In 2012, Lief and I bought an apartment in Medellin, Colombia.
It was nearly 400 square meters in an architecturally interesting building in a prime location and featured a terrace with an expansive view over the Medellin valley and the mountains beyond. It was a one-of-a-kind find.
But it was not the property we’d set out to buy.
Our attention had been piqued by reports of annual net rental yields in this market of as much as 20%. We planned a scouting trip and looked at a dozen apartments that could have worked well as straightforward cash-flowing rentals generating that level of return, but it was the oversized apartment in El Poblado that got our attention.
It was not rental ready, but the price was irresistible. It allowed us to buy at one of the best addresses in a market we predicted was positioned for rapid and dramatic capital appreciation, in addition to those 20% annual net yields, for the extraordinarily bargain price of $675 per square meter.
In addition, while the straight-up rentals we viewed were each one more or less the same as all the others, this was a property of charm and character.
At least it had the potential to be charming. The apartment had been the home of a single 80-year-old woman, who had lived in it alone for decades. The kitchen, the bathrooms, the fixtures, and the fittings were all 1950s originals. The place needed a total overhaul, meaning, that, instead of a turn-key rental investment, we ended up opting for a gut-job rehab.
To carry it out, we engaged a local contractor named Carlos. With Carlos’ help, we conceived a plan to reconfigure and rebuild the space. The apartment had a galley kitchen intended to be the domain of household help. We wanted a big, open kitchen with room for cooking and hanging out as a family. We also wanted a library, a game room, and a bar on the terrace.
The more we got into the project, the more personal it became. We imagined parquet floors in the living room and library, handmade and hand-painted Spanish-colonial tiles in the bathrooms and kitchen, and French doors to the terraces. We let our imaginations run because we’d been assured that the costs of this level of construction and finishing would be low. Both labor and materials were a screaming bargain… everyone told us.
We began the renovation in July. Carlos said the work would take four months. By late December, the place was still a wreck.
By this point, we were concerned not only about the timeline but also the costs. We’d spent the total original budget, but the “Send more money” requests from Carlos were filling up our in-boxes and the photos he was sending to show progress didn’t.
We planned an emergency trip to Medellin to see what was what. Walking through the apartment with Carlos, we calmed down a bit. The demolition and behind-the-walls work had been done, and the new floors had been laid. Still, though, we had no doors, no windows, no bathroom fixtures, no bookcase in the library, no terrace bar, and no kitchen.
Four months of short fuses and heated e-mail exchanges later, we walked through the front door of our finally remade El Poblado pad to find the sun beaming through the windows of the French doors to the terrace and glistening off the polished parquet. It was everything we’d originally imagined it might be.
And, when the final accounting was done, the top-tier renovation had cost nearly twice what we’d budgeted but was still a per-square-meter bargain given the end result.
Lief and I have renovated 13 properties in 6 countries.
What have we learned?
Lesson #1: All renovation projects take twice as long and cost twice as much as you plan.
We’ve not yet taken the step of allowing for this by doubling our time and expense projections from the outset. We worry that, if we did, the inflated figures would still fall short of the ultimate actual figures by half.
Lesson #2: Everyone involved must agree on the objective from the start.
Is the completed property intended for rental or for personal use? Often the answer can be both, which is when things can get messy.
One reason the Medellin project stands out in memory is because, after renovating so personally, we were reluctant to rent. We listed the apartment with one, a second, and then a third rental management agency, but it rented maybe a total of six times. Fit a place out with custom parquet, hand-painted tiles, a clawfoot tub, and antique chandeliers and you become discriminating about who you feel comfortable allowing to spend the night. We set the rental rates so high that we priced ourselves out of the market. Finally, we pulled the listing from the third agency and hired a property manager to take care of cleaning and paying the bills. It was no longer a cash-flowing asset but a straight-up expense.
You could call it a rental investment disaster story. On the other hand, the apartment is now worth four times what we paid for it. It generates no rental cash flow, but we use the property for family vacations at least once a year. I’m happy with the situation; Lief less so. It’s perhaps our best example of what we’ve come to refer to as “The Spousal Effect.” Lief’s spreadsheeted rental projections were out the window when I took charge of the project. What short-term tourist rental renovation budget includes custom cabinetry and leather Chesterfield sofas?
#3: A renovation adventure is one of the best ways we’ve found to engage with the local community.
In Ireland, France, Panama, Colombia, Argentina, and Portugal, the places where we’ve taken on renovation projects, the architects, contractors, woodworkers, painters, and landscape designers we’ve worked with have become personal friends and have been our entrée to the local scene, giving us insights into the local culture we wouldn’t have had otherwise.
When we think back on the renovation of the 19th-century Georgian Lahardan House in Waterford, Ireland, we remember the little bent Irishman with the screwdriver in the back pocket of his tweed trousers who was the first to tell us the place we’d just bought was riddled with rising damp (though he walked away and out the door before we were able to ask him to explain what that meant). We see the Welshman Liam hoisting four or five sacks of cement at a go without noticing. We laugh about the gardener Ian who we finally realized was living in his car but who built beautiful stone walls. And we remind ourselves of John the cabinet-maker who worked around the clock for two weeks so we’d have a kitchen in time for our first Christmas.
#4: It’s possible to renovate a property in a country where you’re not living but risky.
Only one of our renovation projects—Lahardan House in Ireland—was undertaken in the place we called home. All the others have been managed long distance.
The three renovations of apartments in Buenos Aires, Argentina, were handled completely by an architect contact. We didn’t see the apartments until a year after the work had been completed because they were rented on annual leases, but the architect sent pictures on a weekly basis to update us progress. Material selections and furniture choices were agreed via email. The process was seamless, but we wouldn’t recommend it.
Ideally, you should plan to visit the project at least monthly during the renovation process. At critical stages, you may need to be present weekly or daily. If you’re not living where the property is located, add travel costs to your budget.