Investing in foreign real estate can be a major opportunity. It can generate passive income, diversify your portfolio, and protect your assets from the whims of the economy. For example, when the market in the US is unstable, you can count on your properties in other markets to mitigate losses. South America is a popular investment destination for US investors, considering that its real estate sector has undergone a major transformation in the past few years, and Colombia in particular has emerged as a prime investment opportunity because its economy is on an ascending path. Investors are flocking towards it, and you may have considered buying property there too.
Whether you’re interested in residential properties, shared housing, office space, entertainment venues, or vacation housing, the Colombian real estate market doesn’t lack opportunities. However, before you invest, you should do some research. As a foreign market, Colombia has some particularities that may seem odd in the US, not just in terms of which properties sell the fastest but also in terms of how negotiations are carried out and how taxes are applied.
If you plan on investing in Colombian real estate soon, here are some of the key things that aren’t talked about enough:
Most Colombian property buyers don’t have a lot of experience with foreign investors.
Although the number of foreign investors in Colombia has increased, most real estate agents there aren’t used to working with foreigners, and there might be a culture clash. For example, some studies estimate that in cities like Medellin and Bogota (which are also attractive destinations for investors), only around 1% of the buyers are foreign. In Cartagena, that percentage goes up to 3%, which is still not a lot. While it is entirely possible to buy and sell property there, it’s best if you have a local partner to act as a middleman so that things don’t get lost in translation. For example, Colombians have different business etiquette, and negotiations aren’t carried out the same way.
In Colombia, many realtors work for buyers.
In our Western economy, we’re used to seeing real estate agents as independent contractors who try to reach a win-win situation, where both the buyer and the seller are happy. In Colombia, realtors aren’t so objective. Here, the requirements for becoming a real estate agent are very permissive, and you can even become one when selling your own house or your neighbor’s house. Also, real estate agents usually work for the seller, not the buyer, so the commission could be a bit on the pricey side. As always, when buying property abroad, you should do some research on the market because there’s always the risk of being taken advantage of. For example, some sellers increase the price by a landslide, and buyers still don’t notice because the prices are low by US standards. Of course, that doesn’t mean that all real estate agents are this way, but you’re not missing anything by doing your homework and being prepared.
Properties that are no longer profitable in the US are trending in Colombia.
As an American real estate investor, you probably know that some fields, such as casino real estate, have been heavily affected by digital transformation, and most people now play online. In Colombia, online casino games are popular too, but land-based properties haven’t disappeared. On the contrary, because gambling regulation has been adapted and now favors casino operators, casinos from all over the world are opening here.
As a result, casinos are popping up everywhere. In addition to enjoying a wide variety of tragamonedas games online, they can also go to land-based casinos, which offer immersive experiences. It’s interesting to see how the two versions of the casino industry could co-exist, and mostly because the legislation favors casinos.
Online listings may no longer be available.
In the US, both realtors and clients rely on online portals to find properties; if you see an ad for a property online, you automatically know that it’s active. However, in Colombia, real estate websites aren’t updated that often. If you see an ad for a property for sale on a local listings website and call the seller about it, you might discover that it was sold a few months ago, but they didn’t take down the ad. And, the other way around, in addition to the listings you see online, there may be hundreds of other options. Again, if you can find a local partner who can help you navigate the market, that would be ideal.
Developments may take longer than usual to complete, so plan accordingly.
The timeline matters a lot when deciding on a real estate investment. For example, if you invest in a shared housing that’s expected to be completed by 2022, you probably expect to see the first returns in 2023. However, these timelines aren’t always realistic, and you probably know already that one of the main rules of real estate investing is to take a bit of time after the official completion rate. In case there are any delays, or you need some time sorting the paperwork, at least your plans aren’t completely thrown off track. However, in Colombia, delays are much bigger than in the US. For example, it’s not uncommon for a residential complex or mall to be built in five years when the initial estimate was too. You can, of course, get your money back, but delays are usually expected, so instead, it’s better if you just adjust your expectations while investing in Colombia.
As you can see, real estate opportunities abound in the region. Whether you want to invest in holiday housing or capitalize on the growing popularity of tragamonedas in Colombia, you can definitely grow your wealth and diversify your portfolio here. Just remember that it’s a foreign market, and you need to be careful with cultural and market differences. Real estate sectors may perform differently than they do here, and their fluctuations will determine the profitability of your investment.