HAVANA,Oct. 20th If the old real estate adage holds true — it’s all about location, location, location — then about 100 miles off the tip of Florida, it’s boom time. The real estate market in Havana, Cuba, is roaring.
Cuba is seeing its colonial-style mansions and Art Deco apartments selling in Read more
Ruben Font carries a scaffold piece to his home in Havana, Cuba. (AP Photo/Franklin Reyes)
Eager to own a piece of their native homeland, Cuban Americans are placing their bets on the island’s underground foreign real estate market.
HAVANA, Dec. 16th It is still illegal — according to both U.S. and Cuban law — for Americans to purchase property in Cuba, but that hasn’t stopped some from trying.
Their window of opportunity first opened in 2011, when Cuba relaxed a decades-long ban on the sale of property in the country, which prevented home and landowners from selling and purchasing property. Until that point, Cubans were only allowed to swap or barter their homes in deals called “permutas” (meaning “exchange”).
Once the ban was lifted, Cuban-Americans with family and friends still on the island — and cash to burn — saw a way to reclaim a piece of their homeland. In the few years since, an underground foreign real estate market has flourished without much interference from either country’s government.
“This is one of those things where the market forces and interests are ahead of the law,” says Pedro Freyre, chair of Akerman LLP’s International Practice and an expert on the U.S. embargo on Cuba. “[These buyers] left behind homes and they’re beginning to go back to Cuba, look at these places and for most of them this is not about recovering property but about the emotional connection and the family connection.”
The law that bans foreigners from buying property in Cuba is not changing even after last year’s announcement that U.S. and Cuba would reestablish diplomatic relations.
Although restrictions around other kinds of financial transactions were loosened (e.g. Americans can now send $2,000 to Cuban nationals per quarter, up from $500, and use U.S. credit and debit cards in Cuba), non-Cuban residents are barred from buying property there. There are an estimated 2 million Cubans in America, according U.S. Census data.
The process of purchasing Cuban property illegally is simple enough, explains Freyre. “You go to your old house, see who’s living there, and you ask if they want to sell. Then you find a Cuban relative who will buy the house for you.”
Simple, yes, but also risky. Jerry Haar, international business professor at Florida International University, likens the transaction to “being on a high wire with no net below.”
“Your relatives could decide, ‘oh, I want 60/40 ownership instead of 50/50,’ or say ‘I’ve changed my mind and [the property] belongs to me,’ and the government may very well back them up,” Haar says. “You’re dealing with a no man’s land when it comes to the Cuban court systems and it’s very tricky.”
Anabel Fernandez, a University of Havana-educated attorney currently pursuing a law degree at the University of Miami, says there’s an additional risk to consider — that the Cuban government could reverse its loosening on property rights altogether.
After the Cuban revolution in the 1950s, the government nationalized billions of dollars worth of property (homes, farmland, businesses) owned by private Cuban citizens, as well as foreign-owned property (talks between the U.S. and Cuba to settle disputes over American-owned properties that were seized are still ongoing.)
“Even if you as a Cuban national buy a residence lawfully through the right mechanisms, the government could at any time repossess the property without any cause,” Fernandez says. “There is no certainty in any type of transaction in Cuba.”
A sentimental foothold
Joseph, 59, who immigrated to Miami from Havana in 1960, is considering buying a home in Cuba now. When his family fled Cuba, they left their home in the care of a family friend. After some years, the friend became too old to care for the home, so she traded it with another family and moved away.
When Joseph, who did not want his real name used because of the legal implications of this kind of transaction, visited his childhood home for the first time three years ago, he was surprised to find the previous occupants hadn’t changed much. They even left behind stacks of magazines from the 1940s and 1950s and old mason jars his grandfather kept around the house.
“I was very young, but I still have memories of the house I lived in,” says Joseph, a financial advisor in Miami. “There’s obviously a ton of sentimental value [in purchasing the home]… It’d be really nice to have a home my siblings can all visit and connect them to their previous homeland.”
Joseph has no immediate family in Cuba to front the sale, so he’s working with a local attorney to find an alternative third party. He’s also exploring the option of establishing residency in Cuba, since he was born there and qualifies (marrying a Cuban national would also qualify one for residency).
He will need a Cuban sponsor, which could be tricky since his entire family moved to the U.S. He’d also have to commit to returning for at least a week every 24 months. But residency would allow him to at least purchase property without a middleman. There’s also the possibility Cuba opens up its real estate market to foreign investors over the next few years.
