Find out how to generate passive income from Colombian real estate.
No longer hidden (though always a gem), Colombia has the world raving about its dynamic destinations, world-class cuisine, and inspiring history.
Already beloved by travelers, backpackers, and digital nomads, this South American country has lately been catching the eye of a new kind of extranjero: real estate investors.
A thriving economy, unprecedented tourism growth, and historic real estate growth have contributed to unparalleled global investment opportunities in major cities like Bogotá, Medellín, Cali, Cartagena, and beyond.
Whether you are planning to do it or are merely curious about investing in the vibrant, colorful, up-and-coming country of Colombia, this eBook is for you.
We explain everything you need to know about investing in Colombia, including an in-depth exploration of the benefits and a step-by-step guide through the process of purchasing real estate legally, safely, and smoothly.
It’s a question everyone gets asked when they announce plans to visit, live, or invest in Colombia to the uninitiated back home: “Why Colombia?”
To answer the somewhat complex question from an investment perspective, we spoke to two resident experts in Medellin Rich Holman, Owner/Broker at Primavera Realty and and local Australian resident and investor, Adrian Beales. They offered these compelling reasons to choose Colombia for prospective real estate investors:
Economic growth. Nationwide, Colombia has seen historic economic growth since 2002. From Latin America’s fifth-largest economy in 1990, the country has climbed to the rank of Latin America’s third-largest economy with a gross domestic product (GDP) of $330.2 billion USD in 2018.
Looking at the next ten years, Colombia’s economic growth is expected to continue to rise at a constant rate due to increasing oil exports, steady consumer consumption, an expanding middle class, development of an interstate highway system, and expanding exports, among other reasons.
Thriving real estate market. Colombia’s broader economic growth is reflected in its thriving real estate market. Holman, who arrived in the country’s energetic second city of Medellín in 2006, points to incredible growth within the city and across the country in terms of housing prices. Over the last 20+ years, the city has enjoyed an uninterrupted rise, with real estate prices climbing an average of 7-8% each year. Even as housing prices plummeted in the U.S. during the first year of the 2008 recession, Medellín saw a 3.4% growth, remarks Holman.
The trend of growth extends beyond Medellín across the country—and it’s a trend Holman expects to continue. He estimates that property buyers could see returns between 7-8% on appreciation alone. Depending on the location, property, and upkeep, investors who rent out properties can expect net earnings of 4-8%, resulting in non-leveraged annual returns of 11 – 15%+.
Both Holman and Beales emphasize that Colombia is a non-leveraged marketplace. In the U.S. and many other Western markets, financing is available with 5-20% down and interest rates of 4-6% whereas in Colombia it typically requires 30-40% down and interest rates ranging from 11-14%. The absence of leverage reduces the likelihood of Colombia experiencing a real estate bubble, asserts Holman.
Skyrocketing tourism rates. Since 2006, tourism across all of Colombia has grown by more than 300%, from one million foreign visitors to more than three million in 2017. Within the first seven months of 2018 alone, more than two million visitors entered the country.
Looking ahead, additional tourism growth is forecasted across all of Colombia in the coming years, with Medellín leading the way along with Cartagena, Bogotá, and Cali. The country is expected to further drive increased tourism from new direct flights from Spain, Mexico and several new U.S. states.
As Ana Maria Moreno Gómez, Director of the Medellín Convention & Visitors Bureau, predicted in an interview, “Usually, at a worldwide level, tourism is about 10% of GDP. For Colombia, our number is 3.8%, so we have a lot of room to grow.”
Beales sees Colombia’s growth in tourism as a boon for investors, as increased tourism rates translate to increased rental demand. Due in part to the country’s proximity to Florida in the United States and the Central and Eastern Time Zone, Colombia has become popular among entrepreneurs and remote or semi-remote professionals who conduct business in the U.S.
Compared to travelers and backpackers, professional visitors to Colombia are more interested in high-quality, short-term rentals with both second-home comforts and modern facilities, Beales says.
