The Complete Guide to Real Estate Investing in Colombia Part 1

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 article 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.

Why Colombia?
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 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. For example Medellín, over the last 15+ 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 recession, Medellín saw a 3.4% growth.

The trend of growth extends beyond Medellín across the country—and it’s a trend we expects to continue. We estimate 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 4-7%, resulting in non-leveraged annual returns of 13%+.

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.

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.”

We see 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.

Diversification. Currency and geography diversification are another reason to invest in Colombian real estate. 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. 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 30-50% 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. 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. 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.