The weather is very similar, Cuenca to Medellin. These are both mountain cities with what's generally referred to as climates of "eternal spring." How technically accurate that metaphor is depends on your definition of spring-like weather. Frankly, the temperatures in both these cities can get a little too chilly for my liking. On the other hand, I can tell you that, regardless of your interpretation of "spring-like weather," the climate in both Cuenca and Medellin is far gentler than that in Panama City, where Lief and I normally hang our hats these days. Low humidity and cool temperatures by day, with cooler, even, again, chilly temperatures come nightfall--that describes Cuenca and Medellin 365 days a year.
"Where's the control for the heat?" Jackson asked when we checked into our hotel in Cuenca.
"There is no heat," Lief replied, "and there is no air conditioning. You don't really need either one here. Put your sweater on, boy," Lief added to Jack's inquiry, "and you'll be fine."
You'll need to speak at least some Spanish to get by reasonably efficiently in either of these cities. That said, we're noticing many more English-speakers in Cuenca than we remember from the last time we were here (maybe eight or nine years ago). There are also way more expats and foreign retirees here today than back then. Friend Lee Harrison, who was a resident of Cuenca for about a half-dozen years (and who will be hosting our Live and Invest in Ecuador Conference in Quito starting tomorrow), says that, when he and his wife arrived in Cuenca, they joined fewer than 50 other foreign residents. Today, there are thousands. Sunday afternoon, Lief and I wandered along the riverfront, stopping in some of the pubs and cafes you find there. Each was full with folks who looked more or less like we do (that is, not local).
The cost of real estate is a bargain in both these cities but more so in Cuenca, which boasts one of the most affordable property markets you'll find anywhere, for both sales and rentals. Lee will give a complete overview of the property market in Cuenca and other key points across this country at the conference later this week.
Medellin is a sophisticated city with big shopping malls, multi-plex movie theaters, museums, great restaurants, lively nightlife, and excellent infrastructure. Cuenca is a colonial city, more charming than cosmopolitan. ("People eat dinner early in Cuenca," the hotel manager pointed out when checking us in. "Don't expect restaurants to be open past 9 o'clock.") We've seen some modern shopping in Cuenca, but the infrastructure is less developed than in Medellin. This would also be generally true for Ecuador versus Colombia overall.
Medellin is more European than Cuenca, which means the people look more European. You'll blend in better in Medellin. Lief and I, both tall Anglos, stand out in Cuenca (and the rest of Ecuador) like people without tattoos stand out on Venice Beach in California.
Cost of living in general? This is where Cuenca is the big winner. "This place really is as cheap as we tell people it is," Lief said the other day when we stopped in a pharmacy to buy a travel make-up mirror (because I'd forgotten to bring one) and all the water the lady behind the counter had in stock (to help combat my sensitivity to the altitude). The mirror was US2.85, and the bottles of water were 35 cents apiece.
We've enjoyed a series of excellent steak meals, both lunch and dinner (the iron in red meat also helps to combat symptoms of altitude sickness, which, I'm happy to say, have been less severe for me this trip so far than during any previous stay to Ecuador), for as little as US$6.50. That's for a big, thick steak wrapped in bacon in a hotel restaurant with excellent service and including side dishes.
The taxi ride from the airport cost but 3 bucks. A gourmet ice cream cone was $1.75. A half-day bus tour (yes, we took a bus tour--it was a good first-day outing, reminding us of the lay of the land without requiring too much exertion too soon at this elevation...and, yes, thanks to my altitude sensitivity, I qualify as high maintenance in this part of the world) was US$5 for Lief and me and US$2.50 for Jackson.
The point is, you really could live in this city of rivers, parks, flowers, and Spanish-colonial churches on very little. More details tomorrow, when I'll be reporting live from the scene of this week's event in Quito.
Kathleen PeddicordContinue Reading:
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Not a bad return, especially as it doesn't include any potential appreciation.
Of course, not everyone has the time or the inclination to manage a renovation or a rental property in another country, and not everyone wants to put as much money into Colombia as it takes to buy and furnish an entire apartment.
That's why I was excited when one of my real estate contacts in Medellin, Rich Holman, told me about a project he's put together. It amounts to a very reasonably priced first step into this market that comes with the added bonus of a Colombia residency visa.
