Buying property in Colombia as a Foreigner

An introduction to buying property in Colombia as a foreigner

Colombia is becoming a hotspot for foreign real estate investors, and for good reason. The country's diverse landscapes, rich culture, and vibrant cities offer an appealing mix of lifestyle benefits and investment potential. Whether it's the dynamic urban centers like Bogotá and Medellín or the tranquil coastal and coffee regions, Colombia has something for everyone.

Foreigners are attracted by Colombia's affordability and high quality of life. Compared to other popular expat destinations, living costs are low, making it a great choice for retirees, digital nomads, and investors. The real estate market has been growing steadily, driven by both local and international demand.

The Colombian government has worked hard to create a favorable investment climate, with economic stability, improved security, and supportive policies. This, coupled with a growing expat community and thriving tourism industry, has boosted the development of infrastructure and amenities.

In this guide, we will take you through the property purchase process in Colombia as a foreigner, step by step. Whether you decide to use Colombia Law Connection or a different law firm (or do it yourself), by the end of this guide you will know everything you need to be able to purchase property in Colombia.

Can foreigners buy property in Colombia?

Yes, foreigners can buy property in Colombia. There are no restrictions on foreign ownership of property in Colombia, and the process is straightforward. Foreigners have the same rights as Colombian citizens when it comes to property ownership. This inclusive policy has contributed to the growing interest and investment from international buyers in the Colombian real estate market.

Why do so many foreigners buy property in Colombia?

Its hard to know why all foreigners buy property in Colombia. Some have found a partner in which they have a good relationship, and decided to buy property for a place to live. Others have bought property purely as an investment as the rental returns are quite good. All in all, many foreigners buy property in Colombia for several compelling reasons:

• Affordability: Property prices and the cost of living in Colombia are relatively low compared to other popular expatriate destinations. This makes it attractive for retirees, digital nomads, and investors seeking more value for their money.
• Diverse Real Estate Options: Colombia offers a variety of real estate options, from urban apartments in cities like Bogotá and Medellín to beachfront properties and rural homes in the coffee region. This diversity allows buyers to find properties that match their lifestyle preferences.
• High Quality of Life: Colombia boasts a rich cultural heritage, beautiful landscapes, and a pleasant climate. The vibrant local culture, along with modern amenities and services, contributes to a high quality of life.
• Investment Potential: The Colombian real estate market has shown steady growth, making it an attractive option for investors. Economic stability and a growing tourism industry further enhance the investment potential.
• Favorable Government Policies: The Colombian government has implemented policies to encourage foreign investment, including legal protections for foreign property buyers. These measures have created a welcoming environment for international investors.
• Growing Expat Community: An increasing number of expatriates are choosing to live in Colombia, creating a supportive and thriving community for newcomers. This sense of community can make the transition to living in a new country smoother and more enjoyable.
• Improved Security: Over the past few decades, Colombia has made significant strides in improving security and reducing crime rates, making it a safer place to live and invest.

These factors combine to make Colombia an attractive destination for foreigners looking to buy property, whether for personal use, retirement, or investment purposes.

What are the property prices in Colombia compared to western countries?

Colombia is significantly more affordable that virtually all western countries, however below we have provided some examples to see just how big of a difference in price it can be:

1. Bogotá vs. New York and Toronto

Bogotá:

• Average price per square meter in central areas: $1,500 - $3,000 USD
• Example: A 100-square-meter apartment in a prime area: $150,000 - $300,000 USD

New York:

• Average price per square meter in Manhattan: $10,000 - $20,000 USD
• Example: A 100-square-meter apartment in Manhattan: $1,000,000 - $2,000,000 USD

Toronto:

• Average price per square meter in central areas: $8,000 - $12,000 USD
• Example: A 100-square-meter apartment in downtown Toronto: $800,000 - $1,200,000 USD

2. Cartagena vs. Miami and Long Beach

Cartagena:

• Average price per square meter in prime areas: $1,800 - $3,500 USD
• Example: A 100-square-meter apartment in Bocagrande or El Laguito: $180,000 - $350,000 USD

Miami:

