Canadian Markets open in 5 hrs 16 mins

Exploring the underground real estate market in Cuba

Ruben Font carries a scaffold piece to his home in Havana, Cuba. (AP Photo/Franklin Reyes)

This story is part of a weeklong Yahoo series marking one year since the opening of relations between the United States and Cuba.

Eager to own a piece of their native homeland, Cuban Americans are placing their bets on the island’s underground foreign real estate market.

It is still illegal -- according to both U.S. and Cuban law -- for Americans to purchase property in Cuba, but that hasn’t stopped some from trying. Their window of opportunity first opened in 2011, when Cuba relaxed a decades-long ban on the sale of property in the country, which prevented home and landowners from selling and purchasing property. Until that point, Cubans were only allowed to swap or barter their homes in deals called “permutas” (meaning “exchange”). Once the ban was lifted, Cuban-Americans with family and friends still on the island — and cash to burn — saw a way to reclaim a piece of their homeland. In the few years since, an underground foreign real estate market has flourished without much interference from either country’s government.   

“This is one of those things where the market forces and interests are ahead of the law,” says Pedro Freyre, chair of Akerman LLP's International Practice and an expert on the U.S. embargo on Cuba. “[These buyers] left behind homes and they’re beginning to go back to Cuba, look at these places and for most of them this is not about recovering property but about the emotional connection and the family connection.”

The law that bans foreigners from buying property in Cuba is not changing even after last year’s announcement that U.S. and Cuba would reestablish diplomatic relations. Although restrictions around other kinds of financial transactions were loosened (e.g. Americans can now send $2,000 to Cuban nationals per quarter, up from $500, and use U.S. credit and debit cards in Cuba), non-Cuban residents are barred from buying property there. There are an estimated 2 million Cubans in America, according U.S. Census data.  

The process of purchasing Cuban property illegally is simple enough, explains Freyre. “You go to your old house, see who’s living there, and you ask if they want to sell. Then you find a Cuban relative who will buy the house for you.”

Simple, yes, but also risky. Jerry Haar, international business professor at Florida International University, likens the transaction to “being on a high wire with no net below.”

“Your relatives could decide, ‘oh, I want 60/40 ownership instead of 50/50,’ or say ‘I’ve changed my mind and [the property] belongs to me,’ and the government may very well back them up,” Haar says. “You’re dealing with a no man’s land when it comes to the Cuban court systems and it’s very tricky.”

Anabel Fernandez, a University of Havana-educated attorney currently pursuing a law degree at the University of Miami, says there’s an additional risk to consider — that the Cuban government could reverse its loosening on property rights altogether. After the Cuban revolution in the 1950s, the government nationalized billions of dollars worth of property (homes, farmland, businesses) owned by private Cuban citizens, as well as foreign-owned property (talks between the U.S. and Cuba to settle disputes over American-owned properties that were seized are still ongoing.)

“Even if you as a Cuban national buy a residence lawfully through the right mechanisms, the government could at any time repossess the property without any cause,” Fernandez says. “There is no certainty in any type of transaction in Cuba.”

A sentimental foothold

Joseph, 59, who immigrated to Miami from Havana in 1960, is considering buying a home in Cuba now. When his family fled Cuba, they left their home in the care of a family friend. After some years, the friend became too old to care for the home, so she traded it with another family and moved away. When Joseph, who did not want his real name used because of the legal implications of this kind of transaction, visited his childhood home for the first time three years ago, he was surprised to find the previous occupants hadn’t changed much. They even left behind stacks of magazines from the 1940s and 1950s and old mason jars his grandfather kept around the house.

“I was very young, but I still have memories of the house I lived in,” says Joseph, a financial advisor in Miami. “There’s obviously a ton of sentimental value [in purchasing the home]… It’d be really nice to have a home my siblings can all visit and connect them to their previous homeland.”  

Joseph has no immediate family in Cuba to front the sale, so he’s working with a local attorney to find an alternative third party. He’s also exploring the option of establishing residency in Cuba, since he was born there and qualifies (marrying a Cuban national would also qualify one for residency). He will need a Cuban sponsor, which could be tricky since his entire family moved to the U.S. He’d also have to commit to returning for at least a week every 24 months. But residency would allow him to at least purchase property without a middleman. There's also the possibility Cuba opens up its real estate market to foreign investors over the next few years. With so many factors at play and a government notorious for making up the rules as it goes, Joseph says he’s keeping his expectations low.

“You have to be somewhat detached and not invested in outcome because there so many variables that are unknown,” he says. “This may not ever happen. If it doesn't happen...I’ll probably be disappointed, but it won't be the end of the world.”

Further complicating matters is the fact that he wouldn’t just be buying a home. He might also potentially uproot the family currently living there. Joseph visited again in early December and broached the subject of a sale with the owners for the first time. They seemed interested but he didn’t press the issue. “You want to make them feel comfortable and that you’re not going to kick them out of the house or be too aggressive,” Joseph says. If he were able to purchase the home, he’d likely keep them on as tenants and treat it like a vacation home for his family.

In the meantime, Joseph, with help from some of his cousins, has set his sights on a smaller goal — restoring an old family tomb in Havana. The tomb sustained some structural damage that hasn’t been repaired and he’s working with his cousins to sink some money into its restoration. The project will probably cost about $10,000. He sees it as less of a risk, as no other family has come forward to claim the property and the current title owner is deceased.

Investors biding their time

Speculators like Joseph are common, says Hugo Cancio, a Miami-based Cuban-American entrepreneur who runs several media properties in the U.S. and Cuba, including one

focused on the burgeoning real estate market. Investors are salivating over oceanfront properties that haven’t been renovated in years in popular cities like Havana. The idea is that if they can get in early, plunk down a few hundred thousand dollars on a property and bide their time until Cuba officially opens its market to foreigners, they can triple their investment down the road.

“I’ve seen people pay a substantial amount of money for apartments right across from the water in Havana,” Cancio says. “It’s a gold rush to try to own something... But today you’re investing blind. It’s a risky business.” In a market subject to such speculation, prices are all over the map. According to data compiled by Isladata.com, a research firm Cancio also operates, homes and apartments for sale in May 2015 sold for anywhere from $8,000 (U.S.) at the low end to $180,000 at the high end. A search on the popular Cuban real estate listing website Cubisima turned up listings for three-bedroom homes in Havana that ranged from $1,500 to $770,000.

For Raul Valdes-Fauli, a partner at Fox Rothschild LLP in Miami, the risk is too great to consider. He was 16 when his parents fled Cuba in 1960, leaving their home behind. “I was talking to my brother this morning about reclaiming some of our property, but we would not think of doing it against the law,” he says. “We have enough invested here [in America] and our lives are here. We’re not going to violate the law just to go back.”

More stories on this topic >>>