My scout, Ciaran Madden, has just returned from a two-week trip to Uruguay.
He was there to scout the beach resort city of Punta del Este and its surrounding towns. He tracked the path of development east to Rocha, a region of remarkable and unspoiled natural beauty, and a place where the elite are now looking to as Punta and the surrounding towns get busier and busier. And he went inland to look at opportunities to own farms and farmstead homes.
But before all that, he spent time in Uruguay’s trendy capital, Montevideo. That’s where he uncovered an incredible opportunity—a way to own for less than $200,000 and earn a massive rental yield…
Uruguay’s capital of Montevideo is a walkable, modern, prosperous city with leafy plazas and glistening in-city beaches.
During his trip, Ciaran has filled our internal team WhatsApp group with photos, videos and listings. But last week he dropped something in there that blew it up.
He discovered an opportunity that was so good, I rushed it out to members of my Real Estate Trend Alert group as a matter of urgency.
As well as bringing my RETA members off-market deals, I also share with them one-off, urgent deals that my team find as we are scouting. (If you’re not yet a RETA member, but would like to hear about all the deals I bring to our group, you can join here.)
Ciaran shared this photo of Pocitos beach in the heart of Montevideo, Uruguay’s vibrant capital. Montevideo has been ranked as the most livable city in all of Latin America and the Caribbean.
Montevideo flies under the radar, but this is one of the world’s most vibrant capital cities. It has stunning colonial architecture, a huge number of leafy parks and inviting plazas, and glistening golden-sand beaches right in the heart of the city.
This is a walkable, attractive, livable place…a capital befitting safe, stable, prosperous Uruguay. Indeed, last year financial services company Mercer ranked Montevideo as the city with the best quality of life in all of Latin America and the Caribbean.
On the eastern side of Montevideo’s main commercial area, Centro, is a district called Cordón. An area of Cordón spanning several blocks is undergoing rapid gentrification. This is the result of a pattern we’ve seen play out time and time again in cities around the world…
Students began moving into this area for the affordable rents and over time made it a trendy place to be. Today it’s dotted with gourmet coffee shops, craft beer bars, small art galleries, pottery workshops, quirky antique and lighting stores…
Along the way, this area earned the nickname Cordón SoHo.
The leafy Cordón SoHo area of Montevideo is one of the city’s up-and-coming neighborhoods. Today, it’s a vibrant mix of trendy businesses and modern condo developments aimed at the young professionals who want to live in this area.
This area is now a sought-after place to live among Montevideo’s young professionals. Developers are erecting stylish, amenity-rich condo communities to serve this crowd. You’ll pay $150,000 or more for a cramped, 600-square-foot condo in one of these new buildings (this listing is an example).
But Ciaran found another opportunity here…
In the heart of this area, he went to see a traditional home on the market for $198,000. It’s a three-bed, one-bath house spanning 1,500 square feet.
Here’s a walkthrough video Ciaran did of the property. Be sure to watch right to the end to see the kicker…an entire roof area that can be converted into income-earning rooms or studios.
This traditional home in the trendy Cordón SoHo area of Montevideo boasts big rooms, high ceilings, and an attractive skylight. Click to view Ciaran’s walkthrough of the home…
This house offers a few opportunities…
The layout of this property—with its long corridor adjoining large rooms with high ceilings—is ideal for converting it into several short-term rentals or studios.
This home is one-story, but as I say, it also has a large, accessible flat roof. This means there’s the potential to add an additional floor with two or three more rental units. So, with renovation, you could have a four- to six-unit building in the heart of Montevideo’s trendiest neighborhood.
Short term rental rates in the Cordón SoHo area average around $50 to $80 per night, with rates varying depending on the season. According to AirDNA, annual occupancy rates for short-term rentals in Cordón are about 55%.
Say you spent $150,000 on renovations and converted the home into four units, then at $50 per night at 55% occupancy, you’re looking at a gross annual income of $40,150, or a gross annual yield of around 11.5%. (The renovation cost is a rough estimate. It would be advisable to get a quote from an architectural firm before proceeding with this opportunity.)
Here’s the kicker. The current short term rental rates for units like this are wildly low. I’m working on understanding what’s going on…but early indications are that Uruguay, and Montevideo in particular, (despite being generally open through COVID) took a significant hit from which it’s only now bouncing back.
Unlike our other places where real estate values and demand soared in those COVID days Uruguay’s tanked. If my thesis is correct, this would make this the buying moment of a lifetime in Uruguay.
As gentrification rolls through and more people visit, rates, occupancy, and values will soar. Nightly rates here could comfortably treble and still be relatively modest. Treble nightly rates even without increasing projected occupancy and you could gross a whopping 34.5%.
Another way to organize this property that could generate even higher returns is to add 4-6 en suite bedrooms upstairs and make this a 8-10 room guesthouse. With today’s tech, that can mostly be operated on a self-check-in and check-out basis with limited need for a team to operate it beyond a caretaker and cleaning staff.
There’s also the long-term rental option. One of Ciaran’s contacts in Montevideo told him converted traditional homes like these have big appeal to the young hipster set that enjoy living in this part of the city. Long-term rents for new or recently renovated studios in Cordón SoHo start at about $450 per month and go up to about $700.
And there’s another potential kicker with this house…
The exterior of the traditional home that Ciaran viewed in Montevideo.
Either side of this one-story home and its neighbor, there are large apartment buildings. The agent who introduced the property to Ciaran said this home and the neighboring property have not been converted into an apartment building because the neighbor point blank refuses to sell (you’d need the land area of both to make an apartment project viable).
If that changes—and as this area continues its upward trajectory—you’d own something that could have developers banging down your door.
To find out more about this property, and to get the contact details of the listing agent, you need to be a RETA member (just like with my off-market deals, flash deals are also for members only). You’ll find all the details for joining here…and don’t forget, when you join RETA you’ll be the first to hear about all the opportunities my team and I uncover around the world.
Ronan McMahon, Founder, Overseas Dream Home & Real Estate Trend Alert
P.S. Note: We haven’t conducted due diligence on this real estate agency or property. We always recommend that you hire an attorney to carry out due diligence on any overseas real estate purchase.