• Average price per square meter in central areas: $7,000 - $12,000 USD
• Example: A 100-square-meter apartment in Brickell or South Beach: $700,000 - $1,200,000 USD

Long Beach:

• Average price per square meter: $6,000 - $10,000 USD
• Example: A 100-square-meter apartment: $600,000 - $1,000,000 USD

3. Medellín vs. Vancouver and Denver

Medellín:

• Average price per square meter in popular areas like El Poblado: $1,400 - $3,000 USD
• Example: A 100-square-meter apartment: $140,000 - $300,000 USD

Vancouver:

• Average price per square meter in central areas: $10,000 - $15,000 USD
• Example: A 100-square-meter apartment in downtown Vancouver: $1,000,000 - $1,500,000 USD

Denver:

• Average price per square meter: $5,000 - $8,000 USD
• Example: A 100-square-meter apartment in central Denver: $500,000 - $800,000 USD

Conclusions

• 1. Bogotá is significantly more affordable than New York and Toronto.
• 2. Cartagena offers much lower prices compared to Miami and Long Beach.
• 3. Medellín provides excellent value compared to Vancouver and Denver.

These price differences highlight the affordability of Colombian real estate, making it an attractive option for foreign investors and expatriates looking for lower-cost property investments with the potential for high returns.

Where is the best place to buy property in Colombia?

The best place to buy property in Colombia depends on your investment goals, lifestyle preferences, and budget. Here are some top locations to consider:

• Bogotá: The capital city, Bogotá, is Colombia's largest and most cosmopolitan city, offering a mix of business opportunities, cultural attractions, and urban living. It boasts a strong rental market, particularly for professionals and expatriates, with high demand for both residential and commercial properties. The city also features excellent infrastructure and amenities, making it an ideal choice for investors looking for stable rental income, professionals, and those seeking a vibrant urban lifestyle.
• Medellín: Known as the "City of Eternal Spring" due to its pleasant climate, Medellín is famous for its innovation, quality of life, and beautiful landscapes. It has a growing expatriate community and has become a hub for digital nomads. Property prices in Medellín are affordable with the potential for appreciation. The city also offers modern infrastructure, excellent healthcare, and public transportation. Medellín is ideal for retirees, digital nomads, and investors looking for value and lifestyle.
• Cartagena: Cartagena is a historic coastal city known for its colonial architecture, vibrant tourism industry, and beautiful beaches. It has high demand for short-term rentals due to tourism and offers opportunities for luxury real estate investments. The city's unique cultural and historical charm makes it attractive for investors focusing on vacation rentals and luxury properties, as well as those seeking a tropical lifestyle.
• Santa Marta: A coastal city near the Sierra Nevada mountains, Santa Marta offers a blend of beach and mountain experiences. It is an emerging real estate market with growth potential, attracting both tourists and retirees. Property prices in Santa Marta are lower compared to Cartagena, making it ideal for budget-conscious investors, retirees, and those seeking outdoor activities.
• Cali: Known as the salsa capital of the world, Cali offers a lively cultural scene and a warmer climate. Property prices in Cali are affordable, and there is growing interest from expatriates and retirees. The city is rich in cultural heritage and vibrant nightlife, making it an appealing option for investors looking for affordable properties, music and dance enthusiasts, and retirees.
• Coffee Region (Pereira, Manizales, Armenia): The Coffee Region, known for its stunning landscapes and coffee farms, offers a peaceful lifestyle with modern amenities. Property prices are lower with a high quality of life. The region is attracting increasing interest from eco-tourism and rural tourism, offering opportunities for investment in agricultural and rural properties. It is ideal for nature lovers, retirees, and those interested in eco-friendly investments.

Each of these locations offers unique benefits, and the best choice depends on your specific needs and investment strategy. Bogotá and Medellín are ideal for urban living and stable investments, Cartagena and Santa Marta are great for vacation rentals and luxury properties, while Cali and the Coffee Region offer affordability and a rich cultural experience.

Does buying property in Colombia entitle me to a visa?

