All Forum Posts by: Maarten Goossens

For STR I think it's definitely better to own the whole building. Almost all new construction is "propiedad horizontal" which means there is a HOA which not only charges sometimes hefty fees (especially if there is a pool and elevators to be maintained) but may prohibit STR at any moment. This happened to my Bogotá condo... I had to switch to a minimum of 30 days because that's where Colombian law draws the limit between tourism and residential.

Hi everybody, I am based in Bogotá and have been trying to find alternative strategies to mitigate some of the issues described above.

I started investing flipping an apartment in the Chicó area and living in it for five years. Bought it for COP 295M in 2012, rehab was 75M and ARV was about 500M. Now worth about 700M and bringing in about 6M/month in rents (it has a separate studio so it's really 2 doors). Since then I have been able to access the equity through a "garantía real" construction (putting this apartment up as a guarantee for a loan to acquire other properties).

I would like to scale, maybe acquiring an apartment building or office building and flipping it. Main difficulty though is to finance acquisition and rehab.

Some takeaways and questions for the others here:

- High interest rates and required down payments are definitely a barrier. Best I have been able to get is 10.5% and 20 yr. Has anyone been able to get something better? What banks have you been using?

- Inflation can be an ally... loan costs stay the same over time as rents go up (inflation adjusted once a year or at turnover). Taxes, labour, etc. are relatively cheap even as they have inflation adjustments.

- Turnkey residential buy and hold seems to be making little sense... very low rent to value (0.5%/month approx.). Commercial about 0.7-0.8% but still below interest rates. Has anyone found a way around this? (specific areas? which cities? etc.)

- STR is definitely a great opportunity if you can get a team together. My concerns are on the legal end though... if you offer stays of less than 30 days, you are offering tourism services, need to be registered with the tourism authority, charge IVA, etc. ¿What are your experiences?

- Pre-construction sales seem to be making too small of a return... if you have cash, wait a year or two for the project to be built and then sell you may make a profit of 7-8% annualized, but no way to do that with leverage...

- Does anyone have any experiences with commercial loans?

Would be great to hear your experiences!

@Dave Mills The principle is that you make use of the margin between the income and the costs (including debt service), which, adding multiple properties, will exceed the return you would get from a single property with no debt. This allows you to scale your business faster than if you were acquiring properties without debt.

Just wondering... What was REI like in the 1980s when mortgage interest rates used to be well over 10%?

Hi @Mike Lambert, actually I'm from Holland originally. You're right about the 1% cap... although finding properties that do 12% py aren't easy to find. My remark about inflation was that monthly installments do not increase nominally so real cost of borrowing diminishes over time and cash flow increases. But at the same time ROE would fall... Short term is allowed unless a majority of owners in a building decides otherwise. And in Bogotá it seems to me that rates and occupation are relatively low so it is my impression that only few people make much more on airbnb than they would on permanent rentals.

I will have to look into other strategies... maybe foreclosures or building.

What kind of opportunities are you looking at in Medellín?

Hi everyone, I have enjoyed reading BP for a while, first time poster. Looking for advice regarding my particular situation here in Colombia. Me and me wife own, other than our primary residence, two units in an apartment building. Both are producing OK income and we finished paying mortage on these units last year. We are now thinking of taking a loan on that property to invest in more units and grow a portfolio taking new loans or refi's. The thing is interest rates are very high here (11% for 20y fixed) which makes it difficult to find properties with potential cash flow. On the other hand, taxes are low and inflation is substantial (3-5%), and as rent is adjusted yearly for inflation, neutral or even negative properties should be flowing positive next year or within a couple of years. On a typical unit yearly rent yield is about 7% of value, we aim to buy with a discount and do small rehab to increase the yield, but still we would be nowhere near the numbers I have seen on many BP posts.

Do you think a buy and hold strategy makes any sense here? Or should I look for other strategies (many investors here are in building rather than owning).