My strategy in an expensive market with very cheap rents

[Mariano Ospina]

TLDR: I buy apartments in Bogotá’s high-end neighborhoods, rehab them, live in them until they sell, and double my investment.

Hello, people. Here’s my story.

I live in Bogotá, Colombia. Like NY, LA, etc, rents are extremely low compared to purchase prices. You’d be lucky to get 0.5 % of monthly return (as opposed to the 2% rule). Combine that with 9% interest over 20 years, and you can see the problem.

I am a pilot, and was raised as a salary minion. I live very comfortably, don’t get me wrong. 3 years ago I had a career issue, and although I found a new job within a week, I decided I couldn’t count on my salary as my sole source of income. If I lose my sight, get diabetes, etc, I’ll lose my license and then I’m screwed.

I read Rich Dad, found BP and started learning. I quickly understood the BRRRR strategy wouldn't work in my area, so flipping was my option. However, market here is very slow, and it's not uncommon for a property to stay on the market for over a year.

Ok, enough preamble. I offer below half-price on a bunch of apartments in my area (high end urban in the north of Bogota). I buy using conventional banking loan, and invest only the down payment, plus the rehab. Full new everything, not high end, but all high quality. I employ an architect, which has proven invaluable to avoid costly mistakes, specially seeing that construction is not as standard and regulated as in the first world. So, surprises are found often.

I then move, family and all, to that place, and live there until it sells. It might be a month, or 2 years. It doesn’t matter, as the monthly payments to the bank are about the same as what I would pay for renting anyway.

My first project, I put US $80,000 out of pocket. I got US $190,000 out, a 135% profit, and took 1 year to sell. I am now 2 weeks away from moving into my second project, which has been way too slow due to covid restrictions and civil unrest in the country. It goes on the market as soon as it’s finished, and we are moving in straight away. All my living costs for the time it took to remodel go in the expense column for the project (5 months 😥). Still, I should net over 100% profit, whenever I sell. This area is a bit more commercial the the last one, so I’m hoping it will be soon.

I’ll update as soon as something happens.

Thanks for your patience.

Mariano