Everything You Need to Know About Buying Property in El Salvador
El Salvador, also known as the land of volcanoes, is a small but welcoming country that’s full of life, beauty and culture. These are some of the reasons why buying a property in El Salvador is often considered a sound investment.
Thanks to the local real estate agents and foreign investors, the overall market has been recovering.
For years El Salvador was considered unsafe and unfit for foreign travelers and foreign investors. The media was focused on crime and gang violence, positioning El Salvador as one of the more dangerous places to visit. Thankfully, over the last few years, the narrative is changing. In October, 2019, the U.S. State Department eased its travel advisory for El Salvador, reducing the country’s ranking from a Level 3 to Level 2, which put El Salvador on par with France, Denmark and Mexico in terms of safety. This shift in the travel advisory warning, along with other initiatives, including, Surf City and the adoption of Bitcoin as legal tender, are a few of the reasons the overall real estate market in El Salvador has been recovering.
In fact, as mentioned in a recent article in the New York Times, a traditional three-bedroom beach property that once sold for $150,000, 18 months ago, is up by 15-20% to $180,000 today. In particular beachfront property, including real estate in El Zonte, is the top priority for many foreign investors.
If you’re interested in life by the beach, follow along for a few important things you need to consider before buying a property in El Salvador.
Buying Property in El Salvador As A Foreigner
If you’re looking to invest in real estate in El Salvador — whether to live full-time, vacation or list as a rental property — you must start with understanding the basics of how real estate works for foreigners.
Let’s start with the most important question:
Can Foreigners Buy Real Estate In El Salvador?
To answer it simply, YES!
You can buy property as a foreigner if you comply with the following rules:
- A foreigner may acquire real estate if your country of origin grants equal rights to Salvadorans (principle of reciprocity)
- You don’t go over the 245 hectares mark while buying property
It is important to note that as a foreigner, it’s advised you hire professional help while finalizing a property and securing the deal. You must also understand that purchasing property does not automatically grant a foreigner residency, however, residency is not required for purchasing property.
Two Ways Foreigners Can Acquire Property in El Salvador
Foreigners have two options for purchasing property in El Salvador:
- Direct Property Buying – you can buy a property directly by using your Tax Identification Number [NIT]
- Indirect Property Buying – you can follow this approach by creating a company (corporation) in El Salvador under your name and have that corporation purchase the property as an asset
Whatever you decide, it’s important to do your due diligence. In the case of a NIT card, you’ll need your physical presence, a photocopy of your passport and a small amount of money for associated fees.
Important Things You Need to Do While Buying A Property in El Salvador
Once you have your documents ready, you can move forward with the below steps:
- Find your property — do your research. Where and, what type of property, are you interested in? We highly recommend hiring a local real estate agency to show you available properties.
- Hire local, legal representation — this lawyer will be responsible for investigating that the property is free of encumbrance and that the seller(s) are the legitimate owners of the property. The buyer’s attorney must also request, at the National Registry Center, a certification of the property that guarantees the property is free of any problems that may prevent the deed transfer. Finally, your lawyer will guarantee that the property is free of municipal taxes, otherwise it cannot be registered in the CNR.
- Determine whether to acquire the property directly or indirectly.
- Consider signing a contract by which the property is excluded from the market.
- Consider a survey of the land to determine the viability of construction and any required permits.
- Sign the closing documents.
- Make sure that the National Registry of Real Estate and Mortgages receives the information about this transaction. Your lawyer can most likely assist with this process. This is where taxes and registration fees are paid. In about 3 months the deed is finally fully registered.
Services Costs and Taxes to Consider When Buying Property in El Salvador
From lawyer fees to taxes, here are some of the costs to keep in mind:
- Lawyer fees: In most cases, these costs will vary between $500 and $1000. Many lawyers calculate their fees according to the price of the property.
- Agency fees: The percentage ranges between 3% to 5%, which is usually covered by the seller.
- Transfer taxes: If the transaction amount exceeds $28,571.43, then the transfer taxes are 3% of that surplus amount.
- Registration fees: one has to pay $0.64 for every US $ 100 spent on the property’s price. Visit the official website of the National Registry center to learn more about the cost breakdown.
- Additional: You may be responsible for municipality fees on a monthly basis, these may vary depending on the location, and covers services such as security, garbage, and other necessary services. These costs can be as little as $10 / month.
Below you’ll find a breakdown of the costs associated with buying a property in El Salvador.
How To Pay For Property in El Salvador
When purchasing property in real estate, there are a few options:
- Wire transfer
- Check certified by the bank
- If you are a resident you may qualify for a loan, but foreigners are unable to open a bank account in El Salvador
- In some cases, the seller may agree to carry a contract
In general, it is important to understand that the transfer of money can take up to a few weeks given high security measures that have been put in place to prevent fraud and money laundering.
Pay For Your Property In Bitcoin
El Salvador is the first country to accept Bitcoin as legal tender, meaning, you are able to pay for your property in El Salvador using Bitcoin.
The widespread use and adoption of Bitcoin in El Salvador is in large part due to the efforts of Bitcoin Beach in El Zonte, El Salvador, one beach side property in El Salvador that has become particularly popular for tourism.