The potential to rent out your second or retirement residence overseas when you’re not using it yourself can be a big advantage. Cash flow from rental income can help offset carrying costs or even cover them entirely with positive income to spare.
One potential retirement haven that’s interesting in this context is Santiago, Chile. Chile is a first world country with Latin America’s highest standard of living and developed infrastructure. The country is geographically diverse, with beaches, seaside resorts, mountain villages and lake communities. The cost of living is not super cheap, but reasonable and a bargain given the standard of living on offer. Residency is easy to establish and comes with a path to citizenship if that’s of interest.
The big appeal of this country is the lifestyle, which is hard to beat, especially if you’re interested in city living in this part of the world. Santiago is an international-standard city with fine dining, cafes, shopping, art galleries and other trappings of a cosmopolitan environment. As a result, this city is a good place to focus if you like the idea of being able to generate an income from your retirement property. You could earn a net yield of as much as 8 or 9 percent per year.
The potential for rental returns varies neighborhood to neighborhood. The challenge is to balance personal use priorities against potential yield. A one-bedroom apartment in an area with heavy tourist traffic might produce great returns, but may not be an ideal location for part-year retirement. Maybe you’re willing to live on a noisy street to get better rental returns when you’re not in residence, or you might prefer lower returns as a trade-off for some peace and quiet. The important thing is to recognize the compromise as you make it.
Also pay attention to the size of any property you’re considering. In Santiago, as in most markets, smaller units typically enjoy better returns on investment than larger ones. A big property or house, though perhaps more comfortable for your in-country visits, will return a lesser annual yield.
Here’s an overview of Santiago neighborhoods to consider for an investment in a property that is a part-time retirement home and part-time rental property:
Las Condes is a relatively new, modern, clean and upscale neighborhood. This is an exclusive sector. Residents here are high income, and there’s a strong corporate and business presence.
Barrio Italia is an upper middle class area that feels like a quiet, residential U.S. neighborhood from 50 years ago. Mixed among the private residences are antique shops, sidewalk cafes, restaurants, coffee and pastry shops, clothing boutiques and galleries, often hidden away in the interior courtyards common to houses here.
Nueva Providencia is one of the most desirable areas in the city for long-term visitors or expats. It’s an upper middle to upper class sector with tree-lined streets, tasteful residential options, and a strong corporate and business presence that is home to the city’s best selection of clubs, cafes, restaurants and commercial conveniences outside the tourist zones.
Ñuñoa is a part of Santiago’s metro area that has managed to maintain the ambiance of a quiet, residential sector. It has become increasingly popular with young professionals and now offers a handful of tasteful condo buildings in addition to the single-family homes on its tree-lined streets. Ñuñoa is also a nightlife zone, with a great selection of clubs and restaurants.
Barrio Lastarria and Bellas Artes qualify as tourist zones, as does nearby Bella Vista. This is a beautiful and historic area with fine dining, cafes, parks and the city’s best architecture. If you had only one day to spend in Santiago, you’d want to spend it here.
Barrio Brasil and Yungay are works in progress. These adjacent neighborhoods are part of Centro. Here you find unrestored buildings interspersed with a few beautiful renovations. This would be a slow area for rentals but ideal for long-term investors. These are among the most affordable neighborhoods in Santiago. You could buy here for as little as $1,800 or $1,900 per square meter.
Santiago’s most rentable zones include Lastarria, Las Condes and Nueva Providencia. Considering current property values, rental rates and neighborhood appeal, Lastarria offers the best potential for return with a low point of entry, about $2,200 per square meter.
As in most markets worldwide, real estate in Chile is measured in square meters. For ease of conversation, you can figure that 1 square meter equals about 10 square feet. The $2,200 per square meter valuation for Lastarria translates as about $220 per square foot. A 100-square-meter (1,000-square-foot) apartment would cost you about $220,000, and in this neighborhood could return you about 9 percent per year from rental cash flow.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.
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A Retirement Residence That Pays for Itself in Chile originally appeared on usnews.com
