In 2018 I decided to be more cavalier with my Real Estate investment strategy. Instead of going westward like many Americans did during the Frontier Age, I grabbed my investment capital and decided to go southward, venturing into the frontier market of Colombian Real Estate. Before I continue writing about my investment in Colombia I must stress that this wasn’t a decision based on emotions or because I had a wonderful vacation whilst tanning aside coconut tree beaches of Cartagena.

My story is quite the opposite; first my parents are from Colombia, and secondly, I have visited the land of my roots more than 25 times. Lastly, since high school I have had an acute interest in Colombian affairs, business and commerce, and its maturation as a developing country. So does that make me a expert in Colombia? After some thought, I realize it does make me an expert or specialist in Colombian affairs and investments.

There is a thin line between confidence and cockiness, and I admit that I like to hug the border of this imaginary line.

At any rate, in March 2018 I decided to buy 3 properties in Cali, Colombia. Oscar Montealegre, are you bloody crazy to be buying in Cali? Isn’t that where Netflix’s crime infested Narcos Season 3 took place? Yes indeed. However, that was a different era, a different time, and most importantly a different Cali.

Today’s Cali is the 3rd biggest city in Colombia with a population of approximately 2.5 million, behind Bogota and Medellin. The stigma of crime is on continuous decline, dropping more than 80% compared to its peak in the 1990s. Also, Cali is the only city in Colombia to have access to the Pacific coast, rendering itself an attractive city for multinationals and import/export commerce. In fact, the region of Cali is known as the “Cradle of Multinationals”, home to more than 150 transnational establishments. Lastly, the British Broadcasting Company (BBC) named Cali as one of the Comeback Cities that people should pay attention to. Well BBC, I for sure am but please try to keep it under wraps.

Why else do I like Cali as a long-term investment strategy? I consider the city a value play compared to Medellin and Bogota. Today, Cali real estate prices are 50%-100% less expensive than similar properties in Medellin; and as much as a whopping 100%-500% less expensive than Bogota and Cartagena. Also, rents in Cali are roughly 25%-30% cheaper than Medellin, not the best fact in terms of generating high NOI, but with high NOIs we get high property valuations. Therefore in Cali you encounter low property valuations in comparison to Bogota and Medellin.

I do not like buying high, moreover I believe in the mantra that you do not get rich when you sell, you get rich when you buy. The plan is trying to unlock value when investing in Cali and strategizing to capture equity appreciation in the next 10 years-and maybe higher rents (increasing NOI). Experts in Colombia project that Cali real estate prices will appreciate at an average of 5%-7% per year. Obviously, I am not aiming for this type of return, but at least this gives me a benchmark on what I need to surpass a respectable return on investment.

The exchange rate between the US Dollar and the Colombian Peso is also an advantage for American investors. In the last 12 months, the exchange rate has been hovering between $3,100 CP-$3,400 CP for every US dollar. Therefore, my purchasing power has increased many-fold compared to a few years ago when $1 USD would be exchanged for $2,100 CP-$2,200 CP. This is at least a 47% increase in terms of purchasing power, simply giving me the power to buy 47% more not factoring Colombia inflation.

My take is a strong dollar is an additional positive factor in investing in Colombian assets, I link it to buying real estate assets at a discount. Also, since I am a buy and hold guy, I have no intention in selling in the foreseeable future.

Lastly, I live in Los Angeles and we all know real estate in Southern California is very expensive. Although I own real estate in South LA, Long Beach, Watts and Downtown LA, I am no longer bullish in buying properties in LA at such high valuations. Now it does not mean I am not off the market, because I am always in the market waiting to pounce on any investment that makes sense-i.e. Inglewood, Paramount, and South Gate are cities that I am currently looking at.

However, since I do not want to just sit and wait on the sidelines for the next correction-plus I do not believe in timing the market- I ventured southward and opened new horizons for my investments. I realize it is a risky play. I also realize there is no guarantee, but there isn’t guarantee in anything in life. And yes, you must have a high appetite for risk to stomach the ups and downs when investing in emerging foreign markets. But like I said in my introduction, my investment strategy is based on substance, so I possess a strong belief in my investment decisions.

If you do not believe in what you do then what is the point. Well, as you may detect, I believe in investing in Colombia.

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