How to obtain high ROI on real estate in Bogotá, Colombia
Today, we are pleased to present Sam Miller, leading real estate broker in Bogotá, who will talk a little bit about his journey to Colombia and his business.
HalloCasa: “Good afternoon, Mr Miller. Thank you for taking the time and to talk with HalloCasa. Why don´t you introduce yourself quickly to our audience and describe quickly your business?”
Sam Miller “Thanks for the invite. I am an Australian-born & raised, mixed breed American-Canadian. In 2009 I left Canada on motorbike to explore the Americas.
After a year traveling from British Columbia to Buenos Aires, Bogotá and its eclectic lifestyle of opportunities drew me in. Very early on here, I became involved in real estate.
I founded Colombia International Real Estate with a local partner, Sebastian Romero, creating an agency catering to foreigners investing in Colombia.
Living in Bogotá, Colombia
Since then we have grown into a property group (partnering with First American Realty Medellin). We have 3 main operations: An international focused full service real estate agency called Colombia International Real Estate creating high-yield real estate investment products (TIPs & PREPs, more info below), and managing furnished rental properties through The Apartment Bogotá.”
HalloCasa: “Tell us a little bit about your life in Bogotá, do you enjoy it, what do you like the most, what the least?”
Sam Miller: “After 6 years, I still
wake up everyday, inspired by the challenges and opportunities that are laid out in front of me here. Life in Bogotá is not for everyone.
From the foreign perspective, low local wages, weather and traffic keep people from giving it a proper chance. These characteristics are deterring for some, but all can be alleviated fairly easily. Low wages? Start your own business, living on an entrepreneur budget can be more exciting in Bogotá than back home with a comfortable wage. Weather? Put on a light jacket. Bogotá is cold by Colombian standards but cool by international standards.
I love the constantly comfortable temperature. Traffic? Get a motorbike or bicycle and use cheap taxis, it is a megacity afterall. With no distinct ¨Gringo Bubble¨, foreigners in Bogotá create lifestyles here that are only limited by imagination. I love sports, random weekend adventures, cultural events, concerts, trying countless new restaurants & bars, and the occasional game of Tejo.” (Read also our other interview with Edwin Schuh about life in Bogotá)
HalloCasa: “How was the journey to setup your business? What for obstacles did you have to face? Can you recommend it in general to become an entrepreneur in Colombia?”
Sam Miller: “Comparing Bogotá offerings to international standard products and services will give you a 1000 ideas to start with. Our challenge was finding the ´adapter plug´ that took a local need (international standard real estate products and services) and make it appropriate for the international market.
Knowledgeable partners and networking are especially key for entrepreneurs in Colombia. It takes persistence, trial & error and a deep understanding of what and how a Colombian prefers to do things.
Delivering this ¨international standard¨ must be backed by talent all the way through your supply chain, otherwise you won’t be delivering on your promise. This is why we are continually bringing different services in-house.” (Read our long interview about the pros and cons of launching a business in Medellin!)
Real estate in Bogotá, Colombia
HalloCasa: “Turning to real estate in Colombia (and in Bogotá), can you introduce the situation a little to people who don´t have any clue?” Do you see arbitrage opportunities in comparison to other markets / countries? Why is it so hot at the moment?”
Sam Miller: “Colombia is playing catch up. For nearly 2 decades it has had stellar growth and the value of real estate is really being appreciated in certain areas.
Following these trends are key to identifying potential properties that have both the meat and the milk of a cash cow i.e. equity growth and cash flow. Responsible fiscal management (with the exception of hyperfocusing on oil & gas), Colombia has been a silent achiever, hidden behind an outdated reputation.
As the reputation continues to relegated down to a Netflix series, the foreign investment has started pouring in. Tourism growth has gone exponential in the last 10 years and will grow 23% approx. in 2016! (World average is 4%) What this means is the word will get out even further and Colombia will become a default must-see destination.” (Some additional insights: Jon Castro´s view on the transformation of Bogotá)
HalloCasa: “Where would you invest right now? Which cities? Which areas in Bogotá? Which ROI is attainable / with which kind of properties? Which kind of properties do you regard as the most interesting ones in Colombia (maybe different to other countries)?”
Sam Miller: “Bogotá is the beating heart of Colombia, most MNCs, national and governmental agencies operate from here. It receives 51% of all visitors to Colombia. It has 1 million more Colombians migrating to the city over the next 10 years.
Using local and internationally experienced eyes, the growing and appreciating areas of Bogotá are fairly straightforward to identify and sift through for opportunities. Buying and renting unfurnished will net on average 4% cash flow.
This is fine for some, but we look at properties with commercial development or furnished rental potential at 8-10% net cash flow.
Appreciation is a bonus when we analyze a property, but averages around 8% in Bogotá over the last 2 decades. Picking in edgy areas will also catch the very traceable wave of appreciation that a capital city of an emerging country provides.”
HalloCasa: “Now, about your new business model, can you describe it a little and what is the particular value are you adding? Which customers are you targeting mainly?”