One way to establish residency in Colombia is to invest 100 times the monthly minimum wage in a private company. At today's minimum wage and exchange rate that works out to about US$35,000. Of course, finding a private company looking for investors at that level isn't easy, so the reality is that gaining residency in Colombia this way isn't normally a realistic idea unless you're ready to invest a much greater amount.
Rich and his partner Joe Greco, however, have put together an offer using a building that one of their real estate investors bought and renovated in Medellin. The three-unit building is in the Zona Rosa in this city's tourist epicenter. Fully furnished, the units are being prepared for short-term rental.
The idea is simple. Investors can buy a share of the company that owns the building for, not coincidentally, US$35,000, thereby qualifying you for a residency visa in Colombia. The units then will be rented out, and owners will receive their shares of the net rental income after rental and property management fees have been covered.
Projected net yields are 4% to 6% after Colombian taxes (my projected net yields above for my rental scenario are before Colombian taxes, which can be as high as 33%). That's a decent yield especially when you consider that the main benefit of the investment is residency in Colombia. This is also an opportunity to get your feet wet as an investor in Colombia with a modest amount of capital.
If you were to buy an apartment in Medellin and furnish it, the minimum total amount of capital required would be around US$100,000. (One reader found a great apartment last year for US$75,000 and furnished it for another US$10,000, but that was last year.)
As an investor in the project, you enjoy a discount if you'd like to stay in one of the units. Further, the cost of your residency application is included in the investment amount, meaning this is a fully turn-key opportunity.
I think the yields Rich and Joe are projecting are probably conservative. These guys put together a similar project last year (for investment only; there was no residency component). The rental returns for that effort are beating their projections. As they own a real estate company with a rental management arm, they have a steady flow of rental inquiries from tourists, businessmen, and investors. They also have experience managing rental properties in this city.
Along with the yields, investors should see some capital appreciation of the underlying asset. While Medellin real estate prices have increased over the last few years by as much as 10% a year, prices are still very reasonable on a global scale. In addition, the local economy is growing nicely. Therefore, I expect property values to continue up.
The bottom line is that you won't find many real estate investments in this price range, and you won't find an easier residency option for Colombia. And you can reserve a unit with a fully refundable deposit of but US$500. For more details, get in touch here.
Lief SimonContinue Reading:
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I bought the unit partly as a rental and partly for personal use. One Medellin rental manager who has inspected the property now that the renovation has been finished and the unit furnished projects rent and occupancy rates that would translate to a net yield of 11.7% based on the purchase price (and including the monthly HOA fee). If we sold the apartment furnished at the price I think it should sell for, the projected net rental yield would be 7.5% to 8%.
Not bad returns, as they don't include any potential appreciation. Of course, not everyone has the time or the inclination to manage a renovation in another country and not everyone wants to put as much money into Colombia as it takes to buy and furnish an entire apartment. That's why I was excited when one of my real estate contacts in Medellin, Rich Holman, told me about a project he's put together. It amounts to a very reasonably priced first step into this market that comes with the added bonus of a Colombia residency visa.
You can get residency in Colombia if you invest 100 times the monthly minimum wage in a private company. At today's minimum wage and exchange rate that works out to about US$35,000. Of course, finding a private company looking for investors at that level isn't easy, so the reality is that gaining residency in Colombia this way isn't normally a realistic idea unless you're ready to invest a much greater amount.
Rich and his partner Joe Greco, however, have put together an offer using a building that one of their real estate investors bought and renovated in Medellin. The three-unit building is in the Zona Rosa in the heart of this city's tourist epicenter. Fully furnished, the units are being prepared for short-term rental (no worries here about the short-term rental laws in Colombia, as the building has but a single owner...the company that you can invest in).
The idea is simple. Investors can buy a share of the company that owns the building for, not coincidentally, US$35,000 and thereby qualify for a residency visa in Colombia. The units then will be rented out, and owners will receive their shares of the net rental income after rental and property management fees have been covered.
