Below I continue my discussion with Sean Dennis, an expert on Nicaraguan real estate, for International Man readers.
I believe owning real estate in Nicaragua is a relatively low-cost solution for those looking to obtain the enormous diversification benefits foreign real estate offers.
In case you missed part I, you can catch it here.
Nick Giambruno: Granada seems like an interesting place. Why don’t you give us the rundown on it?
Sean Dennis: Granada is a very cool place. It’s the oldest European city in the Americas, which is pretty crazy. It’s a beautiful colonial city, similar to places like Antigua in Guatemala or Casco Viejo in Panama. It has a nice European influence.
There’s great food, great cafés, little bars all along the streets with little tables sitting around and music going, which is quite nice. There’s also quite a rich culture, as a lot of the wealthy Nicaraguans had family homes there or were based there. It’s right on the north end of Lake Nicaragua, so there are beaches near town, and people keep their boats there as well. Then there’s a bunch of islands called isletas. You can buy an island for relatively cheap—I mean $150,000 to say $350,000 with a small house on it.
Nick: What about prices for mid-range, one-bedroom properties in Granada proper? How do they compare to other regions of Nicaragua?
Sean: There’s a few new sort of colonial style—I guess condo is the wrong word—apartments within these beautiful colonial areas or buildings. We’re getting these young single people or young couples coming down, and they don’t want to have an 8,000-square-foot house they need to look after. So yes, there are options for around the $100,000 mark for some nice one- or two-bedroom places and really close to the center, between one to five blocks from the main plaza.
Nick: In Nicaragua, have there been any issues with property titles being secure?
Sean: As a foreigner, buying a property in Nicaragua you have the same rights as a local, so you own title fully in your own name. It’s not like in Mexico where you own it in a trust with a bank, or in a concession or a long-term lease. The title is in your name. You don’t have to have another local as a percentage owner of the property. You have the full title just like when you buy property back in the States.
You can either own it that way or you can own it in something which is similar to an LLC; certain people choose to do that depending on what their tax situation back at home is.
Nick: Is title insurance generally available?
Sean: It used to be, but it became quite hard to claim through them because they’re usually an American-based company. They actually pulled out of Central America because it just became too difficult for them to do it. So the way of doing it now is the lawyers will do all the full research on the property, so you make sure the title is clear and it’s an original title. The property is solvent, i.e., all taxes paid up, there’s no liens on it, and so forth. I mean title insurance tends to be just an American thing in reality. We don’t have it in Europe, and it’s not something that anyone really gets out of the States. It can make Americans feel a bit more comfortable, but by getting a lawyer to do all their research that’s the Central American equivalent of title insurance.
So they can do a trace back to, I guess, 1914 or 1917 to ensure that all transfers of the title have been duly registered and approved, so you know you’re getting a good property. We basically, we won’t let a property go ahead or get closed without all of those checks being satisfied.
Nick: The reason I bring the issue up is that I’ve looked at property in other countries that have had conflicts, like in Cyprus, and there are some title issues with certain properties because of the civil war and the displacement of people. You don’t have any of those issues from Nicaragua, from their conflict in the ‘70s and ‘80s, do you?
Sean: No. The government spent a long time after the conflict sorting out which property belonged to which group, but this was all kept separate from private owners.
So when you buy a property, you get the escritura, which is the title, and your lawyer makes sure it’s an original and clean title. If there’s any property which was donated during the conflicts, it’s under titulo suplementario, which is a supplementary title: this is land you wouldn’t be able to purchase, and it’s clearly identifiable. Therefore we don’t have any issues with that.
Nick: Let’s talk a little bit about how to do a real estate transaction. Tell us about the transaction costs.
Sean: It varies depending on price, because some of the taxes are on a sliding scale, but you’re usually looking around 5% on top of the purchase price that buyers would pay. That covers all lawyer’s fees, any taxes associated with it, transfer costs, registrations, and so forth.
So as the buyer, you are responsible for all sales or purchase costs. When you sell it, you don’t pay anything.
Nick: What about capital gains tax, rental income tax, and property taxes?
Sean: Property tax is a small percentage of the appraised value of the property, which ends up being very little because the appraised value is when the local government or the counsel sends someone around to appraise it in their eyes. It’s not necessarily a reflection of the purchase price or market price. Very often it’s much less. The last house I owned—which I’d say would be valued at $200,000—I was paying $350 a year in property taxes.
The Nicaraguan government does not tax capital gains on real estate nor do they tax rental income, which is huge.
Nick: Are there any attractive residency options?
Sean: Residency is very easy to get. You have to make an investment in the country—something like $30,000, and this includes real estate. It also requires a police report, health certificate, and your birth certificate to be authenticated by the Nicaraguan consulate in your home country, and then it usually costs around a $1,000 to do. Compared to most countries it’s really quite easy and cheap.
There’s a government-funded agency at PRONicaragua that provides free services in order to help foreign investment or investors—businesses small or large—come into the country and help to cut through the red tape and bureaucracy. They’re very helpful.
Nick: Do you have any trusted lawyers that you can recommend?
Sean: Yes; there are these guys at García and Bodán who are Nicaraguan and fluent English speakers. They also operate in Guatemala, El Salvador, and Honduras. They’re not just real estate lawyers; they do corporate law as well. They’re actually the main lawyers for Survivor, the TV program from the States which is down here at the moment. But they also charge the same price as any of the local small firms, so you’re not paying through the nose.
Nick: How can our readers get in touch with you in case they’re interested in looking into Nicaraguan real estate further?
Sean: Our real estate website is Nica Life Realty. I also operate a website called San Juan Surf, which is a directory of local businesses in San Juan del Sur. It also acts as a “what’s going on in San Juan” kind of website. Readers can also drop me an email at email@example.com.
Nick: Sean, thanks again for your time and helping us better understand the opportunities in Nicaragua.
Sean: No problem. Thank you.