The short answer is yes. Buying property in Colombia can be a pathway to obtaining an Investment Visa (Migrant Visa - Type M). Here's how it works:

Investment Visa (Migrant Visa - Type M)

Eligibility: To qualify for the Investment Visa through property purchase, you need to invest a significant amount in real estate. The required investment is approximately 350 times the monthly minimum wage in Colombia (current as at July 2024 COP1,300,000 x 350 or COP455,000,000), which can be around $110,000 - $120,000 USD. It's important to check the current exact amount, as it can change.

Requirements:

• Proof of Investment: You must provide documentation proving your investment in real estate. This includes the property deed and a certificate of tradition and freedom, which shows the property is free of liens.
• Source of Funds: You must demonstrate that the funds used for the property purchase are legitimate. This involves providing financial documentation that traces the source of the money.
• Additional Documentation: Other necessary documents typically include a valid passport, recent photographs, and a completed visa application form.
• Visa Duration: The Investment Visa is usually granted for up to three years and can be renewed. This visa allows you to live and work in Colombia.
• Path to Residency: After holding the Investment Visa and living in Colombia for five continuous years, you may be eligible to apply for a Resident Visa. This grants more permanent residency status, allowing longer-term stays and more stability.

Purchasing property in Colombia can be an effective way to secure an Investment Visa, provided you meet the financial threshold and provide the necessary documentation. This visa not only allows you to enjoy your property but also offers a pathway to long-term residency in Colombia. Consulting with a legal expert or immigration lawyer can help you navigate the specific requirements and ensure a smooth application process. For more details about the investor visa, view our investor visa page here.

What are the taxes that need to be paid when buying property in Colombia?

When purchasing property in Colombia, it's important to budget for several taxes and fees:

• Transfer Tax: Approximately 1% of the property's sale price is paid by the buyer upon transfer of ownership.
• Notary Fees: Typically range from 0.5% to 1% of the property's sale price, covering the costs of the notary public.
• Registration Fee: About 0.5% of the property's sale price, paid to register the property under the new owner's name.
• Value Added Tax (VAT): 19% of the sale price may apply to new properties or those sold by a VAT-registered entity.
• Annual Property Tax: Paid annually based on the property's assessed value, rates vary by municipality.
• Capital Gains Tax: Upon resale, rates range from 10% to 35% for residents and 33% for non-residents on the profit made.

These taxes and fees ensure compliance with Colombian regulations and should be considered when planning your property purchase budget.

What are some risks to consider when buying property in Colombia as a foreigner?

When buying property in Colombia as a foreigner, there are several potential risks to consider:

• Legal and Regulatory Compliance: Understanding Colombian property laws and regulations is crucial. Issues such as unclear property titles, zoning restrictions, or legal disputes can complicate or delay property transactions.
• Currency Fluctuations: Exchange rate fluctuations can impact the cost of property transactions and mortgage payments if applicable. It's important to monitor exchange rates and consider hedging strategies if necessary.
• Property Title Issues: Ensuring clear property title is essential. Some areas may have informal settlements or unclear land ownership, leading to potential disputes or legal challenges.
• Market Volatility: Real estate markets can be volatile, influenced by economic conditions, political stability, and local market dynamics. Property values may fluctuate, affecting the investment's profitability.
• Tax and Financial Considerations: Understanding and planning for local property taxes, transaction fees, and potential capital gains taxes upon resale is essential to avoid unexpected financial obligations.
• Local Economic Factors: Economic fluctuations and local market conditions can impact property demand, rental yields, and resale potential. Researching local economic trends and property market forecasts can mitigate risks.
• Cultural and Language Barriers: Differences in language and cultural norms may affect communication and understanding during property transactions. Working with trusted local professionals, such as lawyers and real estate agents, can help navigate these challenges.
• Security and Safety: While security has improved significantly in recent years, some areas may still have higher crime rates or security concerns. Researching neighborhood safety and consulting with locals can provide insights into the area's security situation.
• Residency and Visa Issues: While property ownership itself does not grant residency, understanding visa requirements and potential changes in immigration policies affecting property owners is important for long-term planning.

Can foreigners get a loan from a bank to buy property in Colombia?