Sam Miller: “Integrated investment options. For our first few years in the market, we could only identify properties with great potential and point the investor in the right direction.
Now we can identify, renovate, design, furnish and administer the furnished properties, which provides a great passive way to get involved in the property market, cheaply and conveniently. We have two main investment products. We have TIPs (Turnkey Investment Properties) which are basically individually titled apartments that we renovate/furnish and enter into our property management system with cash flow between 8-11% net ROI.
For larger projects we have PREPs (Packaged Real Estate Projects), we create a Colombian business entity and open the project to funding for our investors. These are typically buildings that we find that can be converted into high-yield rental units.
ROI on these projects are paid out in preferred dividends and generate 8-10%, plus great equity growth as the property becomes a high-performing, cash flow asset. Our priority is to find what works, simplify, and scale up, so we call themTIPs and PREPs“.
Our typical clients are North American & European investors with $100-300K USD, who have heard of the rising star that is Colombia, and are looking for hassle-free, high-yield investments before the popularity of the country goes mainstream.”
HalloCasa: “So, that means people can hire your full-service solution without taking care of the re-modelling and you also take care of the administration later on?”
Sam Miller: “Yes. It is a tall order to walk into a foreign country and then understand the market, identify a property with investment potential, navigate the process, interview designers, contractors, and property managers, hire based on trust and efficiency, and establish processes to have money sent automatically to your bank account.
As a one stop shop, we can take a client with a budget to receiving paychecks into their bank account. People value time more than ever these days, so when we say passive investment, we mean it. We haven’t seen anyone else offering a product/service like this in Colombia, although I would respect the effort if they tried. We know what it takes.”
Real estate trends in Bogotá, Colombia
HalloCasa: “From your perspective, what are trends in Colombia with respect to business travellers and also as a tourist destination”
Sam Miller: “We talked earlier about the tourism numbers going exponential in Colombia. The country still has a very long way to grow in terms of being a top Latin American tourist destination but it is clearly on that path.
Local and international business ears are perked up right now about the opportunities here. A 30 year tax free incentive that expires in 2017 did great for just keeping up enough supply in the hotel market over the past decades. Occupancy rates across the industry have been steady at a healthy 60%, higher in some areas. The value-luxury, serviced apartment markets are overlooked and remain under-served. (More on tourism: Interview with Benita Glück about Pereira and her travel agency)
That is why we have put The Apartment Bogota into top gear. Luxury and standard accommodations are available, but lack characteristics a modern international traveler needs; Local recommendations & experiences, quality and high-tech furnishings, Whatsapp concierge, bi-lingual airport pickup, friendly check-ins, value location options, corporate services etc.”
HalloCasa: “What do you like the most about Colombia?”
Sam Miller: “The value of experience over consumption, the charismatic people who surprise you with their kindness, the unpredictability, the diversity of people/climates/activities, the curvy mountainous roads and unrivaled diversity of landscapes that make it the best country in the Americas for motorcycle adventure travel, a perseverant, smiley culture that continues to march onward in a positive direction, choose-your-own-season (within an hour or two you can take a cheap flight or drive to your climate of choice),
a land of opportunity only limited by your persistence and creativity, a people that are patriotic to the values of the culture and not the politicians that run it, superb three course lunch menu deals, you can get anything delivered, a massive amount of events/concerts/festivos, the nightlife, the breed of international expats it attracts that are not dependent on a path of least resistance, affordable, internationally inspired restaurants, many different sub-cultures in each region, it´s not (yet) overrun by foreign tourists, circus shows at the traffic lights, mobile snack stands whenever you need them.”
HalloCasa: “What do you like the least about Colombia?”
Sam Miller: “Many countries have unseen potential, but Colombia is one of the greatest examples of that. It is progressing in leaps and bounds but there is still such a long way to go, and the traditional bureaucracy slows down its progress.
Unequal wealth distribution hinders the quality of life for the entire population, but is not a challenge considered top priority. With such a turbulent history of violence, scams, corruption, Colombian people can sometimes relegate their concerns to their families and immediate sphere of influence.
It means the upper class used to go from guarded communities to guarded schools to guarded holidays homes.
The situation has improved incredibly, but locals are just starting to get used to the freedom this improvement means. In contrast, the large majority of foreigners live outside of that traditional bubble and are creating incredible lifestyles for themselves.”
HalloCasa: “Thank you so much for the interview! How can people contact you in case they have follow-up questions?”
Sam Miller: “People can contact me via email: firstname.lastname@example.org, phone: (+57) 3203756521 or via our websites: Colombia International Real Estate (Turnkey Investments, Residential Sales): www.colombiainternational.co and The Apartment Bogotá (furnished apartment rentals, property management): www.theapartmentbogota.com.
Thank you very much!”
HalloCasa, the marketplace for international real estate properties, is being founded by a German in Bogotá. HalloCasa´s mission is to build trust for vendors and investors with respect to cross-border real estate transactions.