With so many factors at play and a government notorious for making up the rules as it goes, Joseph says he’s keeping his expectations low.
“You have to be somewhat detached and not invested in outcome because there so many variables that are unknown,” he says. “This may not ever happen. If it doesn’t happen…I’ll probably be disappointed, but it won’t be the end of the world.”
Further complicating matters is the fact that he wouldn’t just be buying a home. He might also potentially uproot the family currently living there. Joseph visited again in early December and broached the subject of a sale with the owners for the first time. They seemed interested but he didn’t press the issue.
“You want to make them feel comfortable and that you’re not going to kick them out of the house or be too aggressive,” Joseph says. If he were able to purchase the home, he’d likely keep them on as tenants and treat it like a vacation home for his family.
In the meantime, Joseph, with help from some of his cousins, has set his sights on a smaller goal — restoring an old family tomb in Havana. The tomb sustained some structural damage that hasn’t been repaired and he’s working with his cousins to sink some money into its restoration. The project will probably cost about $10,000. He sees it as less of a risk, as no other family has come forward to claim the property and the current title owner is deceased.
Investors biding their time
Speculators like Joseph are common, says Hugo Cancio, a Miami-based Cuban-American entrepreneur who runs several media properties in the U.S. and Cuba, including one focused on the burgeoning real estate market. Investors are salivating over oceanfront properties that haven’t been renovated in years in popular cities like Havana. The idea is that if they can get in early, plunk down a few hundred thousand dollars on a property and bide their time until Cuba officially opens its market to foreigners, they can triple their investment down the road.
“I’ve seen people pay a substantial amount of money for apartments right across from the water in Havana,” Cancio says. “It’s a gold rush to try to own something… But today you’re investing blind. It’s a risky business.”
In a market subject to such speculation, prices are all over the map. According to data compiled by Isladata.com, a research firm Cancio also operates, homes and apartments for sale in May 2015 sold for anywhere from $8,000 (U.S.) at the low end to $180,000 at the high end. A search on the popular Cuban real estate listing website Cubisima turned up listings for three-bedroom homes in Havana that ranged from $1,500 to $770,000.
For Raul Valdes-Fauli, a partner at Fox Rothschild LLP in Miami, the risk is too great to consider. He was 16 when his parents fled Cuba in 1960, leaving their home behind. “I was talking to my brother this morning about reclaiming some of our property, but we would not think of doing it against the law,” he says. “We have enough invested here [in America] and our lives are here. We’re not going to violate the law just to go back.”
http://finance.yahoo.com/news/buying-real-estate-in-cuba-211639988.html
HAVANA, Dec. 6th (by D. Sidney Potter) If there’s one thing that conservative Democrats can rejoice about, given the less than stellar reviews of their point person who now occupies 1600 Pennsylvania Avenue, rent free, is that the ‘shout-out’ heard around the world would have to be President Obama’s “opening” with Cuba that occurred earlier this year.
The residual effect of this better than late coup d’état in terms of international diplomacy, is that the opening with Cuba will somewhat allow Americans in a roundabout way to buy investment real estate without the red-tape that existed before, when that other young President, with the initials JFK monogrammed on his luggage occupied the White House.
This diplomatic opening, has just about made it possible to buy a single family residence and/or a similar type of investment property, such as a duplex, small apartment complex, or perhaps a similar income producing property, without the normal red-tape; Communist or non-Communist state.
Make no mistake, this is a momentous occasion for small investors to resort developers. The good news however (depending upon your perspective), is that you won’t have to renounce your American citizenship, move to Cuba, and shack up with a Cuban national in order to buy an investment home.
Greenbacks in a Red Country
According to Yad Aguilar, CEO of Canada-based Point 2 Cuba, a company that provides Cuban real estate expertise to international investors and developers.
Many people have been planning ahead for this day. I can tell you that a number of major American hotel companies have already spotted sites in which they’re interested. I can tell you that I’ve already heard of a 750-slip marina under discussion. And I can tell you that, for American travelers, the prices will be incredible… beautiful penthouse condos will be going for as little as $200,000.
Although Mr. Aguilar may be a bit more optimistic then what jaded investors are willing to fully embrace, here are the facts: Cuba is 220 miles south of Miami and is considered one of thy hottest real estate ‘buys’ in the world right now.
