Nicaragua: Overview

RENTAL YIELDS

Yields are good

Rental yields are generally good in Managua. Yields on houses are around 7.7% to 8.7%. Prices for houses are around US$500 to US$800 per sq. m. Rents are around US$5.50 to US$7 per sq. m., with yields of about 10.5% to 15%.

Read Rental Yields  »

TAXES AND COSTS

Rental income tax can be high in Nicaragua

Rental Income: Income earned by non-resident individuals on Nicaraguan-sourced income is taxed at progressive rates of 10% to 30%. For rental income, 70% of the gross rent is taxable (consequently, only 30% of the gross rent can be deducted).

Capital Gains: Capital gains earned through selling real estate properties in Nicaragua are taxed at the ordinary income tax rates.

Inheritance: Inheritances and gifts are taxed at the ordinary income tax rates.

Residents: Income tax for residents is levied on Nicaraguan-sourced income only.

Read Taxes and Costs  »

BUYING GUIDE

Total transaction costs are moderate in Nicaragua

The total round-trip transactions cost is around 10.5% – 15.5%, inclusive of the hefty real estate agent fee that goes from 5% to 10%. The total cost of registering property is about 6.5% of the property value. The seven procedures needed are completed in about 65 days. However, the lack of clear title on some properties, both urban and rural, is a major consideration for investors.

Read Buying Guide  »

LANDLORD AND TENANT

Rental market practice is pro-landlord

Nicaragua’s rental market legislation is generally pro-landlord, being very supportive of what the parties have agreed in the written contract.

Rent: Rents and rental increases can be freely agreed by the parties involved.

Tenant Eviction: A problem though is the litigation process for tenant eviction, it can take years with no guaranteed favorable results.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Catching up with economic growth

Daniel Ortega won his second term in Nicaragua’s November 2006 elections. He led the Sandinista movement during the civil war in the 1980’s against the US-supported Contra rebels. From the 1990 elections in which he lost, Mr. Ortega has come back to lead Nicaragua again after 16 years.

Nicaragua (pop. 5.7 million, GDP/cap US$906), a land of lakes and volcanoes, is considered one of the last frontiers in the Americas. Plagued by negative media coverage during the 1980’s, this Central American jewel is Latin America’s best kept secret, with its precious landscapes and colonial towns.

Though the country is still struggling to overcome the consequences of dictatorship, civil war and natural calamities, Nicaragua is now a peaceful country. Its government is democratically elected and has been pardoned 80% of its National Debt. Nicaragua has achieved a large degree of economic openness, due to a government focus on liberalization and privatization, and is very eager to attract foreign investment.

Peace has brought some economic growth, lower inflation, and lower unemployment. It is the fastest growing economy in Central America with an average GDP growth of 4.15% from 1995 to 2005. The growth was partly spoiled by Hurricane Mitch, which in 1998 rendered 20% of the population homeless, and caused billions of dollars worth of damage. The inflation rate is at 9% in 2005, down from 3,000% in 1990 and 13,109% in 1987.

But improvements are still badly needed. Real GDP per capita in 2005 is still 33% lower than its 1981 level. About 40% of the population is still below poverty line. Inequality is still high and concerns of the indigenous population are not adequately addressed.