You must be logged in to reply to this topic.
-
Next week I’m going to Medellin. It’s only about an hour flight from Panama City. And an up and coming place for expats to move to and for tourist. Real estate prices are still very low. Many international investors are buying properties there then converting to vacation rentals.
I’m starting a tour company in Colombia in 2017. My daughter is going with me. We’re staying in a vacation rental. And we’re meeting with a lady who has several vacation rentals in Medellin and a few in other countries. I’ll see if she’s available to come to the Panama Retreat.
Medellin Colombia is a modern town in South America. It has a population of about 2.5 million and is located at about 5,000 feet so it has spring like weather year round. It has modern malls, excellent streets and beautiful green areas throughout the town. The main part of the town is in a valley surrounded by large mountains.
The exchange rate for Colombian Pesos to US dollars has been $1 US to $1800 COL… until the oil crash happened. Because Colombia’s revenue is about 50% dependent on oil, their exchange rate has blown up to $2800 COL to $1 USD. This has created some incredible real estate opportunities. You can buy a condo in a ok part of town for about $20,000. In the very best parts of town, you can buy a 3 bedroom 3 level condo or expansive penthouse for about $150,000 with incredible views. Many investors are buying these, doing some renovations then renting them out for short term vacation rentals.
But.. and this is a big but…
Not all, but many of the short term vacation rentals are geared towards the sex tourism in Medellin. You’ll see places advertised as party houses. That means it comes with a prostitute or you can bring your own or several.
Rents for these places is high so the cash flow is excellent.Plus weed AND even cocaine are legal in Colombia so many of the tourist are only there for sex and drugs.
Of course there are places to rent long or short term which are not party houses. But rents are not as high. If you look at AirBnB or VRBO for Medellin, you’ll see that many places are advertised that” this is not a party house” or this is a party house.
Medellin is a nice place to visit but I would never consider living there. These are some other things to know:
1. You can stay 6 months as a tourist then you need to leave the country for at least 6 months before you can come back. So you’d need to get a residency Visa to stay. Buying an investment property for $400,000 colombian pesos qualifies you for an investor visa.
2. Colombia taxes you on your worldwide income AND assets. A US citizen who lives overseas full time can deduct $103,000 in income from your US tax return but you’d still be stuck with paying taxes in Colombia. Most expats I talked to said they just don’t report income or pay any taxes in Colombia – not even on rental income.
3. They have property taxes in Colombia. I’ve been spoiled in Panama because we have no property taxes. The taxing structure is Colombia is based on which area you live in. Poblado, where I stayed and one of the most exclusive areas, is Stratus 6 and taxed the highest. Taxes are less in Stratus 5,4,3,etc Stratus 6 is 1.5% of the property value.
4. Everyone there is very snobby. Which stratus you live in really matters. If you live in stratus 6, you are expected to dress in high fashion, drive the nicest car, and have the best furnishings Definitely NOT a laid back atmosphere like it is in Panama
5. Despite that Medellin was the murder capital of the world just 10 years ago, you rarely see any police. Crime is not a problem (they say) but you would think there would be more police presence.
Back to investments. I met with a group of 8 investors. Half of them are renting out party houses. The other half just have regular rentals. They all said good contractors are easy to find and the prices are excellent. They do have stores similar to Home Depot with every gadget you can imagine. Furniture leans in the Italian design.
The investors are all counting on the Colombian peso to US dollar to come back to normal within 2 years then they plan to cash out – making a huge profit just playing the currency arbitrage game. Most of the investors have investments in other countries where they are also playing the currency game too.
If you are concerned about what will happen to the US dollar, the best thing to do is have investment based in a different currency. The dollar is high now. But if it goes down or crashes, it will make investments in overseas properties ( not in a USD economy) even more profitable.
That said, it sure is weird to pay $128,900 for dinner for 4 people in Colombian pesos! Those high numbers play a mind game on you.
The investors are all from the United States, mostly under 45, and have been doing this for 10+ years. An interesting group.
You must be logged in to reply to this topic.