However, most Americans and foreigners are shut out of this potentially lucrative product due to existing archaic laws still on the books. Namely, the Trading With the Enemy Act, passed by the U.S. Congress in 1961. However, that’s not the case for Cuban nationals.
Why? That’s because Fidel’s little brother, Raul Castro, in control of Cuba since 2006, and to his business acumen, has become an ardent pro-business advocate in a Communist country. More specifically, Raul is allowing Cuban residents to buy and sell their own homes. This is the new normal.
So a real estate revolution is occurring, of which has never happened in such volume since Fidel took over the island country 54 years ago. At that time, Fidel seized nearly all foreign owned real estate in Cuba, without so much as a peso for the real estate.
The Real Estate Revolution and The New Normal: Cuban Style
Is this a new day in Cuban-American relations? Irrespective of the politicos, the feeling since President Obama’s announcement is bullish among investors. Here’s what those in the know are saying about the new normal.
“Where Cuban tourism and residential development is concerned,” says Point 2 Cuba’s Yad Aguilar, “the sky’s the limit. The opportunities are certainly there. And American investors, resort developers, and high-end residential developers are just waiting for the opportunity to rush in, and fill the vacuum that’s been created over the past 54 years. For the resort and residential sectors,” Aguilar added, “we think Cuba will become a land of opportunity!”
To further support this optimism, Cuban-American real estate broker Pablo Tacon, who opened a new office in Havana earlier this year, called Cuba Tacon Inmobiliaria – it’s a bit more complicated than that. How complicated? There are two different ways in which Cuba’s real estate market functions; one for the locals, the other for outsiders.
Pablo tells the World Property Journal, “One market is called Permuta, which is for Cuban Nationals only as the buyers and the sellers amongst themselves, with the Permutaeros as agents; the other is for foreign investors only with particular designated properties and intermediaries.”
Translation: If you have a stomach for international intrigue, versus buying cookie cutter bull shit condos in Phoenix, AZ and would like a little excitement in your life, then the Cuban housing market just might be for you. And especially so, if you dig anything written by Ernest Hemingway and prefer tequila shots over Pina Colados.
To be clear, because this is not for the faint of heart, Cuba’s way of transacting real estate today is archaic, opaque and fragmented. Yet, given the country’s natural beauty, its proximity to Florida and the thawing political détente, vis-à-vis American Cuban relations, what’s not to like about Cuba.
In practical terms, and even with the unlikely accession of Republican Marco Rubio to the White House, can one really expect relations with Cuban to be nothing short of sunny days going forward? Likely not.
What’s the takeaway: Expect Cuba to delivery kick ass investment returns to property speculators worldwide over the immediate to near-term.
Marry a Cuban, Buy a Home?
According to World Property Journal, there is a back door way of buying homes in Cuban, albeit it’s rather unorthodox.
Another example of how some non-American, non-Cuban investors are skirting Cuban property purchase laws, involves the investor marrying a Cuban woman and both beginning to live permanently in Cuba. The property could be bought in the woman’s name. She would hold the title for life. And if the two divorce, the property remains in the woman’s name. True love would have to blossom and endear in this situation.1
Also according to World Property Journal, there are ways of entering the Cuban market in a less salacious manner, all the while maintaining your Christian values. So if you happen to be a frustrated, cash-loaded American who desires to enter the Cuban real estate arena, you may be technically hamstrung, based upon the aforementioned Trading With the Enemy Act, passed during Kennedy’s first year in office.
Here’s the skinny: There plenty’s of opportunity for under-the-table action involving Americans and foreigners.
For example, and according to World Property Journal, an American investor could consider funneling funds to a Cuban resident friend in Cuba to purchase properties and hold the title under the friend’s name.
Under this situational scenario, Raul Castro’s government – sometime in the near future of course, would allow non-Cuban Americans to legally buy real estate in Cuba with no restrictions attached. The risk, is that such a move by Raul might be many years away, which would leave the property in the Cuban friend’s name for an indeterminate period.
http://dissidentvoice.org/2015/12/investor-alert-move-to-cuba-marry-a-senorita-and-buy-flip-homes-for-free/
HAVANA, Sept. 10 It’s unclear how quickly Cuba’s economy will handle recent changes in diplomacy, but many feel it might become the best real estate investment for American entrepreneurs.
