Buenos Aires 2-bed villa at 3.2% gross: buy or pass?

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shareTheSignal

Property manager
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The figure that changed my view was the gross yield: only about 3.2% on a two-bedroom Buenos Aires villa priced at ARS 818,300,000. Expected rent is ARS 2,198,000 a month, so even a modest vacancy or major repair could remove much of the return.

I have allowed for management, ordinary upkeep, empty periods and a separate maintenance reserve, but I am less confident about shared building costs and how quickly expenses could move. Before deciding, I plan to verify the source and date of the rent estimate, the reserve balance, anticipated major works and which charges belong to the owner. Is there another cost or financing sensitivity that should determine whether this is simply a pass?
 
At that starting yield, there is very little room for surprises. Annual rent is ARS 26,376,000 before any costs, so taxes, insurance, common expenses and one empty period all matter.

I would not rely on the building merely looking sound. Find out what is actually held in reserve, whether major work is anticipated, and which shared expenses fall to the owner.
 
Are the purchase price and proposed rent quoted from the same point in time? Also, is ARS 2,198,000 based on an existing lease, a manager’s estimate or comparable listings?

Without knowing how that rent may change over the lease and how quickly expenses can move, a static 3.2% calculation might conceal more than it reveals.
 
That distinction is important. I’d also separate costs into recurring and irregular items rather than using one broad percentage. Put property tax, insurance, management and shared charges on individual lines, then model vacancy, turnover work and major repairs separately. Otherwise a generous maintenance allowance can still miss a specific large building charge.
 
I’ll push back slightly on treating 3.2% gross as an automatic rejection. A buyer might accept low current income for personal use or a strong view on the property’s long-term value. But if this is meant to stand on rental cash flow alone, the deal needs a compelling reason to tolerate such a narrow margin.
 
Tenant turnover may be the underestimated cost. Vacancy is only one part of it: there can also be cleaning, repairs, marketing and management time between occupants. Run a scenario where a departure causes both lost rent and a lump of turnover spending in the same year.
 
I’d add that estimates are not enough for property tax and insurance. Ask for the current bills and get an insurance indication for this particular villa. Those figures may not predict future costs, but they give you a much better starting point than a generic percentage of rent.
 
Is this an all-cash purchase? Financing could change the answer completely. With only 3.2% gross, even modest borrowing costs or repayment obligations could turn a merely low-yielding property into persistent negative cash flow. Test several financing assumptions rather than using only the expected loan terms.
 
I’m confused by the description of a villa alongside “building reserves.” Is it standalone, or part of a managed complex with shared structures and common expenses? That changes the due diligence. For a shared property, I’d want clarity on reserve balances, upcoming works and how costs are allocated among owners.
 
Rather than choose a target net yield in isolation, I’d build three cases: normal occupancy, a turnover year, and a year with a significant repair or shared assessment. Use the same rent in each, then vary only the relevant costs. If the downside case requires repeated cash injections, decide whether the non-rental upside genuinely compensates for that.
 
Agreed on scenarios, though I wouldn’t keep rent identical if the purpose is stress testing. One case should include weaker-than-expected rent as well as vacancy. Expected rent is not contracted income unless there is already a lease, and even an existing lease does not answer what happens at the next turnover.
 
Currency treatment also needs to be consistent. Compare the ARS 818,300,000 price, ARS 2,198,000 monthly rent and operating expenses at the same date, then state whether your required return is being judged in pesos or another currency. Mixing nominal rent growth with a return target measured elsewhere can make the spreadsheet look stronger than the economics.
 
So the next step is not choosing an arbitrary acceptable net yield. First confirm whether the rent is actual or projected, clarify the shared-building arrangement, obtain current tax and insurance figures, and get realistic management and turnover estimates. Then rerun the cash, financed and downside cases consistently. If 3.2% gross still depends on optimistic assumptions, the margin is probably too thin.
 
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