Yes, foreigners can obtain loans from banks to buy property in Colombia, though it can be more challenging than for Colombian citizens. Local banks do offer mortgage loans to foreigners, but the terms and conditions are often stricter. Additionally, international banks with branches in Colombia or banks in the foreigner's home country that offer international property financing can be considered. Requirements typically include a good credit history, which can be difficult to establish without a financial history in Colombia, and proof of stable income, such as employment contracts or bank statements. A significant down payment, usually ranging from 30% to 50% of the property's value, is often required, along with additional costs like legal fees, notary fees, and property appraisal fees.

Interest rates for foreigners can be higher than those for residents, and the loan terms might be shorter due to the perceived higher risk by the banks. Loans are generally given in Colombian pesos, so exchange rate fluctuations can impact the overall cost if the income is in a different currency. Considering financial products that mitigate currency fluctuation risks is advisable. Engaging a local lawyer can help navigate the legal aspects of securing a loan and ensure compliance with Colombian laws, while banks will require an official property appraisal to determine its value before granting a loan.

Practical steps include researching and comparing different banks and financial institutions to find the best terms and conditions, preparing all necessary documents, and consulting with local real estate agents, lawyers, and financial advisors to navigate the process. Staying informed about the Colombian property market and economic conditions is also crucial for making a well-informed decision. While obtaining a mortgage as a foreigner in Colombia is possible, it requires thorough preparation, understanding of local banking requirements, and often higher financial readiness compared to local buyers.

What documentation do I need to buy property in Colombia as a foreigner?

Buying property in Colombia as a foreigner involves several steps and requires various documents. Here's a list of the essential documentation you will need:

Identification and Personal Documents

• Passport: A valid passport is required as proof of identity.
• Foreigner ID (Cédula de Extranjería): This is a foreigner's identification card in Colombia, which you may need if you plan to stay long-term or engage in legal processes.
• Visa: While a visa is not required to purchase property, having a valid visa can facilitate the process, especially for long-term residency or investment purposes.

Financial Documentation

• Proof of Funds: Documentation showing the source of funds used for the purchase. This could include bank statements, letters from your bank, or financial statements.
• Tax Identification Number (NIT): A NIT number is required for tax purposes in Colombia. This can be obtained with the help of a local lawyer or accountant.

Property-Specific Documents

• Property Title: Ensure the property has a clear title, free of liens or encumbrances. This involves a certificate of tradition and freedom (Certificado de Tradición y Libertad) from the Public Registry.
• Sales Agreement: A preliminary sales agreement (Promesa de Compraventa) signed by both parties, outlining the terms and conditions of the sale.
• Deed (Escritura Pública): The public deed signed before a notary, officially transferring the property title to your name.

Legal and Administrative Documents

• Power of Attorney: If you cannot be present for the transaction, you may need to grant a power of attorney to a representative in Colombia.
• Notary Fees and Documentation: Prepare to cover notary fees and provide any additional documentation required by the notary for processing the property transfer.
• Property Appraisal: An official appraisal (Avaluó) of the property, which might be required by the bank if you are financing the purchase.

Additional Considerations

• Insurance: While not always required, having property insurance might be recommended.
• Real Estate Agent Agreement: If you are using a real estate agent, ensure you have a clear agreement outlining their services and fees.
• Legal Assistance: Hiring a local lawyer experienced in real estate transactions to assist with document preparation and verification.

To buy property in Colombia as a foreigner, you will need identification documents, proof of funds, property-specific documents, and legal and administrative documentation. Engaging with local professionals such as Colombia Law Connection, real estate agents, and notaries can help ensure all necessary paperwork is in order and the transaction proceeds smoothly.

What is the step-by-step process for buying property in Colombia?

Research and Preparation

• Determine Your Budget: Assess your financial situation and determine how much you are willing to spend.
• Identify Your Needs: Decide on the type of property (residential, commercial, vacation home, etc.) and the location.
• Market Research: Conduct research on the Colombian property market to understand current prices, trends, and popular locations.

Find a Property

• Real Estate Agent: Engage a reputable local real estate agent who can help you find suitable properties.
• Property Search: Visit potential properties, considering factors such as location, condition, and price.
• Due Diligence: Verify the property's legal status, including ownership, encumbrances, and land use.

