Contrary to what most foreigners think, here in Bolivia there are actually very profitable investing opportunities, but those are not the ones that you may be thinking of right now. You will find that in this country some fields have advantages for investment purposes, but others have to go through a lot of hassles of different natures, like the law system, behavior of the people, market size, tax avoidance, informal businesses, etcetera.
To invest in Bolivia you have two highly profitable options: 1) investing in real estate and 2) investing in small one product/service companies that target high income people. Large companies, franchises, importing and general product businesses, most of the time, will fail in this country.
If you are a foreigner, finding the best strategies to invest in Bolivia may be difficult. We will try to clarify this topic to you in this article, we will be talking about which are the best investment options you have, and also the worst ones. We are real estate experts and people that have lived here all their lives.
Disclaimer:
All the knowledge that we are going to share with you comes from experience and our point of view of the real estate in our country. We are real estate experts from Bolivia that have lived here our whole lives, so we think we can bring a valuable point of view for you to make better decisions.
The best investments you can do as a foreigner
What is a great place to invest in certain fields and areas but is one of the worst for other fields and industries, you need to know which areas may bring you the best of your money and which ones are not the most suitable for people from overseas like you.
A) Investing in the Bolivian real estate market
After trying different kinds of business and also see how native people and foreigners perform here with their companies and ideas, we have come to the conclusion that by far the best way to invest in Bolivia is in the real estate field.
Why? Well because for the following reasons:
- Bolivia laws and institutions have a well established system to protect real estate property and owners rights. Contrary to what people from overseas think, once you own a property here in Bolivia it’s almost impossible for it to leave your hands, if you take the necessary precautions the property will not have troubles and will bring you equity and rental income. Also, no matter if you are from overseas, or a Bolivian citizen, laws here apply the same for both kinds of persons.
- It’s not necessary to be very savvy in this field to make real estate investments in Bolivia. You don’t need to be an MBA professional or something like that to invest in real estate in this country, actually many bolivians without any knowledge invest in properties here. Caution: you really need to know how to do all the paperwork or you may get the target of scammers!
- You can start with just $10,000. Urban properties can go down to even 3,000 in sales price. Most of these properties will be new urban land lots, but also you can find one bedroom apartments for just $20,000 or $18,,000
- Bolivian real estate properties only go up in price. The real estate market in Bolivia is very profitable, our population is only increasing and a lot of people from rural areas are moving to urban areas. This drives the situation that almost any property in urban areas is just increasing in price, no matter the fluctuations of the market.
- You don’t need to have a company to invest in real estate. You can invest in real estate as a natural person here. You don’t have to pass through the hussle of creating a Bolivian company, which we really don’t recommend. The laws and bureaucracy are high for companies and businesses in Bolivia.
- Properties can go from just $3,000 to more than 1 million, just like in developed countries. You have a wide range of real estate properties in which you can invest from land lots for about $3,000 to the best houses and buildings in the most exclusive areas for about 1 or 2 million dollars. Even more, the price per 1 ft2 can go up to $150 in the best neighborhoods.
- The taxes are pretty low for real estate investment. When you invest in real properties you only will be paying between 0.01% and 0.001% of the market value of the house for ownership taxes on an annual basis. You will also need to pay around 16% of the rental income in taxes each month. If you invest as a natural person, you will only need to pay an additional ~5% in income taxes.
- There are also other advantages that we will discuss later.
There is a following section when we describe in detail all these reasons and why investing in real estate in Bolivia is the best investing option that you have available right now. You can jump to this section.
As you can see, this field is very beneficial for investments at this time in Bolivia. That’s why we also have chosen this field to conduct our activities. You have a lot of advantages no matter if you are Bolivian or from overseas, because laws apply the same to both types of people.
Some documents and paperwork change for foreigners, and also they can’t buy rural properties, but these are minor issues you can fix easily. The real business in Bolivia is in the urban properties, that’s where the money is, also, the majority of Bolivian people live in urban areas.
B) Running small highly targeted businesses
Another good option to invest in Bolivia is to create small businesses or companies that are focused on one very specific product, service or one very specific, all of them need to target high income people. Here we are talking about companies valued from $50,000 to $1 million, with any small team of employers, between 3 and 10 members.
