As in all parts of the world, renovating or redeveloping property in Buenos Aires is a rewarding process. As an individual you can create a tailor-made home or as an investor you achieve healthy returns with product differentiation in the market.
Before beginning the redevelopment process it is essential to have an effective strategy in place, with a professional and knowledgeable oversight team. There are three phases in the development process that need to be managed to help ensure a successful project: Pre-Development, Construction-Development, and Post-Development.
People are naturally attracted to property in Argentina because of the unique nature of the market. Property is purchased in US Dollars in cash, meaning that people rarely use mortgages and the low cost mortgage culture of much of the world has passed Argentina by. The Argentine mentality towards property is very positive. Following the economic crises of recent years the 'portenos' (as the residents of Buenos Aires are known) prefer to have their funds locked away in traditional bricks and mortar, rather than invested in financial institutions.
The most challenging phase of renovating a property is devising a plan to encompass all aspects of the renovation process. When selecting potential projects in Buenos Aires it is important to identify undervalued and under-utilized real estate, especially in areas experiencing an increase in demand.
Not all properties are opportunities and some should not be considered for renovation. The property may have an ill-conceived floor plan layout, poor architectural features, or be in such bad condition that renovation costs would make the project unfeasible. You must understand the general price level of local property, thus ensuring that you are not overpaying for the acquisition of a particular building. A solid understanding of the post-construction value of your property compared to that of the market is also fundamentally important.
When building on an existing property or lot, there are certain restrictions that must be adhered to. Two significant regulations are the F.O.T (Factor de Ocupación) and F.O.S. (Factor Ocupación del Suelo), which determines the number of square meters one can build on in that particular lot.
Creating a preliminary budget for acquisition and renovation costs is a key step in determining project feasibility. To create a realistic budget you should have an idea of the local construction prices for labor and materials, and know all relevant professionals in order to successfully carry out renovation.
Developing a successful project can best be accomplished by selecting a competent team. That is to say, one must be selective and astute to recognize the talent of individuals involved in the renovation process. Especially in foreign countries, it is best to choose individuals and companies who are referred to you and/or have a proven track record. It is prudent to ask for references and to follow them up, visiting previous projects to discuss the quality of work carried out.
Another important aspect to a successful project is securing the appropriate building permits and fulfilling the necessary due diligence in order to legally begin construction. Depending on the size of the project an “aviso de obra”, or the notice of construction, may be required. The main governing body in Buenos Aires to secure the necessary permits is the G.C.B.A. (Gobierno de la Ciudad de Buenos Aires).
Perhaps one of the most critical parts of the pre-development phase is the proper management and negotiation of contracts. As the owner of the property you will want to make sure the risks of the projects are borne by the correct party. Discussing potential issues that may arise during construction can help eliminate confusion and disputes in the future. In Argentina some people may put less emphasis on the matter; however it is advisable to put in writing the definition of the scope, purpose, objective and plan of execution of each contract. It is important to be able to monitor deviations on contracts, and state who will have jurisdiction or whether to hold arbitration in the event of disagreement. Consult on legal issues with an attorney before agreeing to any contract.
In this phase of development, communication between all parties involved is critical for project success. A plan of communication should be developed. This is particularly important in Argentina where the language barrier must be overcome. The whole team must be properly informed on relevant information about the project’s status.
When redeveloping a property, important decisions must be made about the nature of the various obstacles that can arise during construction. Control of the construction costs and monitoring of the budget with detailed records of project costs is vital for ensuring the appropriate funds are available for project completion.
Certifying project costs and reviewing the quality of workmanship and materials must be done on a continual basis, in order to keep the project under budget and have a well-constructed finished product. Another important aspect is to constantly review and preside over the construction schedule. In Argentina there is a more relaxed attitude to time and deadlines than in most Western countries. Therefore paying close attention to the pre-established benchmarks that are to be realized is even more important.
Architects in Argentina are often contracted to perform design services as well as the duties typically performed by the contractor. Both architect and contractor can act as project director. In both situations the architect or the contractor will be responsible for the labor force, and it is important that they have the necessary insurance and are held liable for the workers on site.
As the project nears completion, a very thorough review of the project will need to be organized to ensure that the proper “punch list items”, or final finishes and corrections, are correctly carried out before the project is handed over to the owner. Professional scrutiny and review are needed, to be sure that the project is built exactly along the lines of the architectural plans.
The post construction phase involves a review of the overall development process, carried out by your project managers. This is then presented to you on successful completion of the renovation.
Despite the various factors that need to be considered and managed, there are countless benefits of going through the redevelopment process. Having a home that is unique to one’s tastes and style, with beautiful architectural features, is unquantifiable. And if your goal is to rent the property, you will have a very competitive and distinct space that renters are willing to pay a premium for.
This article has been submitted by Design Developments. Design Developments provides comprehensive real estate development services that seek to increase the wealth of clients by investing in undervalued real estate in Argentina. For further information go to www.designdevelopmentsgroup.com.