Make an Offer

• Offer Letter: Submit a written offer to the seller or their agent, specifying the price and any conditions.
• Negotiation: Negotiate the terms of the sale, including price, payment terms, and any contingencies.

Sign the Preliminary Sales Agreement (Promesa de Compraventa)

• Agreement Drafting: Draft the preliminary sales agreement outlining the terms and conditions of the sale.
• Deposit Payment: Typically, a deposit (usually 10% of the purchase price) is paid at this stage.
• Legal Review: Have the agreement reviewed by a local lawyer to ensure all legal aspects are covered.

Due Diligence and Verification

• Title Search: Conduct a thorough title search to ensure the property has clear title and is free of liens or encumbrances. For more information about title searches, click here.
• Certificate of Tradition and Freedom: Obtain this document from the Public Registry to verify the property's legal status.

Arrange Financing (if applicable)

• Mortgage Application: If you need financing, apply for a mortgage with a Colombian bank or an international lender.
• Approval and Terms: Secure mortgage approval and finalize the loan terms.

Sign the Public Deed (Escritura Pública)

• Draft the Deed: The notary drafts the public deed based on the preliminary sales agreement.
• Notary Appointment: Schedule an appointment with the notary for signing the deed.
• Payment of Remaining Balance: Pay the remaining balance of the purchase price at this stage.
• Sign the Deed: Both parties sign the public deed before the notary, officially transferring ownership.

Register the Property

• Registration Process: Submit the signed deed to the Public Registry Office (Oficina de Registro de Instrumentos Públicos) for registration.
• Payment of Taxes and Fees: Pay any applicable taxes and registration fees.
• Obtain the Registered Deed: Once registered, obtain a copy of the registered deed, confirming your ownership.

Final Steps

• Utility Transfers: Arrange for the transfer of utilities (electricity, water, gas, etc.) to your name.
• Property Insurance: Consider obtaining property insurance to protect your investment.
• Move-In or Rental Arrangements: If you plan to live in the property, arrange for your move. If it's an investment property, consider hiring a property management company.

The process of buying property in Colombia involves several steps, including research, finding a property, making an offer, signing a preliminary sales agreement, conducting due diligence, arranging financing, signing the public deed, registering the property, and completing final steps like utility transfers and insurance. Engaging local professionals such as real estate agents, lawyers, and notaries is crucial to ensure a smooth and legally compliant transaction.

Do I need to hire a lawyer when buying property in Colombia?

While it is not legally required to hire a lawyer to buy property in Colombia, it is highly recommended. Here are several reasons why hiring a lawyer is beneficial:

Due Diligence

• Title Search: A lawyer can conduct a thorough title search to ensure the property has a clear title, is free of liens, encumbrances, and legal disputes.
• Legal Verification: Lawyers can verify that the property complies with local zoning laws and building regulations.

Document Preparation and Review

• Sales Agreement: A lawyer can draft or review the preliminary sales agreement (Promesa de Compraventa) to ensure your interests are protected.
• Deed Preparation: Lawyers can help draft the public deed (Escritura Pública) and ensure all legal requirements are met.

Negotiation and Representation

• Negotiation: A lawyer can negotiate terms with the seller or their legal representative to ensure a fair deal.
• Representation: If you cannot be present for certain stages of the transaction, a lawyer can represent you through a power of attorney.

Legal Compliance

• Tax and Legal Advice: Lawyers can provide advice on taxes, fees, and any other legal obligations related to the property purchase.
• Compliance: Ensure that the transaction complies with all Colombian laws and regulations, avoiding potential legal issues in the future.

Security and Peace of Mind

• Risk Mitigation: Hiring a lawyer helps mitigate risks associated with property transactions, such as fraud or misrepresentation by the seller.
• Peace of Mind: Having a legal expert handle the transaction can give you confidence and peace of mind that all aspects are being professionally managed.

While not mandatory, hiring a lawyer to buy property in Colombia is highly advisable due to the complexities of legal and regulatory requirements. A lawyer such as Colombia Law Connection can assist with due diligence, document preparation, negotiation, legal compliance, and overall risk management, ensuring a smooth and secure property transaction.