here in Peru (like an LLC) that will be registered to the property’s address. That Peruvian company will then be used to hold my foreign websites and online work.
As the sole director of that Peruvian company, I’m then eligible for a business visa which leads to citizenship in 3 years. To get the citizenship, I only need to prove that I can speak the language (Spanish) and be able to show ties to the country (i.e. the property).
Note: Get yourself a good local lawyer and you’ll be able to easily navigate Peruvian visa laws in a cost effective manner that’s suited to your own personal circumstances.
Where Can I Get More Information About Property In Peru?
On my YouTube channel I will be documenting my own progress. So far to date, I’ve been filming the process as I go through it. And I’ll also film the apartment once I move in and the process of furnishing it.
If you’re looking for more information on buying a property in Peru, from someone who has actually done it, then you should subscribe to my YouTube.