Why to build companies this way in Bolivia? Well because of the following reasons:
- Commodities and basic products cost almost nothing in Bolivia. A slice of bread costs here $0,07 and an apple $0.15, you can buy all the groceries you need with just $50 for all the upcoming month. The same is for common clothing, entertainment, transportation, internet services, etcetera. Now imagine you create a large company to serve this kind of goods here, you will just earn a little money by this way.
- High income people and foreigners living here really support well targeted businesses. People who live in the most exclusive areas and neighborhoods (where also a lot of aliens live) are most of the time rich people that can afford advanced, luxury or first world products and services. These goods can have the same prices as in a small town in a developed country. Then, creating small businesses that target high income people in Bolivia will bring you the most return without the need to invest too much (between $50,000 and $1 million of investment).
- The market is very small for general products or services. Also, the market in general is very small, most of the Bolivian people are poor and can’t afford other goods than the general ones necessary to live. You can compare all the Bolivian market to the accusation and buying power of a 500,000 population city or town of the United States. Also, very high income people in Bolivia (like avg. income people in developed countries > $3,000 a month) represent only ~4% of the population here, so this high income market will be of around 200,000 folks here.
- Once you get bigger the bureaucracy and culture here becomes more resistant. The government in Bolivia is socialist and it has been this way since 20 years ago. It’s also difficult for large businesses to do their paperwork and their activities here, a lot of social conflicts arise from time to time, strikes and work stoppages are common, taxes are often avoided and because of this, informal businesses have an advantage over large formal businesses, also really big companies became the target of bad people and corruption, and so on.
- Certain Bolivian laws protect the employers too much. Here it’s very difficult to fire an employer, you just can’t fire someone without any consequence, you will need to pay a lot of benefits for just 3 months of working, also out of syndicates arise for a lot of different industries. People try to be in the same company for a lot of time and companies are afraid of the possible legal problems that arise between them and their employers. Also informal employers are everywhere and they only benefit informal businesses. Large companies have an important financial disadvantage, because they need to pay benefits taxes for employers etcetera, which informal businesses don’t pay.
- Qualified employers are not easy to find, scaling is difficult. Almost no business or company from Bolivia is competitive in the international market. One reason for this is the Bolivian employers are most of the time not very competitive, they are not well prepared to handle the demands of an international market. We have found that most of the time the services and products that are produced here lack the best quality that a first tier country may expect. Then if you want to offer a work-class service or product producer here you will have issues with scaling.
We have seen this phenomenon in Bolivia all the time, people from overseas came and create a small businesses, for example:
- Specific & special food restaurants.
- Small supermarkets.
- Branded clothing & fashion stores.
- Innovative spa & beauty services.
- Other services from small companies you can find in a common town of developed countries.
These businesses with narrow-targeted products or services focused on high income people in Bolivia (around 200,000 folks, 2% of the population) need to be placed in exclusive neighborhoods of this country, where the market for these goods really is.
We have seen it a lot of times, a foreigner comes from overseas and creates a small targeted business with an idea that hasn’t been applied to the country yet. Then, Bolivian people think this is an innovation, but it’s just a first world product or service that didn’t exist here until that time.
Real estate is the best field to invest right now in Bolivia
In the following list of pros we will discuss all the advantages that investing in real estate in Bolivia can be the most profitable type of investors you can do in the present in this country.
This section is based on a complete and very detailed guide written in Spanish about how to invest in real estate in Bolivia. Try to read it to know everything about this topic, in the following direction: Translated Link.
1) It’s a set and forget investment
The paperwork to buy a house in Bolivia is certainly complicated, but once you have the ownership of the house in Bolivia, you don’t need to worry about almost anything. It’s like a set and forget solution. You will need to change the tenant every few years (2 to 4 years) to avoid possibly legal appropriations but that’s all.
Also, is a common agreement in Bolivia that the tenant is responsible for the maintenance and repair in the house. So, you won’t need to worry too much about maintenance, most of the time the tenant should give you back the property in the same conditions as when you rented it. You also can pay the house taxes online or with your representative.
2) It’s safer that most people think
Local laws and the real estate government system protect very well the ownership of properties here in Bolivia. Also, people tend to avoid legal real estate troubles in this country at all costs, because these troubles and lawsuits can last for multiple years and can cost thousands of dollars, money that Bolivian people mostly don’t have.
