Seizing Medellin’s booming Real Estate without moving a finger
We really care about you all, that’s why we highly recommend that you remain aware of realtors, developers and/or property management companies saying that rental properties can yield more than 6-8% per year. We’ve been managing rental property since 2015, both our own and some of our closest clients and friends, and only in very limited cases we’ve seen someone pulling double-digit returns.
Per today’s prices of real estate and expected rental rates, pulling a 2-digit is close to impossible to achieve. Those times in which extremely good bargains were easy to find everywhere in the city are long gone, they disappeared years ago together with the prejudices and general misconceptions of Medellin as a non-recommended destination. We’re now in everybody’s mouth; different media now talk about the once undiscovered wonders of our city; people are now actually wanting to visit us, and many are staying: retirees, adult professionals and young digital nomads. Without a doubt, Medellin is a city for all tastes.
And, while this new dynamic has brought a lot of positive effects to our economy and society, it has caused a tremendous impact in real estate prices, especially in prime locations like El Poblado. Prime real estate prices have skyrocketed due to foreign buyers willing (or being offered) to pay more than local buyers, and this implies lower expected rental returns, especially when the offer of furnished condos increases every day. Evidently, the demand for furnished properties has increased with the inflow of foreigners, but the offer has grown much more rapidly. And with more offer out there, smaller will be your chances of renting it out, and also less likely your chances to sign on a reliable property manager. Most of them are either too big to care or just incapable of providing a worthy service, and you’re definitely not going to want to spend your next vacation in Medellin like our good friend Kerry a couple of years ago, when he desperately gave us a call while cleaning the toilet of his penthouse, begging us to connect him with another property manager given that his current one was not even taking his calls.
So, we’ve got to ask… why even bother? Why bother passing through the immense hassle of owning rental property when the expected yields are so easily outperformed by other options, completely turnkey alternatives, some of which are actually safer and even directly related to real estate? The only answer I can think of is that we haven’t succeeded at delivering the message. We haven’t been able to advise our clients, on time, that there are far better opportunities out there from which they can seize. So it was about time to do something about it.
While we offer four different alternatives of this kind, all of which highly outperform average rental yields, today I want to bring to your attention just one of them: Private Mortgage Lending, or becoming a private lender to a foreigner, buyer or real estate developer, willing or needing to leverage their acquisition or project development. These debtors are not being serviced by local banks due to a ludicrous perception of risk per debtor’s lack of financial history in Colombia. This, for us, represents an immense opportunity, which we pass on to our investors. And, FYI, mortgage interest rates in Colombia are 4-5 times greater than in the US, allowing us to offer an average net interest rate of 10% per year.
Our mortgage lending operation started in 2013, when we placed our first loan, collateralized by a prime property in the heart of Provenza, the most exclusive neighborhood of El Poblado and where Happy Buddha, a highly renowned hostel was built. Since then, we’ve allocated USD 10+ million, only using prime property as collateral, terms of no greater than five years, and lending only up to 60% of the market value of the collateral. So far, our default rate is 0%. While we have allocated most of these loans using funds from a handful of close investors/creditors, we have decided to take this opportunity to the next level and allow other potential investors to join us and participate in the program.
So what do you get when you invest in this product?
• A completely turnkey, costless operation: Our team handles everything, including setting up the loan, studying the debtor’s financial capacity, structuring the mortgage lien, and collecting monthly payouts. Plus, all expenses related to the legal works are charged to debtor.
• Fixed, periodic payouts of only interests or interests + principal, depending on how the loan is structured.
• A fixed net annual return of, in average, 10%.
• The tranquility of investing in a safe asset, yet highly productive, while your group of expert advisors take care of all the hard job.
And what do you save yourself from by investing in this product instead of rental property:
• Finding a reliable property manager, then dealing with them
• Property taxes
• HOA issues
• Wear and tear of your property
• Occupancy rates
• Or, like Kerry, cleaning toilets
So, if you want to invest in a profitable, secure asset, guaranteed by prime real estate, but do not want to deal with the many complications that owning rental property will represent, this product is for you.
To learn more about this product click here.
If you wish to become a private mortgage lender please contact us.
Of course we like real estate and encourage investors to include it in their portfolios. We have our own stake in real estate in Colombia and maybe in the future outside of it. Furthermore, we have a boutique, very successful Property Management division with over 30 properties in Medellin and 5 in Cartagena under management, servicing a few of our closest clients with highly satisfactory results. To review our Superhost status AirBnb profile, click here and to inquiry about property management services please contact us at [email protected] or at [email protected].
More than to stave off foreigners from buying real estate in Medellin and Colombia, this newsletter is intended to provide another point of view about the real estate industry in our home city, an opinion that we consider just, fair and necessary for our clients to learn. A standpoint of a company that is unbiased and whose clients deserve to know what else is out there.
Diversification is key and necessary for a healthy investment portfolio.