All Forum Posts by: Aaron B.

Hello! It is time for me to share another story concerning one of my international investments in Medellin, Colombia, South America.  This is a 30-year-old penthouse that I bought and completely remodeled. I went over budget with the remodel and then decided I wouldn't have one anymore, I just wanted to design it well.

First, here is the background property information for context. Note that all prices here are converted to their USD equivalent for your convenience, but are actually paid in Colombian Pesos (COP) at the exchange of the day. Since this was a remodel, all expenses were paid overtime at various exchange rates. So I am providing an approximate cost average. I pay cash for my international purchases.

Penthouse specifications:

• Purchase price in 2019: $220,000
  250 square meters = 2691 square feet
• Average price per square meter = $1,000
  Average price per square foot = $81.75
• Remodel cost in 2020 (including all furniture, appliances, etc.) = $150,000 
• Total investment = $370,000
  • Average price per square meter (with remodel) = $1,480
    Average price per square foot (with remodel) = $137.5
• 4 bedrooms
• 4.5 bathrooms
• 2 glass enclosed patios
• Annual property taxes = $1,700 per year
• Monthly utilities are about $300/month
• Administration (HOA) is about $200/month
• Cable+Internet package is $50/month, I pay for fast speeds for remote workers and digital nomads
• Annual insurance is approximately $835 for the year and provides complete umbrella coverage for $1,000,000
• The full-time housekeeper is $425/month and helps with all cleanings between reservations, but because she handles two properties, her cost average per month for this property is really about $213/month.
• The maintenance guy is paid ad-hoc and as needed; I estimate only about $50/month

My overall cost of ownership is low totaling about $975/month.

Rental history:
I first began to rent this remodeled penthouse in 2021. I took professional photos and put the property online, and then within three days, I had my first reservation. I successfully rented the property at $2,000/week in the summer of 2021, and that was great. However, my neighbors became problematic and did not like me having weekly tenants. In order to avoid drama, I switched to monthly rentals at $5,000/month. I have been renting it at that rate since October 2021, and at a 100% occupancy rate. Half of my tenants came through Airbnb and the other half were organic and rented directly through me for cash. I am confident I could increase the rent to $6,000/month based on the demand and current market which is hot (even better than before COVID).

However, I did get an offer from a former tenant to buy my penthouse turn-key this week. One of my former guests is interested in putting this property under contract next week. I will let you know if I flip it. He is interested in the rental income stream. I estimate that I put about 1.2 billion Colombian pesos (COP) into this property with the repurchase and remodel. I may be flipping it for 2 billion COP. The appreciation is great given the relatively short time I have owned it, but you must also consider the difference in exchange rate this year versus the year I bought and the year I remodeled. All that being said, I may be earning a $90k-100k profit if I do flip it at my asking price. All within the span of 3 years. If I do sell it, I will be taking all of the capital and re-investing into a new project that I have already begun. Otherwise, I will be happy to continue collecting my monthly rental income, and I will increase the price to $6,000/month. 

Hello, everyone. I have been away for a while but am back to share some updates. I still own this property and it is performing better than ever. It is occupied 100% of the time earning $350/night+. I have Smart Pricing enabled with a cap of $1,050 per Airbnb's automatic recommendation. However, nobody has ever paid that much per night or even close to it, though some nights do book in the $400+ range. That being said, since I am 100% occupied at this rate, I am considering increasing it. I would like to ensure that I continue to get 5-stars across the board and don't want to set the price so high that my "Value" rating drops below 5-stars. That being said, this property is now producing ~$9,500/month on its own.

The other penthouse which I haven't posted about yet is performing as I had hoped also! I will save that for another post. But here is where I am at with this penthouse in Medellin. I have 4 days still available this month that can book for another $1,400+ potential earnings in August 2022 (which would bring August to a whopping $11,000). That being said, the exchange rate works in my favor for both buying power (more pesos per dollar) and my cost of living is 10% cheaper than last year. Last month when the exchange rate hit 4,600 COP/Dollar, I was living at a 20% discount. I don't even notice or feel inflation or a recession in the world. I know it is happening, but my life seems to be pretty resilient to it. COVID proved to be a great test and now the war in Ukraine, and I am stronger than ever.  I truly feel that smart international investing is the way to go if you are up for the challenge. Fortune favors the bold.

I am spending about $1,500 right now to improve some small interior design details that will make it even more attractive to renters. I will share photos of the interior design changes when I am done. The money is being spent on a new desk, new coffee table, new lamps, new pots for my plants & trees, and new light switches and outlets.

On another note, I have three new projects in the works and feel confident about the future prospects here, so much so that I am investing another $1.2 million down here. I think in mid-to-late 2024, I will be able to produce $1,500+/night in rental income with a handful of properties. My goal is $30,000/month net in rental income. 

 No, I have not tried this. I have always used my own capital. It would be difficult to find this because there are not as many overseas investors who would be familiar with the local market.

@Scott Morris quick update for you, it is now Thanksgiving 2021. I have raised the rental rates and the price range is now between $275-$300. I have smart pricing enabled, so the price automatically fluctuates within the range. That being said, I am now earning $8000+ just in this penthouse. I have another that I will post about, I just started renting it a couple of months ago (month-to-month though) and it is doing incredibly well too. 