Since Fidel Castro took control of Cuba in 1959, the island nation was essentially shut off from American interests and investment. In some ways, Havana still exists in 1959 complete with old, dilapidated buildings and decades-old American cars. That’s all changing. For real estate investors, the change is very welcome
The famed Paseo del Prado, the most prominent promenade in the city, is also a location where a great deal of real estate transactions takes place. While still in the beginning stages, the emphasis on real estate in Cuba is growing thanks in part to the indomitable Cuban spirit and the opportunities as perceived by the normalization of US and Cuban relations.
Why Cuba is a Prime Real Estate Opportunity
Put simply, the Cuban people and the real estate market are ready for an infusion of US investors who can bring new life to the Cuban economy and reinvent the real estate market.
The pieces are already in place and Raul Castro, the current leader of Cuba, allowed his countrymen to start buying and selling real estate in 2011 which means that the decades of Communist doctrine in terms of private property has now changed to a capitalistic one.
Before, the citizens of Cuba were only allowed to trade property. Today, the buying and selling of private property have created a small boom in terms of home renovations as well as fixing up old hotel properties that could be rented to new tourists coming in from the US and other countries.
However, most of the real estate market is still heavily involved in renovations since constructing new buildings and homes is still very difficult given the low wages and profits of the Cuban people.
However, that could all change if there is a large influx of American tourists and investors into the country such as it was in the 1950s before the Castro regime took power. While the previous Cuban government of the old days was highly corrupt, it did allow for the construction of many buildings and homes which still exist and are used today.
The promise is that with all the new money, Cubans will start building new homes, hotels and other types of buildings, which would represent a real boom to the country in general.
For American investors, the possibility of purchasing prime beachfront properties at relatively low prices combined with the expected growing economy in Cuba represents a very large temptation. In essence, Cuba may be seen as a paradise that was closed off for nearly 60 years and now is re-opening to a new world where the profit potential is staggering.
Potential Limitations to the Cuban Real Estate Market
Currently, American can actually invest in Cuba, but only through a relative who lives on the island or through an associate that acts as their front man. However, all the legal deeds remain in the name of the Cuban purchaser which greatly increases the risk of things going wrong.
For example, a foreigner can marry a Cuban and have the right to purchase real estate while living on the island. However, if they should get divorced, the property goes to the Cuban automatically.
In fact, there are many horror stories of foreign investors trying to gain a foothold in the Cuban real estate market under the current system which has not turned out well for them at all. In addition, there is a very large question about what is known as the “right of return” issue.
In 1962, Fidel Castro seized all property that was foreign-owned which today means that there is roughly $8 billion in commercial and private property that still has claims by American citizens and corporations to sort through before the real estate situation can be fully normalized.
Considering the feelings of many Cuban ex-patriots who live in the United States along with corporations that still exist wanting their properties returned. This is a process that could take a considerable amount of time depending on the attitude of the Cuban government.
Other issues include the relatively primitive state of Cuba itself as there is no internet access on the island to any real degree. That means current real estate agents operate in Cuba with no internet as if it were the 1950s.
Plus, the market itself is still a cash-only system with many agents taking a 5% cut for their fees. This is one reason why up to 50% of the sales take place without any real estate agent to make the transaction.
Today, the Cuban real estate market is only open to Cuban citizens which in some ways makes sense as it only started up a few years ago. To subject it to massive foreign investment would be chaotic to say the least and problematic if the Cuban government decides to make changes in the middle of the process.
However, the changes in property laws as well as the expansion of the Cuban economy is already happening which means that if relations are normalized, it offers the real chance for substantial investment opportunities which would not only change Cuba into a modern society, but also reap tremendous profits for foreign investors.
The Cuban Investment Potential With the market expanding with the Cuban people and American investors chomping at the bit, the question is certainly more about when the investment can start taking place and not if.
While the normalizing of relations is currently occurring, it is important to note that the economic sanctions by the US on Cuba are still in place because that takes congressional action to lift. That will no doubt be a very important part of the equation if the Cuban real estate market will open up to foreign investment.
Furthermore, the new normalization is happening under this President’s authority which means that when a new President is elected and starts their tenure in office in January, 2017, that could all change as they would have the power to revert the US/Cuban relations to their former state.
So, there are still factors that must play out before the Cuban real estate markets can truly open up.
http://www.forbes.com/sites/omribarzilay/2015/09/09/cuba-the-next-best-real-estate-investment-for-americans/2/