Investing in Colombia has been one of the favorite objectives of many foreigners in recent years. Whether to do business or settle in the country, many people of different nationalities have found Colombia’s ideal place.
Real estate is one of the most common foreign investors’ sectors, whether for housing or for commercial and return purposes. In this article, we will talk about some aspects that, according to our experience, we consider essential to observe if you want to invest in real estate in Colombia.
It is essential to analyze all the legal acts carried out on the property to be purchased. Certificates of Tradition and Freedom, Public Deeds, lease contracts (especially if it is a used good).
With this, you can verify the existence of domain limitations or preventive measures in judicial or administrative processes. Likewise, you will have access to information about the owners.
Thus, with the title study, you will be able to verify that the operation through which you will become the property owner corresponds to reality and that the promised characteristics of the property do indeed exist. Likewise, you will be able to detect negative situations concerning the property in advance, which will allow you to timely withdraw its acquisition. In this way, you will avoid that investing in Colombia be a bad experience.
Real Estate Trust
In Colombia, there is a real estate trust modality for the purchase of new properties. Said structure consists of a contract through which a fiduciary entity, supervised by the country’s financial authority (Superintendencia Financiera de Colombia), acts as an intermediary between the builder and the buyer for the receipt and administration of the resources associated with a real estate project.
The buyer does not deliver his money directly to the builder but rather temporarily deposits it in the trust entity through this figure. This will transfer it to the builder when the latter meets a series of conditions.
Although this trust is not mandatory, it is highly recommended even more in foreign investors, as it guarantees that the monies available for the purchase, at the non-existent date, are duly allocated to the project.
The process of acquiring real estate to invest in Colombia is divided into three stages: signing a promise to purchase agreement, Public Deed, and registration.
As its name suggests, the promise to purchase agreement is a contract by which the parties promise to carry out the act of sale on the property. Therefore, the main business issues are agreed here, such as identification of the property (real estate registration, location, boundaries, etc.) and description of its specifications, value, payment method, date of Deed signing, penalties, conditions, distribution of notarial expenses, taxes, among others.
Thus, it is essential to properly negotiate and draft the promise to purchase agreement contract to protect your interests as an investor, especially in a possible default case.
Then, the conditions set out in the promise will be expressed in the Deed, which, under Colombian law, is the one that properly constitutes the contract of sale on the property. This second stage is essential to ensure that the deed contains what is agreed in the promise. On the other hand, keep in mind that you must be accompanied at the notary by a translator with official certification to sign the deed if you do not speak the Spanish language.
Finally, do not forget that the deed’s signing is not what makes you the property owner, but rather the registration of the said document in the office called «Public Instruments Registry.»
Visa for investing in Colombia?
Investing in Colombia in a property whose value is more significant than 650 Current Monthly Legal Minimum Wages (for the year 2021, the equivalent of COP 590,542,000) allows you to apply for a resident visa, which gives you initial term to stay in the country for five (5) years.
Therefore, if the intention is to establish your permanent address in Colombia on behalf of real estate investment, you will have an excellent opportunity to do so.
To invest in Colombia, you must consider tax aspects and other obligations
Investing in Colombia by acquiring a property will not necessarily make you a tax resident in the country. The latter will depend on other variables depending on your plans and objectives. However, keep in mind that you will have to assume certain charges by owning a property, such as property tax, administration payment, public services, among others.
In this way, it is recommended that you identify from the beginning not only the amount of your investment but also the taxes and maintenance expenses.
Knowledge of the zone and its variables
Although here we expose this point at the end, it is undoubtedly the first thing you should account when investing in Colombia.
Do you want a home property? With a commercial destination? Are you going to use it directly? Are you going to rent? Ask yourself all these questions before choosing. Depending on those answers, you must select the property’s location and characteristics, weighing factors such as the socio-economic situation of the sector, access, mobility, valuation projections, and other elements that will influence the property.
In this item, we recommend, in addition to legal advice, the accompaniment of a real estate advisor.
At Castrillón & Cárdenas Abogados Consultores, we have an outstanding team to offer you personalized advice tailored to your needs in each stage of the process safeguarding your interests.
Our vision seeks to design the best strategy to invest in Colombia, providing you with the appropriate context to have a safe and reliable process.