Double Your Money in Uruguay

Saturday, Feb. 9, 2008
Montevideo, Uruguay

Read more about foreign real estate investing in International Living Postcards—Saturday Edition

The auction was split between two rooms with as many as four properties scheduled every 15 minutes. But there was no sense of urgency...except for one auctioneer, who didn’t spend any time working the crowd and retired his property with no bids. The house was in a bad part of town, but you could have bought it for $6,000 plus the auction costs of $2,000. Still sometimes cheap is cheap for a reason (as Lee Harrison mentioned recently).

You couldn’t be sure, but most of the people in the room seemed to be looking for a place to live rather than searching for investment properties. One father bought an apartment for his daughter. Two couples bidding on the same property made the auctioneer earn his 1% fee as they each agonized over raising the bid another 5,000 pesos (about $250). At least seven times the auctioneer made it through “ a la una, a la dos” before the interruption of a raised hand stopped him in his tracks.

By the end of the day, the bank withdrew two of 37 properties and another four had no bidders. The “no bids” were in bad neighborhoods except for one. That property was in a very good neighborhood...but it wasn’t a great deal even at the reserve price. It’ll be back, though. At the next auction the bank will try again at a lower reserve price.

The most interesting properties were three apartments in Ciudad Vieja. They all went for their base price...one at $138 per square meter ($12.82 per square foot). With renovation costs in the region of $500 per square meter ($47 per square foot), there is plenty of money still to be laid out for this apartment. The investment will nevertheless pay off, as prices in Ciudad Vieja for renovated properties runs as high as $1,500 per square meter ($139 per square foot).

I almost bid on the apartment without knowing a thing about it. The street is good and soon to be pedestrianized, making it even more desirable as this part of town slowly turns from rundown to chic. Still, sometimes cheap is worth the risk. If I’d had enough cash in my pocket to pay the auctioneer fees and the deposit, I would have jumped in.

The next day I went to see the locations of the properties auctioned from Ciudad Vieja. My instincts are intact. The apartment that I wanted to bid on is not only on the right street...it’s on the right end of the right street. The property would sell on the open market for at least double what the winning bidder got it for. Next time, I’ll definitely bid.

The auctions by BHU (Banco Hipotecario del Uruguay) are done the last three days of each month, but you have to do more than just show up on the day. Lee Harrison was wise to advise you to prepare yourself beforehand and get to know the neighborhoods—I strongly recommend you do this. Also, get to know the selling prices of non-auction property. Then take a look at the properties on the list. The bank publishes a listing sheet on its website, but it also prints a newspaper with more details about the properties that is available in its lobby in the middle of the month. Between the 15th and auction time, most auctioneers publish an individual listing sheet for the properties they have been given for the auction. Each property at the auction is auctioned by a different auctioneer.

If you’re looking at Uruguay for investing or living (and you should be), the BHU auction is a good way to learn about Montevideo properties. It is also an inexpensive way to get your feet wet. The most expensive property of the 37 auctioned that day went for less than $30,000 including the auction costs and fees. That property was a one-bedroom apartment in an excellent neighborhood for $714 per square meter ($66 per square foot). The average prices in that neighborhood are between $900 and $1,000 per square meter ($84 and $92 per square foot).

Lief Simon
For International Living

Editor’s note: Before you jump on the next plane to take advantage of Uruguay’s bargain property, you must read Lee Harrison’s special report on the Uruguay property auctions. He will tell you which neighborhoods to look out for and what type of preparation you need to ensure you get the best deal at the auctions.

Read related articles:

- The Best Deals in Montevideo

- A Two-Bedroom Apartment for $6,000…and Other Bargains

- Four Tips to Help You Get a Dream House