Diversification. Currency and geography diversification are another reason to invest in Colombian real estate, stress both Holman and Beales. As the world continues to experience an increase in globalization and interconnectivity, it is especially wise for investors to branch out internationally. Global diversification through investment in Colombia can aid in hedging both currency and geographical risk.
The strength of the Colombian peso versus the U.S. dollar is the only wildcard, notes Holman. But while exchange rates are impossible to predict, the current strength of the USD continues to make Colombian real estate a global bargain. And should the dollar ever weaken, investing in Colombia could offer capital gains of 30-100% just on the currency adjustment alone.
High-quality lifestyle. Once marred by a reputation for being dangerous and unstable, Colombia has undergone an inspiring transformation, shedding its reputation for violence and replacing it with one of culture-packed cities, diverse landscapes, and tremendous economic and social progress. The current strength of the dollar against the peso allows USD investors who choose to live or travel in Colombia to enjoy cosmopolitan comforts at a fraction of the cost of many Western countries, notes Holman. In fact, many senior citizens struggling to live on their social security in the U.S. could live quite comfortably in Colombia.
Visa eligibility. A final benefit of investing in Colombian real estate? By purchasing eligible property in Colombia, investors can obtain a residency visa and put themselves on the pathway to obtaining a second passport. Making an investment of 650 times the Colombian minimum monthly salary will make you eligible for a resident visa, which extends for up to five years and may be renewed. After five years of residency, investors may be eligible to apply for Colombian citizenship and there are even less expensive investor visa options available today for as little as $25,000 USD.
Having a “backup residency” is more important than ever, says Holman. Establishing legal residency or holding a second passport provides security and travel freedom in addition to what many expats consider to be a superior lifestyle.
Invest in Colombian real estate in 10 steps
Intrigued? Before moving forward, there are several important considerations investors should be aware of before purchasing Colombian real estate.
To learn more about the process, we spoke to an Attorney and Residential Property Legal Advisor, Daniela Córdoba. She gave us a step-by-step overview which we’ve outlined below.
Step 1: Travel to Colombia.
Whether you are eager to buy today or are on the fence about purchasing a property in Colombia, Córdoba urges prospective investors to visit different parts of the country and make sure reality matches up with individual expectations.
In Colombia, you can rent a local apartment in the city you are planning to move to or invest in and get a feel for the local vibe. If you’re not familiar with other Colombian cities, take time to scout them out and see how each compares.
Step 2: Choose a city.
Visiting Colombia will prepare investors for taking their next step: choosing a city. Investment opportunities can be found across Colombia, but the big four—Bogotá, Medellín, Cali, and Cartagena—offer some of the most promising ones.
Medellín, aka La Ciudad de Eterna Primavera, charms with its eternally spring-like weather and fascinating history, while Bogotá wins hearts with its thriving nightlife and blossoming food scene.
Cali beckons explorers with vibrant salsa beats. Cartagena, the jewel of Colombia’s Caribbean coast, calls to beach lovers with sun and sand.
Step 3: Choose a barrio.
After exploring the ins and outs of your new city, investors will be ready to decide where they want to live. Many of the cities in Colombia—including its four major destinations—are divided into neighborhoods, or barrios, each of which has a distinctive flare.
We’ll discuss some of our favorite barrios in each city below.
- Medellín: A darling among expats, Medellín is home to a number of popular neighborhoods for foreigners. El Poblado—with its nightlife, upscale restaurants, and shopping—is a top choice. However, some digital nomads and younger professionals prefer Laureles and Envigado..
- Bogotá: A modern city, Bogotá has everything from sleek and stylish residential zones to bustling bohemian neighborhoods. We recommend Chapinero, which is packed with dining options, cafés, nightlife, and more.
- Cali: An up-and-coming destination, Cali is a favorite among travelers seeking an off-the-beaten-track adventure. Our favorite neighborhoods in the salsa capital of the world are El Peñon, Granada and San Antonio—lush, tree-shaded barrios with a flourishing restaurant scene.
- Cartagena: Heading to sunny, beachside Cartagena? We suggest Manga, a burgeoning residential neighborhood within walking distance of the historic Old Town and Getsemani.
