Dollars vs Purpose: Working Locally vs Remotely in Ecuador

Dollars vs Purpose: Working Locally vs Remotely in Ecuador (Script)

Jason    00:00 

Did you know the average salary in Ecuador is around $850 per month? Compare this to the US where it’s around $5000 per month and you immediately see some cost of living advantages if you’re earning a US-style wage whilst living in Ecuador. But surely the case for working remotely can’t be that simple, can it? If it was, why would I be working so hard to grow a business in Ecuador? Maybe I’m just slow or a glutton for punishment. Find out as we explore the financial pros and cons of working locally in Ecuador versus working remotely. Vamos.

Jason    00:37 

Let’s start by exploring the case for remote work. It’s a very strong proposition from a purely economic perspective. The average monthly US salary is almost six times what the average Ecuadorian earns via formal employment. So straight up working remotely gives you a six times better return on your time. But I’d take this a step further and say that dollar for dollar, it’s significantly harder for most expats to make money in Ecuador compared to working remotely. I’m going to use our real estate business to demonstrate this shortly.

Jason    01:12 

But first a quick side note on Ecuadorian basic and average salaries. For this video, I’m largely talking about average salaries of formal employment. That is employment legally registered with the IESS. Expats sometimes confuse the average salary with the basic salary. The basic salary changes every year and is the lowest amount someone can be paid via formal employment. It’s currently $460 in 2024 and this is almost half the average salary. And this doesn’t include the very significant portion of the informal workers that generally earn less than the basic salary.

Jason    01:54 

So you already have a six times advantage by working remotely. But let’s dig deeper. Let’s talk about how much effort it takes to make money in Ecuador. I’m going to use my circumstances to demonstrate this as I think it is a very good use case. I’ve worked remotely for US clients before and during my time in Ecuador, but I’ve now transitioned mostly to growing our Ecuadorian real estate business. For simplicity, let’s focus on the rental component of the business.

Jason    02:25 

There are some expats that do work in the rental market in Cuenca and other cities of Ecuador, and rentals do provide consistent income. But it’s certainly not for everybody it’s very labour-intensive and scrappy. You’re competing against agents that have zero moral or ethical considerations and if you’re like us and actually care about your clients, the renters, and the landlords, then you will be at a considerable disadvantage straight up because your time will be spent on providing a quality service rather than looking for the next quick buck.

Jason    02:58 

Sorry, that ended up being a little bit of a rant. Thanks for bearing with me, but you do catch my drift. It’s a different sand pit that you’re now playing in and now you either learn the rules or you create your own sand pit.

Jason    03:11 

Let’s break down the rental numbers to come up with some sort of effective hourly wage. As I mentioned, it is very labor-intensive to work in rentals. Getting the listings is difficult there’s no easy steady supply of listings that we can tap into like the MLS or similar. They all need to come to us either through our relationships with landlords, our general friends and family network, other agents, or physically visiting the apartment or house to get details of the landlord and then hopefully list it.

Jason    03:41 

But then we do actually need to physically list it. This can include multiple conversations with the landlord, visiting the property multiple times, getting any repairs made, taking photos, and videos, uploading this listing to our websites and social media, and running newsletters that the list goes on. In short, we need to do a lot of work. So now that you have the listing, you need to find the tenants. We’re lucky at Yapatree because we are well-known by the audiences that rent through us. But if you’re just starting out, this is going to require a lot of effort to be known and gain trust.

Jason    04:18 

Then we have to physically show the property and close the deal. This includes helping with the notarization of the contract and basically ensuring that the landlord and tenants are clear on their expectations. I’d suggest general expectation management, especially for expats is the most important part of the process, but it’s also where most of the agents here really struggle with.

Jason    04:43 

So now we have the deal done, it’s signed, sealed, and delivered. How much time have we spent on this one deal? Now each property is different, some are very easy to rent, whilst others are targeting a much smaller audience, etcetera. But now on average, we spend around 28 resource hours renting one single property. And how much income did we receive for these 28 hours of work? For long-term rentals in Cuenca, we are paid one month’s rent as a commission when leasing a property for 12 months. But around half of our listings are rentals shared with other agents, so we share this commission too.

