Preparing to Buy Real Estate in Medellin

1. Why should I buy a property in Medellin?
2. What costs do I incur when buying real estate in Colombia?
3. What costs do I incur when selling real estate in Colombia?
4. What costs do I incur as an owner of real estate in Colombia?
5. Can I get a mortgage in the US to buy real estate in Colombia?
6. How do I know which real estate agent to work with?
7. Do I need a lawyer who is familiar with real estate in Colombia?
8. How do I know if real estate in Colombia is good or bad value?


1. Why should I buy a property in Medellin?

Recent poll showed that “99% foreign visitors to Medellin ‘highly satisfied”.

Medellin is emerging as an appealing overseas retirement haven, with its pleasant climate, scenery; cultural and recreational diversions, friendly people and highly educated workforce are drawing individuals from all over the world to the Eternal Spring City. Tourism has been up every year and expected to increase year over year.

With a continuous decline of US dollar value having money outside the US dollar in another currency provides a great hedge against market instability.

All three major rating agencies have raised Colombia’s Credit Rating to Investment-Grade and Billionaire investor Sam Zell has selected Colombia for real-estate investments as the “next best” in Latin American market as economic growth prospects look very bright.

House prices in Colombia rose strongly in last few years and expected to continue rising due to the economic growth prospects.

Medellin offers a low cost of living and the real-estate prices are still affordable. Therefore it is a great time to buy a property here, rather than wait for 5-10 more years.


2. What costs do I incur when buying real estate in Colombia?

As a real estate buyer, you will need to pay the following:

  • Notary costs (Gastos de notaria): Notaries charge between 0.30% and 0.35%. The price difference depends on the notary in question. This cost is split 50/50 between the buyer and the seller. So, as a buyer, you will pay about 0.15%.
  • Government taxes (Impuestos a renta): Government real estate taxes are 1.05%. The cost is split 50/50 between the buyer and seller. So, as a buyer, you will pay 0.525%.
  • Registration taxes (Impuestos a registrar): In order to have the sale registered in the government offices, you will pay 0.5%. The buyer is responsible for paying all of this tax.

So, for example, if you buy real estate for 200,000,000 pesos, your total costs will be:

Notary costs 0.15% = 300,000 pesos
Government taxes 0.525% = 1,000,000 pesos
Registration taxes 0.5% = 1,000,000 pesos
Total: 2,300,000 (approximately $1,150 US dollars)

3. What costs do I incur when selling real estate in Colombia?

As a seller you will be liable to pay half of the notary costs and government taxes as described above.

You will also need to pay the following:

  • Agent commission: As a real estate seller you will pay the agent 3% of the value at which the real estate is sold. If you are selling land instead of property, or property which includes a significant plot of land, i.e. a farm, the fee is likely to be 4%.
  • Sales taxes (Retencion en la fuente): As a real estate seller, you have to pay an additional 1% sales tax.

So, for example, if you sell real estate for 200,000,000 pesos, your total costs will be:

Notary costs 0.15% = 300,000 pesos
Government taxes 0.525% = 1,000,000 pesos
Agent commission 3% = 6,000,000 pesos
Sales tax 1% = 2,000,000 pesos
Total 9,000,000 pesos (approximately $4,500 US dollars)

4. What costs do I incur as an owner of real estate in Colombia?

As an owner of real estate, you are liable to pay the following:

  • Government taxes (Predial): Taxes are based on the value of your real estate. Compared to USA, the taxes are very low here. For example, real estate valued at 200,000,000 pesos will cost approximately 100,000 pesos per month in taxes. Property taxes are paid tri-monthly.
  • Administration: If real estate that is part of a complex, for example, an apartment block or gated community, may incur an administration fee. This fee covers the cost of security, maintenance and usually basic home insurance. This fee varies on the building from 0.1 to 0.2 percent, so it’s worth keeping track of when comparing properties for sale. For example, an apartment valued at 200,000,000 pesos might cost 200,000 pesos per month in administration.
  • Utility bills: Utility bills vary according to the ‘strata’ rating given to the property. Strata ratings range from 1 (low end) to 6 (high
    end). For example, most real estate in Poblado will be strata 6. As a rough estimate, energy bills (water, gas, electricity) and
    communication bills (telephone, cable and broadband) will cost about 200,000 pesos per month.

So, for example, the total costs for owning real estate in Colombia, valued at 200,000,000 pesos, are approximately 500,000 pesos per month (approximately $250 US dollars).


5. Can I get a mortgage in the US to buy real estate in Colombia?

As things stand, it is not possible to get a mortgage in the US for buying real estate in Colombia, unless you are a Colombian citizen.

If you are considering getting a mortgage inside Colombia, you should note that the rates are considerably higher than those in the US or Europe and you would need to put down a very sizeable deposit (minimum 30%).


6. How do I know which real estate agent to work with?

You should demand the following from your agent:

  • Your real estate agent should understand how much time you have and therefore work at a pace that is appropriate for you. There is no point standing around drinking coffee, talking about the wonderful climate in Medellin, if the buyer has 2 weeks to close the deal
  • Your real estate agent should understand exactly what you are looking for. They should be proactive and not rigidly stick to the short number of properties for sale on his or her books
  • Your real estate agent should understand that a buyer is more inclined to take the plunge if they are not pressured. An agent that insists after viewing 3 properties for sale that there is no better deal in town than the one on the table is definitely not worth dealing with
  • Of course, if you do not speak Spanish, it’s important that the agent speaks English or works with somebody who does
  • Most importantly your agent should know the rules and regulations, and have a very good understanding of the market conditions

When you work with LUHO, you can be assured that our agents provide you with the best service and knowhow in the industry, and you can be worry-free!


7. Do I need a lawyer who is familiar with real estate in Colombia?

While it’s common practice in the US to use a solicitor when buying real estate, in Colombia it depends on the complexity of the sales terms. For a straightforward purchase it’s easy enough to check the papers and sales contracts in a public notary and remove the cost of hiring a private lawyer or solicitor.

As a foreign investor we recommend that you work with a lawyer, who can make sure all laws and regulations are complied with, so when you sell property you can take your investment back with no issues.


8. How do I know if real estate in Colombia is good or bad value?

It’s good practice to keep track of each property’s value per squared metre so that when you find two properties of the same size and specification you can decipher which is better value.

That said, sometimes real estate varies significantly in terms of its age, the ‘prestige’ value of its street, the architect’s use of space or the quality of materials used for flooring, doors and walls. For an apartment, the price will also increase the closer it is to the top floor and the more spectacular its views from windows or balconies.

If you are planning on entering the rental market, you’ll find that some types of property and neighborhoods are better than others, though this won’t necessarily be represented in the value of the property.

We will guide you through the entire process, if you are buying a property as an investment and would like rental income, our sister company can help you with this, TheApartmentMedellin.com. We are the premier provider of luxury rentals in Medellin market.