Then, for this reason it’s very difficult for someone to conduct a legal conflict here to try to steal your house from your hands. Also, if you have all the paperwork well done for your property, you can well defend your ownership in the legal system Bolivia, but most of the time these legal conflicts don’t even appear because as we said, they are very costly and not affordable to conduct for scammers.
3) The house taxes are very low
The taxes you are going to face for having the ownership of a house will be:
- A 3% of the sales price paid in taxes when you buy the house.
- 0.01% to 0.001% ownership house tax over the price of the house you need to pay annually
- A 16% of the monthly rental income you receive that you need to pay every month (VAT rental tax).
- For natural persons sometimes around an extra 5% to 10% in taxes of the rental income, paid every quarter.
As you have seen most of the time the percentage of your rental income that goes to taxes in Bolivia will be no more than 20% and most of the time will be around 16% or 17%.
4) You can start even with $10,000
There are new land lots available for as low as $3,000 in the edge of the Bolivian cities, but the average price of these properties are around $10,000. Some of them may already have a construction inside, and in other lands you will need to build a home for the tenant, who will also take care of this house.
There is also the possibility of buying 1-bedroom apartment units for just even $20,000, and if they’re still in the project phase, you can finance their construction, and with this you can obtain a discount for their purchase, getting the apartments for price down to $18,000 or less.
5) The real estate market is not well developed in Bolivia
You will find a glove of great opportunities here because we don’t have a clear real estate market. There is a lot of asymmetric information both on the side of the sellers and the buyers.
So if you will need to evaluate hundreds of properties to get a good deal in first developed countries, you will find what is way easier here to get a good offer. People in Bolivia are not yet well versed in real estate as in other countries, where it’s a trending topic right now, so owners here many times lack the right tools to properly appraise their houses.
In summary, it is a lot easier to find good houses to sell or to rent in Bolivia because the market has a lot of hidden opportunities.
6) Properties in Bolivia only go up in price
You may not believe this statement but it’s true we will explain you why:
- In Bolivia the population is increasing at a very high pace. In 2000 we were only 8 million of Bolivians, now 20 years later we are almost 12 million, a 50% increase in this period of time.
- A lot of people are migrating to urban areas and cities like Santa Cruz or El Alto. This means that all the properties that in the past were on the edge of the cities now are in the middle or even in the center of these cities, and this situation increases the sales price of the properties.
- Bolivian GDP is increasing at a rapid pace. Our GDP is increasing at between 3% to 5% per year since more than a decade ago, this means that with this increase in wealth, all the Bolivian real estate properties are increasing in value as well.
All of the above reasons drive to a phenom that no matter how or what are the fluctuations of the real estate market in Bolivia, the baseline prices and the intrinsic value of the houses and properties here are only increasing in value.
The average rate of value increase for a property in Bolivia to 5 years in the future is around 1.5. This means that a house today appraised at $100,000 in 5 years can have a price of $150,000. This range goes from 1.3 to 1.7 in most of the cases, with the new land lots having an average of 1.7.
7) The monthly rental income is acceptable
Real estate houses and apartments in Bolivia have gross rental annual income that ranges from 4% to 8%. This means that if you buy a $100,000 house here in Bolivia, you would expect to get between $4,000 and $8,000 per year, and earn a net income of about $3,000 to $6000 per year from this property.
Remember that to get a loan from a Bolivian Bank, you need to live permanently here and have a job with which you can prove your earnings. Banks are not used to approve loans for foreigners. Also, interest rates for mortgages are in the range of 8% to 13%, this is why we encourage you to buy a property here with only your money.
8) You don’t need to have a company to invest in real estate
There is no requirement to start a company to buy a house for investment purposes here in Bolivia, under your own natural name you can have the ownership of a property here. This is important because natural persons in Bolivia pay very little income tax (in the range of 5% to 10% of their income). Companies pay 25% of their net income in taxes.
It’s also a lot easier to manage your property in Bolivia, because you don’t even need to hire anybody, just make the deal with the tenant, who will also take care of your house (always sign a public need for the rental!), receive the rental income, pay the taxes, replace the tenant every few years (every 2 to 4 years) and that’s all.
9) Properties can go from $3,000 to more than 1 million in price
There are properties suitable for investment budgets, you can’t invest from $3,000 (with a lot of risk, because you won’t have money to build a house for a tenant, you will just get the land) in new land lots on the edge of the cities, to 1 million in a house in the most exclusive neighborhoods of Bolivia.