Projected net yields are 4% to 6% after Colombian taxes (my projected net yields above for my rental scenario are before Colombian taxes, which can be as high as 33%). That's a decent yield especially when you consider the main benefit of the investment is residency in Colombia. It's also an opportunity to get your feet wet as an investor in Colombia with a modest amount of capital.
If you were to buy an apartment in Medellin and furnish it, the lowest total amount of capital required would be around US$100,000. (One reader found a great apartment last year for US$75,000 and furnished it for another US$10,000, but that was last year.)
As an investor in the project, you enjoy a discount if you'd like to stay in one of the units. Further, the cost of your residency application is included in the investment amount, meaning this is a fully turn-key opportunity.
I think the yields Rich and Joe are projecting are probably conservative. These guys put together a similar project last year (for investment only; there was no residency component). The rental returns for that effort are beating their projections. As they own a real estate company with a rental management arm, they have a steady flow of rental inquiries from tourists, businessmen, and investors and experience managing rental properties in this city.
Along with the yields, investors should see some capital appreciation of the underlying asset. While Medellin real estate prices have increased over the last few years by as much as 10% a year, prices are still very reasonable on a global scale. In addition, the local economy is growing nicely. Therefore, I expect property values to continue strong.
The bottom line is that you won't find many real estate investments in this price range, and you won't find an easier residency option for Colombia.
You can reserve a unit with a fully refundable deposit of US$500. For more details, get in touch here.
Lief SimonContinue Reading:
Read more...
Then he goes on to qualify this statement by saying that the cost of living in these two cities is comparable if you ignore property taxes, HOA fees, health insurance, and medical care, which he admits are all more expensive in Tucson. But, he maintains, taking those costs out of the equation and focusing on real estate prices only, you can't beat the U.S. Sun Belt in this post-bubble age.
You can decide to ignore every other cost-of-living factor about a place you're considering for living or investing and make a comparison based on real estate prices only...if you like. However, if you do, you'll need to compare apples to apples.
I hate to break the news to the reader in Tucson, but we must have a different definition of middle class. After slogging through hundreds of online property listings for Tucson, I finally found a place that appeared livable from the pictures. It was priced at US$70 per square foot. Maybe it is located in what is considered a middle-class neighborhood. I know Tucson only historically, not currently (I grew up in Arizona). Going by the pictures, though, I'd say that neither the house for sale for that price in Tucson nor the neighborhood where it's located are as nice as what you can buy in Medellin for the same price.
That said, big picture, my new reader-friend is right. You certainly can buy cheap in the Sun Belt. You can also buy cheap in Detroit and many other places in the United States right now. I wouldn't want to live in any of those places or in any of the cheap properties that I found in my research for Tucson. But they exist.
The places I found in my online research on Tucson that seem to compare in quality of construction and location with El Poblado in Medellin (the neighborhood we're typically referring to when we give price references for that city) worked out to about US$130 per square foot.
The reader who contacted me pointed out they have great weather in Tucson (comparable to the weather in Medellin) for maybe six months a year. He ignores the other six months of the year, when you'll need around-the-clock air conditioning or you'll risk death. Daily highs hover around 100 degrees for at least five months of the year in this part of Arizona.
But let's leave utility costs aside...just as we're leaving property taxes, HOA fees, health insurance, and medical care costs aside.
Let's strip away everything but the cost of real estate. Where does that leave us?
In a rundown neighborhood in the middle of the desert. Again, I speak from firsthand experience. I lived in this part of the world for the first 25 years of my life.
I'll take Medellin any day.
Sarcasm aside (I admit that I can get carried away), one important point to make in this context is that an apples-to-apples comparison of real estate prices can be difficult, not only between Tucson and Medellin, but between any two places in the world.
The first step is to break the prices being compared down to dollar per square meter (or per square foot). However, once you've done that, you have to also next do what an appraiser in the States would do. You have to factor in things like location, amenities of the property, amenities of the area (shops, hospitals, etc.), and quality of the construction (I'm not interested in living in a mobile home no matter how cheap it is).
You can't compare the cost of an apartment in the center of Paris with the cost of a farmhouse in Iowa. That's an extreme example, but it makes the point.