The image below shows November 2021 from Airbnb's Insights page.  

I am looking to purchase another property in the near future, pre-construction...so I won't have the keys for that one for 2-3 years. Property here is doing well. I only see it getting better. And after seeing how well I did during the pandemic, I am not really worried about much. Things are looking like they are on the up-and-up from an occupancy/price/popularity perspective, but the new tax laws suck.

A friend of mine was silently blacklisted by Airbnb and his reservations were non-existent, including pre-existing bookings that got canceled. Basically, a former tenant did not announce she has an animal and when she arrived, the housekeeper denied her entry because it was against the house rules. She went and complained to Airbnb and told them that it was a service animal (but never mentioned it to the owner), and his account (and all rentals under it) were immediately blocked. He did not realize it until a few days later and contacted Airbnb to find out what happened...they said they blocked him for discrimination. His account has been restored to normal after this incident, but he was not notified in a timely manner. Make sure something weird is not going on with your account like this by calling support and verifying.

Personally, I would buy a few properties 100% paid and earn all of that rental income. With that, I think you can earn 6-figures of rental income per year and not stress about finances and mortgage payments. There is a certain level of mental and emotional freedom that comes with not owing anything (including for your properties). One house earning you $3,000+ a month with no mortgage is what some people need 15-30 properties to earn with an exponentially higher overhead. That becomes a type of nest egg you can rely on. Reset your debt to 0, and decide if you want to have any leverage after you have some assets that you own debt free. Every several months, maybe twice a year after you collect rental income, you can use that for a down payment on a new leveraged property if you want.

@André Rairan Zacchi Pereira in Brazil and Colombia. They are mostly penthouses. However, I do have a 3 bedroom 2 bathrooms smaller apartment that is a pre-construction that I am waiting on. And I also have that one property in the favela in Rio de Janeiro. I also have some boutique hotel investments.

Eventually, I want to invest in Vietnam, specifically the new smart-city districts that will be developed in Ho Chi Minh.

@Mike Lambert, the tourism numbers are growing faster than the number of rentals that are available in Medellin. Furthermore, among available rentals, there is currently a shortage that I see lasting awhile because many of the new developments are hotels and not residential. Many of the residential projects that are in construction now still have 1.5-3 more years to go before they are operational. By the time they are on the market, I expect the tourism rates to still have outpaced the development. Maybe one day the market will hit that threshold, but for now, I just don't see it happening anytime soon. 

Concerning competing on price. According to AirDNA (an AirBNB analysis platform), the local average rating for an Airbnb host & their respective property is not very good. Across the board from quality to cleanliness, it ranges between 3.5-4.5 stars. That being said, there is a lot of room for improvement across the board. One of the reasons for this is the cultural differences with Colombians. Most property buyers here (more than 95%) are still Colombians and not foreigners. They have a different mentality when it comes to renting, investing, and hospitality. It gives me an edge. You don't have to compete on price when you simply offer something better in every other category. Until they catch up in every rating category + a comparable property, I feel that the competition is weak right now.

On a separate note, I am considering a project in Guatape. I am currently evaluating several and a couple looks promising, however, the capital requirement is much larger because of the sheer size and ambition of said projects. But I already did the due diligence and they check out. My passion project is in a different town a coffee region. I am bringing a Balinese-style resort to the area which does not currently exist around these parts.

@Mike Lambert, as for the glamping. I am buying 30 acres to build out a cool resort getaway in the mountains. I am going to offer something unique that is not found in Colombia. It is going to be a passion project but also an investment that I am confident will work out. It will be a while until I have anything worth posting about for the land because I have not started any development yet. It is going to be absolutely amazing though, and it is a very ambitious project (but realistic). Only 25% of the land may be developed according to law, however, some of the things that I want to build don't necessarily require any licensing or approvals. That law still leaves me about 6-acres to play with.

@Mike Lambert, you are correct that many people are not getting these kinds of returns. I have been lucky with my investments and methodically chosen and curated them. Just tonight, I raised my rental rates from the former $250/night and 100% occupancy rates to $300/night. I am going to continue to test now that there is sufficient tourism to Colombia again and try to push it up to $400/night while monitoring occupancy rate and overall returns. 

That being said, tourism is not the only kind of renter that I get. I have had wedding parties, model photoshoots, artistic projects, private dinners, and other kinds of odd events held at my property.

I do have very good reviews, I am a Super Host on Airbnb, and I offer a luxury rental with quality and design that is very rare to find as an available rental in this city. My target market is the luxury property renters that do not mind paying the extra money. I do accommodate and help them to make sure they have an amazing stay - everything from providing them local recommendations and coordination of private drivers, chefs, tours, etc. I am not making money on those things, but merely referring them to good quality businesses and providers in the area. All of the little things that I do have the tenants telling other people about my place and recommending my place organically, to others. I have had many tenants who stayed because some other friend had stayed and told them about it. I also have had several repeat tenants, which is not that common in the short-term rental market. 

I have the right location, desired quality, captivating design/ambiance, great host reviews & property management, and the right level of competitiveness. What you will find in the Medellin market is a general lack of property maintenance, poor property management, lack of responsiveness and attention to detail, and a lower-than-desired quality. Many times the photos are far better looking than the property actually is, that is not so with my property.