`We talk about it all the time, but Investing in Medellin really has us excited. Since we started back in 2006 it’s only gotten more exciting. Investors who know their numbers can readily compare the upbeat feeling to other areas of the globe where the real estate industry has been pretty much stable during the last few decades.
And then, of course, there are those places which aren’t so stable. Are these third world countries, war torn and with governments in shambles we’re talking about now? No. We are talking about places like the United States of America, where house prices took a tumble just a few years back, causing millions of home owners to file for bankruptcy. Putting families out on the streets and decimating millions more people who thought they were investing in a relatively “safe” market in the richest country in the world. The cycle there of boom and bust is, and will continue to be a volatile place to put your real estate dollars. Are you buying in a bubble? Where in the bubble are you buying? Will your bubble burst? It’s a crap-shoot, and a short cycle at that.
One of the most attractive cycles we’ve seen in our lifetimes is the long, slow rise of the Colombian country’s fortunes. Fully developed countries have many attractive qualities, but real estate isn’t always one of them. Especially today, with the vast proliferation of all the competition being generated from television shows that make it look easy to flip houses in just a thirty minute show!
In our experience, the most successful people in any walk of life are those who stand on the shoulders of those who came before them. Who study trends and look at markets with open eyes. We believe opportunity abounds in this world, and we don’t limit ourselves to what’s just in front of us. We believe real estate investing is the same. Learn from our mistakes, read our stories and download our value-packed educational guides. It’s through your wise and careful fact-finding you will arrive at the decisions that make the most sense (or pesos) for your wealthy future!
To maximize your profit from the real estate investment boom in Colombia, it helps to educate yourself with the do’s and don’ts so you can minimize risk and maximize return on investment. What follows is our best advice on how you can protect yourself and at the same time, profit in a big way.
BUYING CHEAP PROPERTIES FROM UNKNOWN DEVELOPERS
New real estate developers would usually offer the most flexible payment schemes or even lower monthly payments to catch the attention of buyers. However, the risk of investing on a new player in the industry is just too high and may prove to be unstable. Further, as we talk about in other articles, buying new in Medellin, specifically, has proven to be less profitable than looking at used homes and apartments. We go for value investing here, and it has proven to be a very lucrative way to get into the double digit returns we prefer. Buying new is a trend for the ultra-wealthy, not for those interested in building recurring incomes.
OFFERING ATTRACTIVE FURNISHING PACKAGES FOR PRE-SELLING PROPERTIES
Some developers give generous packages including furnishing usually between 3 to 4 years before a property is finally completed and turned over to a buyer. By then the furniture and appliances that went with the package could probably be out of style, if not, obsolete. Plus, you’ll have tied up all that cash, which could have been used for another deal in the meantime. When you see the prices for furniture in these areas, you’ll soon see that it’s a buyer’s market and your choices can be made when the house you’re buying is completely done and ready for you to live in, or rent out. That, by the way, is a factor that will influence your furniture choices as well.
FOREIGNERS MAY NOT BE ALLOWED TO RENT CERTAIN PROPERTIES
The laws of Colombia prohibit renting certain real estate properties for short-term. If you’re looking to join the online rental game, you need to have someone who’s well-versed in these laws. The primary thing you will need to keep in mind is that in some buildings there has been a vote on whether you can rent a room or a house, short time. Finding out about this factor, and others can completely change the possibilities for your property, so be careful.
Further there are certain banking and visa issues you’ll need to get ironed out before you make the jump on Medellin. Don’t be under prepared for this. You may cut some corners at a different place, on other issues. This is not an area you’ll want to do so. We are happy to bring you up to speed on these issues, simply click the “contact” us button on the top or bottom of this page.
BUYING A PROPERTY BASED ON UNIT TYPE & SIZE RATHER THAN LOCATION
Are you looking at high-end development options, considering the value difference provided by the accompanying landscape, fixture and finishing including amenities and common areas? Often these are important, but sometimes location nullifies the perceived advantages. For instance, are foreigners your target customers? If so, is your place in a desirable stratus? What about new trends? There is a growing movement of savvy foreigners who are moving away from El Poblado. Where are they going and which neighborhoods have the greatest future earning potential? These questions and many, many more must all be considered. Like any investment, the more information and data you can collect from as many different, reliable resources, the better.
So, choosing a property on an upscale market may generate a higher return on investment because of a higher property value when you eventually sell your property.
Also, there’s a potential downside if you don’t check out whether new buildings are going up near your new investment. We could tell you some sob stories of people who invested in a great view only to have a new building go up and block it! Consider how comfortable you would feel buying in the neighborhood you grew up in. Chances are, you know every last thing about living there. Over here is no different. Can you imagine a stranger, showing up in your town and buying homes without knowing a thing? It’s a bad idea, and you’re smarter than that.
SOME EXTREMELY HELPFUL TIPS TO BE CONSIDERED BEFORE BUYING AN INVESTMENT PROPERTY
There is a need to be thoroughly informed and oriented by experts who can appraise you to all the mundane (but important details) of investing in Medellin.
If you’re shopping with cash, the stakes are higher and many people may feel an aversion to spending heavily on lawyers, realtors and the translators they (almost) don’t need. In our long experience, we’ve seen plenty of people get burned, both in buying properties that didn’t meet all the criteria for being heavily trafficked by foreigners, or that were subject to rules that prevented rentals, and a number of other tragedies, most notably that money was stolen by unscrupulous real estate amateurs (there is no law stipulating who can sell real estate in Colombia).
Do your research, and if you, like other savvy investors, find yourself looking closer at Medellin, we hope to meet you. Speaking of research, have you seen these independent results for Colombia?
Take a look:
This survey outlines the top 20 property markets in Central and South America, on a affordability measure of a per-square-meter basis. The criteria considered a cost for a two-bedroom apartment of 75-100 square meters in each market. We consider this an ideal size for a second home abroad or a retirement residence, and an ideal configuration for a rental property.
Medellin appears third on this list, but I can assure you it’s NUMBER ONE for cosmopolitan cities you might actually enjoy living in. Looking at the overall numbers, this may be the best time in a decade to diversify into Latin America real estate, thanks to a strong U.S. dollar and a number of positive developments in key cities, according to this, and other surveys.
As stated, Medellin is listed as third most-affordable location to purchase property in Latin America. Like Cali, Medellin has continued to suffer from a much undeserved reputation. Thankfully this is changing rapidly now. In fact, crime rates in Medellin have fallen so far, the difference from some U.S. cities is stark. Right now, the lag in crime has yet to impact real estate values tremendously in this pleasant city of parks, gardens, and museums, where the strong European undertones and a café culture are attracting young and old alike. And that, is the primary reason we’re so excited about what’s available down here right now.
For more insider information, grab a FREE copy of our Real Estate Guide to Medellin.
(Survey appears courtesy of liveandinvestoverseas.com)