Step 4: Hire a bilingual local team.
When it comes to finding your ideal property in your preferred city and neighborhood, Córdoba emphasizes the importance of finding a reliable team that is familiar with the local market and Colombian real estate regulations. She recommends building a locally-based, bilingual team made up of the following:
- A real estate agent. Particularly for investors whose Spanish is not fluent, it is highly advisable to find a bilingual agent. A local agent can help buyers find a property that matches their requirements for location, amenities, price, and investment potential, and then assist in negotiating terms with the seller.
- A real estate attorney. Beyond an English-speaking local agent, Córdoba says it is important that investors seek guidance from a bilingual attorney. In Colombia, contracts must be written in Spanish to be considered legally binding. The attorney will assist in drafting the sales contract, performing a title search, ensuring that the buyer’s funds are properly registered with the Central Bank, and assist in crafting the terms and conditions for the closing.
Step 5: Make an offer.
With the support of a local team, investors will be ready to begin the process of making an offer on the desired property. In the initial negotiation, the investment team and the seller will come to an agreement on the price and the terms of the purchase agreement. Working with a strong professional team, the investor can then negotiate what is included in the price—such as parking, appliances, furniture and fixtures and storage—in addition to closing costs, down payments, and other important conditions.
Step 6: Title due diligence.
Once the initial offer is accepted, it is essential to work with a lawyer to ensure the title of the house is clean and problem-free to avoid any legal trouble. While Colombia has undergone tremendous growth, there are a few stray properties purchased with “dirty” money that linger behind as relics of the country’s tumultuous past, warns Córdoba. A local lawyer can help investors collect and review documents for due diligence, including:
- Certificado de Tradición y Libertad. This document includes a list of past owners, in addition to any debts or legal claims held against the property.
- Escritura pública. This is the property title that states its address, its matrícula inmobiliaria—or public lot number—and any restrictions on the sale.
- Paz y Salvo Predial. This document certifies that municipal taxes on the property have been paid.
- Paz y Salvo de Valorización. This document certifies that any taxes related to the increase in the value of the property have been paid.
Step 7: Sign a Promesa de Compraventa.
If investors decide to proceed with their purchase, their lawyer will draft a Promesa de Compraventa, or sell-and-purchase agreement. This contract should outline the final sales price and important terms, including but not limited to:
- Payment terms, amounts, and dates
- Any commission, fees, or taxes that remain to be paid
- Proration of utilities
- Proration of rental income if a renter is in place
- Penalties for non-compliance of parties
When signing the promesa, investors may also be required to furnish a down payment. Down payments may vary in size but typically come to around 10% of the sale price, says Córdoba.
Step 8: Transfer money to a brokerage account.
To obtain investor status and for their funds to be legally registered in the county by the Colombian Central Bank, Banco de la República de Colombia, investors typically must transfer money from their foreign account to a Colombian brokerage bank account. Note that it is very important to register the funds correctly as a foreign investment using Form 4 as this will enable you to repatriate the money in the event you sell the property. We strongly recommend working with a lawyer to do this.
Step 9: Sign the new Escritura pública.
After the day of closing, the Colombian government may take a month or longer to officially transfer the ownership. Once a month has passed, the new owner will receive the new deed, or Escritura pública. Once the deed is signed and notarized, the investor is officially confirmed as the new owner of the property.
Step 10: Obtain a visa.
Investors who wish to remain in Colombia and establish residency may do so by obtaining a Resident, or Type “R,” visa. With a qualifying investment of at least 650 times the Colombian minimum wage, investors may apply for a five-year visa that may be renewed every additional five years.
Investors can also opt for the three-year renewable investment visa option at 350 times minimum wage or for 100 times minimum wage they can invest in a Colombian corporation, an option that is available through some local investment offerings.
Own a piece of Colombia
If you are thinking about embarking on the exciting but proven process of investing in Colombian real estate, we encourage you to get in touch with our team at Primavera Realty.
To get started, get in touch so we can learn more about what you are interested in. Then someone from the Primavera Realty team will contact you and help you successfully become the owner of your dream property in Colombia!