Colombia Real estate Investing Tips

Real estate investing activity in Colombia have provided stability, wealthy and excellent returns for people of different social levels.

In an area of such obvious growth and potential, real estate investors in Colombia are confident they will experience substantial financial gains as the demand for both commercial and tourist residential property in Colombia increases.

RULE No. 1: Always think on real estate investment, as a long term investment.

Why? Because like any other type of investment, you can’t predict the future. When you invest in real estate you have a level of risk involved because the market constantly fluctuates.

You need to be thinking about selling the property before you have even purchased it. There is no guesswork involved in real estate but rather calculations of costs to invest and what you will come out on top with. You should have a decent idea of what you are going to make on a property before you put in an offer on it.

RULE No. 2: Do your Homework. Be informed about the local real estate market.

Once again: Information, information, information. You should begin by becoming familiar with the local market because this is a direct indicator of the nation's real estate market. Learning about this information is vital to your success in real estate. The local economy is a huge determining factor when it comes to the market value of a property. If the local economy is up the price of the home goes up and it goes the same when the economy has gone down. Many of the changes that happen in the market are caused by an increase in interest rates, tax rates and unemployment rates.

Another indicator to consider is the average time a house is on the market in that area. If homes are selling fast and their average market time is low, this is a good sign that the market is hot and could be profitable. A local real estate agent should be able to get you that information regarding the place you decided to invest. A local real restate agent can also give you information about future developments in the area or changes in the land use. Sometimes we just know by word mouth about a future shopping mall construction, a street widening or things like that just because we are on the day to day working pace.

RULE No. 3: Define what you expect from your investment..

An investment property or a rental Property? You could buy an investment property and hope to cash in on the property in the future, or you could look for a rental property that will offer profitable cash flow from month to month.

For rental property you have to different value increasing. The property value and the rent value. You can rent an apartment in Colombia for about 0.5% to 1% of the property’s commercial value. Value increasing rate for real estate has been 10% country’s average for the last three years. So you can get a minimum of 16% average return. Since banks pay 7% annually interest return for funds, is not a bad deal.

Of course there will always be other expenses, such taxes and rental agent fees, which you must pay. However, these additional expenses will still leave a nice little cash flow of profits for your efforts.

As a property investor you must focus on the big picture. You will probably buy an investment property which allows you to make a good profit in at least two or three years.

If you’re planning to stick with it in a longer term, and if your house is in a hot market, you can expect for sure a higher return for your investment.

When you are a property investor you are not very interested in making money on your investment right now. Your primary objective is holding onto the property for the long term and selling the property when the market value has risen significantly.

What suits you best will depend on your needs as well as your resources. If you have time and stand by money earning the minimum bank interest rate, then an investment property could be way the go, but if you want to have cash flow from your property a rental property might be your best choice.

RULE No. 4: Investing in Hot Markets. Don’t follow everybody’s trend.

Miami, Las Vegas, New York. Two years ago many people made a lot of profit in a year or less . When I started investing in the US market in 2004, the value increasing rate in Miami was about 20 to 25 % for several years, and even the most respectable and experience real estate investors, said that the prices would continue rising. A lot of Colombian investors follow the cheery trend.

What happen? In 2006 price stopped going up. What do you do when you put your only savings in a down payment and the closing dates are stepping you the heels? Well, if you’re lucky enough you can receive the same down payment amount after two years. But if you can’t close the property you simply lose money.

So we are back to Rule No. 1 and complements Rule No. 4. Don’t follow the trend just because everybody says so.

Well, but you might say: How can I predict high or low increases in real estate market?. Wiser than follow the trend is to look at the big picture. (Rule No. 2) .

At the end of 2005, Mr. Greenspan was already giving some signs about going interest rates up. You know what’s going on now. In Colombia we had the same situation back in the early 90’s. A real estate boom of five years with the difference that interest rates scaled up at the end of the decade, letting some buyers in serious troubles.

So an important thing to watch is the direction of interest rates. As they fall, people can use lend money to buy, demand start growing and prices can easily go up.

Another good indicator is to look at the job creation in the area, which drives the demand for housing and other real estate. A real estate boom may pass a city by if there is no growth in jobs, and therefore no growth in population.

We learned how the opposite work as well. It is much less likely that people can continue to pay higher prices if interest rates are rising. This is could explain the reason why home prices are dropping in many US hot markets in 2007.

There is not particular investor tip with the secret formula to success when buying a property abroad. If you can find the right property in the best location and grab it at the lowest price possible, before it becomes common knowledge, Congratulations! You will have very lucrative returns for sure.

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