Lief Simon
P.S. The reader from Tucson also pointed out that you can get a 20% yield on rental properties in that city right now. I have to wonder if it's worth the risk. If your tenant can't afford a house that costs US$40,000 with interest rates as low as they are today, how is he going to pay you US$700 a month in rent?Continue Reading:
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"So, after a brief frisking and an inspection of the bus (to make sure there were no bombs on board), they let us proceed on our way to the colonial city of Popayán.
"This was the Colombia that I came to know during my first extended stay, back in mid-2006.
"It was far safer than it had been in 2002--when former president álvaro Uribe took office--and many Colombians I encountered in 2006 told me how much their country had changed for the better.
"Travel in Colombia was still an exercise in learning where it was safe to go, but it seemed at the time that the country had turned an important corner...which made it interesting.
"A few weeks after that incident, I told the story to Publisher Kathleen Peddicord at a meeting in Panama City. Rather than being put-off by the situation in Colombia, she asked me to go back, asap...within two weeks!
"As it turned out, and as I discovered over a series of return visits to follow, Colombia had indeed turned a corner, and it hasn't looked back.
"When I returned to the country in subsequent years, I heard less and less talk about safety. Unsafe areas (while still there) became the exception rather than the rule. In 2010, I toured several major cities, and the topic of revolutionaries and safety never came up in conversation...not once. Colombians by then were looking ahead to a bright future, rather than discussing the darker aspects of the past.
"And they're not alone. In January 2010, The New York Times 'Travel' section included Colombia on its list of 'The 31 Places to Go in 2010.' This opened the door for the mainstream traveler to start noticing what Colombia has to offer...from the magnificent walled city of Cartagena to the colonial charm of Popayán...from the hip clubs of Bogotá to the upscale cafes of Medellín...
"Then, in May 2011, Sam Zell--perhaps the world's foremost real estate investor--made a prediction. Zell said:
"'If I were to identify today the next focus point for real estate investment, it would be Colombia.'
"In September 2011, Zell made his first US$75 million investment in this country.
"Then Carlos Slim, named the world's richest man by Forbes magazine, said he's seeking to boost his investments in Colombia because of the country's open policy on oil exploration, its mineral assets, and its growing middle class.
"Mr. Zell and Mr. Slim have marked the return of the professional investor to Colombia.
"Then, to top it off, in March 2011, Standard and Poor's restored Colombia's investment grade rating. Moody's followed suit in May, giving Colombia two critical investment grade ratings needed to attract large, institutional investors.
"For the big money and the professional investor, all the news from Colombia is good.
"For the smaller, private investor or retiree, change happens more slowly when it comes to well-entrenched stereotypes like the one that shadows this country.
"I have the pleasure of joining well over 1,000 readers each year at various conferences and events. These are well-informed, open-minded people, positive about opportunities for living and investing abroad. Yet, when I mention Colombia, at least 80% respond with: 'But what about the drug cartels?'
"The Medellín Cartel was dismantled by 1993. Unfortunately, though, it lives on in books, movies, and our collective imagination. Pablo Escobar was killed at the end of that year by Colombian authorities...not Harrison Ford. The real cartel is a part of Colombian history.
"But I have to admit that the outdated stereotype is good for some of us. If the world were focused on Colombia's lifestyle, safety, security, solid economy, energy exports, and strong currency...real estate prices would be a lot higher than they are.
"And folks like you and me wouldn't be finding the values that we can find today.
"I was sold on Colombia, specifically on Medellin, thanks to its climate and lifestyle. These are completely unparalleled. I make this claim based on extensive Latin American travel, living, and investing experience.
"I was sold on Medellin, and I bought a second home there. For this I paid about half what I'd pay in many more popular, yet far-less desirable locations.
"So the stereotype has treated me well...as it has a growing number of leading-edge expats who've also made Colombia their home, full- or part-time.
"The guys in jungle fatigues carrying machine guns were a bit scary when I ran into them on my first visit to this country, but now they're part of my history, too. In their place are more recent experiences of sidewalk cafes, fine dining, and the world's best climate.
"I'm glad we purchased our home in Medellin while images of Pablo Escobar (and Harrison Ford) are still fresh in everyone's mind. Once those images fade, today's great values will go with them."
Kathleen PeddicordContinue Reading:
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