Jason    05:25 

Now let’s assume that the average monthly rent for these properties is $600 but we share listings 50% of the time. Let’s quickly do the maths on that. So let’s assume we have 10 rentals, 5 that are full commission and five that are half commission because we’ve shared those with a different agent. And the price we’re renting at – let’s assume it’s an average of $600. So we’ve got 3000 + 1500 dollars, which is 4500 commission for the 10 properties. Divide that by ten and we have $450 income per property.

Jason    05:57 

But it took us 28 resource hours to achieve it and that gives us an effective hourly rate of $16, which is actually really quite good for Ecuadorian standards. But this is really one of the best-case scenarios because it doesn’t factor in substantial real-world risks such as the time spent on all the listings that were never closed, tenants that ultimately don’t rent through us, landlords deciding not to pay commission, time spent for any mediation between landlords and tenants, staff training and the list continues. This increases the overall time spent on each successful rental to 44 hours, reducing our effective hourly wage to 10 dollars, 22 cents. Now this is before allowing for the 12% IVA which needs to be paid, which pushes the hourly wage down to $9. So the end result of all this work and all this risk is $9 per hour.

Jason    07:01 

Now still, it is not a terrible local salary by any means, but I am going to bet that you can earn more income with less risk by taking the most entry-level of online or remote jobs. Teaching English, customer support, content writing, and other entry-level jobs all generally pay more than this. But if you have a remote skill that is in demand, for example, digital marketing strategist or developer, then you’re looking at significantly more. Something like $50 per hour is definitely attainable with experience.

Jason    07:40 

So now we’re back at the five to six “x” multiple in favor of remote work. So no matter which way you look at it, working remotely is at least five times more profitable than working locally in Ecuador. This begs the million-dollar question, why would you bother working in Ecuador when the financial case for working remotely is so strong? I do think those of us who choose to work here generally go down the path of running our own businesses. And of course, some do find regular local employment as well. And I can’t speak on behalf of other business owners, but my motivation is pretty straightforward and it really comes down to purpose.

Jason    08:22 

My purpose is to help expats safely make the move to Cuenca like I did so many years ago. And I also want to contribute to the local economy. I want to see Cuenca thrive, grow and prosper. I want to bring employment opportunities to locals that simply don’t exist at the moment. I want to make sure that your move has the best chance of success. In short, if I have even the tiniest impact on Cuenca’s economy or your move here, then my purpose has been fulfilled and that actually means a lot to me.

Jason    08:58 

The hardest part for me is weighing up this sense of purpose against the opportunity cost I forfeit by not working remotely. But to be completely honest, I do still struggle with this. Especially at the end of a frustrating long day. It can be quite difficult to just pick myself up and continue. But as long as my heart is fuelled by purpose then I will continue to walk this path of growing a real estate business in Ecuador and helping you with your transition to Cuenca.

Jason    09:28 

Of course, we are all different. My path is probably not for you. If financial security is your strongest motivation then working remotely is the easy decision. Even if you are considering working in Ecuador, I would always suggest having remote work as a backup option. The last thing you want to do is get stuck in Ecuador trying to make ends meet, which I do see happen all too often. Hopefully, this helps provide some context when you’re walking your own path to Ecuador.

Jason    10:00 

Of course, I’m here if you have any questions or want some additional perspective, that’s it for today. Thanks a million for watching if you did get value from it, please do consider subscribing so you get notifications about our future videos as well. Love to hear your thoughts on this topic in the comments too. Ciao ciao.

If you’re currently looking to purchase or rent in Cuenca, take a look at our current listings on our website, or simply provide your preferences to us, and we’ll handle the search for you. Thank you for your interest. We appreciate you watching the video, and we look forward to seeing you in the next one. Goodbye!