You also have the possibility of financing the construction of a multi-family building or high-rises, getting discounts with this as we said before. Then, you have all kinds of real estate properties in Bolivia that can meet your investment needs. In summary, you can buy new land lots, tiny houses or apartments, average houses, exclusive and luxury properties, business premises, etcetera.
The downsides of real estate investment in Bolivia
Most of the time you will need to pay with pure cash, bank loans in Bolivia are not the best to finance real estate investments, they have incredibly high rates of 8% to 13% per year, getting you with almost no positive cash flow left in almost all the cases.
You will need to do the things right or you at at the risk of being scammed. We told you that once you own the house with the proper paperwork done, it’s a very safe investment. Another story is when you are buying the house, here is where the risks of being scammed or received by unethical people are. We have a complete guide about how to buy a house in Bolivia, just follow the link.
Also you need to have a lot of care when renting your property in Bolivia, you really need to avoid squatters and illegal occupations, which are very common in our country. To achieve this, you always must sign up a public deed for the rental with the tenant, and also always pay rental taxes. We have a detailed guide about how to rent a house in Bolivia, visit it on the link.
The worst investments you can do in Bolivia
The following are according to our point of view the worst investments you can do in our country, we will detail why this is the case.
Investing and creating large companies
As we have said large companies go to a lot of hassles here, a tiny market, a lot of poor people, a socialist government, too much protection for employers, foreigners are not well supported, commodities and basic products are really cheap, informal businesses dominate the market, people is a accustomed to avoid import and business taxes, and so on.
You will face an unfair competition against informal businesses, such as Starbucks or similar large companies, which simply lost almost everywhere but most exclusive neighborhoods in the market against little fast food informal shops.
Creating general product companies
As we say before commodities and basic products are really cheap in Bolivia, also the market is tiny. It’s also dominated by well settled behaviors of people that are accustomed to buy unbranded clothes, groceries from ant markets, cell phones from informal wholesale stores, etcetera.
If you invest in this field you will earn a little money, maybe a few thousand dollars per month, but you will face incredible challenges as if you were funding a startup in a developed country.
Importing goods to Bolivia
Avoiding import taxes is a huge problem in Bolivia, almost all sellers and majorists don’t pay taxes when they import products to our country. Formal importing companies face huge and unfair competition, because they are obligated to pay taxes for the fact that they are formal and legal businesses.
If you don’t know how to properly do this, you will lose money in this industry all the time here in Bolivia.
Running franchises from worldwide known companies
With the exception of very profitable companies, creating a franchise filial in Bolivia many times won’t work. One exception to this general fact is real estate, where ReMax and Century 21 are doing very well here. But franchises related to food, clothing, entertainment, transportation, etcetera have the odds of mostly failing in this country. As you may notice McDonald’s, Burger King, Subway, Walmart, eBay are nonexistent here.
If you want to open a franchise in Bolivia, remember to do the best market research possible and find out if it may be profitable.
Final words
In this extended note about how investment in Bolivia works, and which are the best ways and worse ways to invest here, you have learned that the two best strategies to invest in this country are in real estate and with small well targeted businesses.
You’ve known that, from our point of view, real estate is by far the best field to invest in this country and this is the type of investment most suitable for foreigners, because it is a set and forget solution that won’t require a lot of your time to be managed. It also has a lot of advantages. The most important one is that real estate properties here go only up in price throughout the time.
You also have seen that businesses which have one product or service well focused on addressing a need of high income people can also be very profitable, but they are not going to escale beyond 1$ million value in most cases. On the flip side, you have seen that large companies have all the odds to lose and fail, because Bolivia has a tiny market with a lot of low income people.
As you have seen, other business models also struggle with a lot of bureaucracy, a government that is socialist, competence with informal businesses with unfair advantages, task avoidance, a tiny available market that is comparable to a 500,000 population town of a developed country, behaviors of Bolivians that are used to buy from ant markets and informal companies, and so on.
We encourage you to deeply analyze your future investment in our country and also highly consider investing in real estate. There is a reason why we have chosen this field for us too, it’s a great way to go.
We hope this information has helped you and if you want to know how to buy a house in Bolivia, visit our dedicated guide: Buying a house in Bolivia, all the steps and risks.
BolivianExperts.com, information about how to live, work, invest and travel in Bolivia.
