Our Favorite Property Investment Market Just Got Even More Attractive
Aug. 20, 2012, Paris, France: A slightly weakened Colombian peso makes property investing in this country even more appealing right now for U.S. dollar-holders.
Dear Live and Invest Overseas Reader,
I don't try to time currency fluctuations, but, last week, my banker in Colombia e-mailed to tell me the Colombian government announced they would purchase US$300 million over the next few weeks. She thought, therefore, it might be a good time to transfer some money down there if I needed to.
Indeed, with the few final purchases for the apartment in Medellin still pending, sending a little more cash down at a slightly better rate of exchange (about 2%) sounded like a good idea.
While the 2% difference on the small amount I'm transferring doesn't do much more than cover the wire fees, it would make a difference if you were wiring money for a real estate purchase in Colombia.
That small improvement in the dollar exchange rate makes up for some recent price appreciation in the Medellin market. Prices are still excellent in Medellin on a global scale, but they have been increasing steadily the two-plus years that I've been active in this market.
You can still find apartments in the best neighborhoods of Medellin, in move-in condition, for less than US$1,000 a meter. Compare that to Paris, where I've been for the past week. Checking in a local real estate office, as I tend to do wherever I travel, I saw an apartment in one of this city's best neighborhoods listed for what amounts to over US$15,000 a square meter at the current euro-dollar exchange rate.
To put that in better perspective, a 126-square-meter (about 1,300-square-foot) apartment in the El Poblado area of Medellin is currently listed for US$115,000, while a 120-square-meter apartment in the 7th arrondissement in Paris is listed for US$1.9 million.
Of course, Medellin isn't Paris. Back in Paris, though, after having gotten used to a full-time maid, a full-time driver, and paying US$1 per item for dry cleaning in Latin America, I'm reminded that there are trade-offs. You could easily retire on the US$1,785,000 price difference between the cost of buying best in Medellin and the cost of buying best in the City of Light.
As an investor, you're better off in Medellin, too. Even though you can buy an apartment in a good area of Paris for much less than US$15,000 a square meter (perhaps half that in an area that would still make sense for rental), the expected rental yield would be much less than in Medellin. Perhaps 4% net in Paris versus a minimum 8% net in Medellin.
Of course, you have the perceived risk factor of Medellin, but, taking a pure investment perspective, you also have more opportunity in Medellin than in Paris or most any other location I could think of. The Colombian economy is growing, the country is stable, and right now they are buying a bunch of dollars, weakening their currency a bit.
Drug lords and FARC aside, Colombia has a bright future and a growing middle class. It's that middle class that will be pushing up real estate prices over the next several years. That makes Medellin not only a market where you can get an excellent rental yield, but, again, one of the few in the world where I believe you can expect some capital appreciation as well.
We'll be in Medellin in three weeks for our Live and Invest in Colombia Conference. Come visit us and take advantage of the currency dip that's expected over the next several weeks.
Editor's Note: Today's essay is republished from Lief's Offshore Living Letter. Published twice-weekly, the Offshore Living Letter covers the offshore, investment, tax, and asset-protection beats. It comes direct from Lief Simon's laptop, wherever he's traveling in the world, to your in-box...and it's completely free. If you're not receiving it yet, you should be. Sign yourself up here.Continue Reading:
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