Rent Luxury Apartments in El Poblado, Medellin
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| How to Buy Real Estate in Colombia | |||
Preparing to buy 1. What costs do I incur when buying real estate in Colombia? As a buyer, you will need to pay the following: Notary costs (Gastos de notaria) Notaries charge between 0.30% and 0.35%. The price difference depends on the notary in question. This cost is split 50/50 between the buyer and the seller. So, as a buyer, you will pay about 0.15%. Government taxes (Impuestos a renta) Government taxes are 1.05%. The cost is split 50/50 between the buyer and the seller. So, as a buyer, you will pay 0.525%. Registration taxes (Impuestos a registrar) In order to have the sale registered in the government offices, you will pay 0.5%. The buyer is responsible for paying all of this tax. You will also incur costs if you decide to work with a lawyer. See question 6. So, if you buy property for 200,000,000 pesos, your total costs will be: Notary costs 0.15% = 300,000 pesos Government taxes 0.525% = 1,000,000 pesos Registration taxes 0.5% = 1,000,000 pesos Total 2,300,000 (approximately $1,150 US dollars) 2. What costs do I incur when selling real estate in Colombia? As a seller you will be liable to pay half of the notary costs and government taxes as described above. You will also need to pay the following: Agent commission As a seller you will pay the agent 3% of the value at which the property is sold. If you are selling land instead of property, or property which includes a significant plot of land, i.e. a farm, the fee is 4%. Sales taxes (Retencion en la fuente) As a seller, you have to pay an additional 1% sales tax. So, if you sell property for 200,000,000 pesos, your total costs will be: Notary costs 0.15% = 300,000 pesos Government taxes 0.525% = 1,000,000 pesos Agent commission 3% = 6,000,000 pesos Sales tax 1% = 2,000,000 pesos Total 9,000,000 pesos (approximately $4,500 US dollars) 3. What costs do I incur as an owner of real estate in Colombia? As a property owner, you are liable to pay government taxes, administration fees (for some properties) and utility bills. Taxes are based on the value of your property. For example, an apartment valued at 200,000,000 pesos will cost approximately 100,000 pesos per month in taxes. Property taxes are paid tri-monthly. Any property that is part of a complex, for example, an apartment block or gated community, will pay an administration fee. This fee covers the cost of security, maintenance and usually basic home insurance. This fee varies a lot, so it’s worth keeping track of when comparing properties. As an estimate, an apartment valued at 200,000,000 pesos will cost approximately 300,000 pesos per month in administration. Utility bills vary according to the ‘strata’ rating given to the property. Strata ratings range from 1 (low end properties) to 6 (high end properties). For example, most real estate in Poblado will be strata 6. As a rough estimate, energy bills (water, gas, electricity) and communication bills (telephone, cable and broadband) will incur about 300,000 pesos per month. So, the total costs for owning real estate in Colombia, valued at 200,000,000 pesos, are approximately 700,000 pesos per month (approximately $350 US dollars). 4. Can I get a mortgage in the US to buy real estate in Colombia? As things stand, it is not possible to get a mortgage in the US for buying real estate in Colombia, unless you are a Colombian citizen. If you are considering getting a mortgage inside Colombia, you should note that the rates are considerably higher than those in the US or Europe and you would need to put down a very sizeable deposit. 5. How do I know which real estate agent to work with? It’s a good idea to work with different agents and look at a wide range of options in order to refine your requirements. After a while, you’ll understand exactly what you can get with your budget and which agent you want to continue working with. You should demand the following from your agent: Your agent should understand how much time you have and therefore work at a pace that is appropriate for you. There is no point standing around drinking coffee, talking about the wonderful climate in Medellin, if the buyer has 2 weeks to close the deal. Your agent should be proactive and not rigidly stick to the short number of properties on his or her books. The agent should understand exactly what you are looking for. It may even be necessary to jump out of the car and ask if there is anything for sale in a particular apartment block that catches your eye. All agents need to sell properties to make money, but a good agent will realise that a buyer is more inclined to take the plunge if they are not pressured. An agent that insists after viewing 3 properties that there is no better deal in town than the one on the table is definitely not worth dealing with. Of course, if you do not speak Spanish, it’s important that the agent speaks English or works with somebody who does. 6. Do I need a lawyer who is familiar with real estate in Colombia? While it’s common practice in the US to use a solicitor when buying real estate, in Colombia it depends on the complexity of the sales terms. For a straightforward purchase it’s easy enough to check the papers and sales contracts in a notary and remove the cost of hiring a lawyer. 7. How do I know if real estate in Colombia is good or bad value? It’s good practice to keep track of each property’s value per squared metre so that when you find two properties of the same size and specification you can decipher which is better value. That said, sometimes real estate varies significantly in terms of its age, the ‘prestige’ value of its street, the architect’s use of space or the quality of materials used for flooring, doors and walls. For an apartment, the price will also increase the closer it is to the top floor and the more spectacular its views from windows or balconies. If you are planning on entering the rental market, you’ll find that some types of property and neighbourhoods are better than others, though this won’t necessarily be represented in the value of the property. |
Transferring money 8. How can I open a bank account in Colombia? To open a bank account in Colombia you will need a ‘Cedula de Extranjeria’. To obtain a Cedula de Extranjeria go to your local DAS office with your passport. If you are unable to obtain a Cedula de Extranjeria, you might be able to persuade a bank to bypass its own bureaucracy and let you open an account based on the fact that you will be depositing a large sum of money. This process is often easier if you know an existing client at the bank. If you don’t know anybody, you could ask the person who intends to sell their property to you. If you have your own bank account you can transfer money before you make an offer. This avoids the scenario whereby, on the day you attempt to transfer the money, the US dollar drops in value and, if you are on a tight budget, you no longer have enough money to complete the purchase. If you are unable to open your own bank account, you can transfer the money directly to the seller’s account. In this instance, it is common practice in Colombia for the seller to reimburse you, if after the exchange rate, the funds amount to more than the agreed sales price. 9. How can I transfer money to a bank account in Colombia? Transferring or ‘wiring’ money to Colombia is surprisingly simple, but don’t assume the bank in Colombia or your own bank outside Colombia know what they are doing. You will need to provide your foreign bank with: 1) Details of an ‘Intermediary’ bank that will facilitate the transaction between the bank in Colombia and your foreign bank 2) Details of the bank in Colombia where the money will be received 3) Details of an individual account at the bank in Colombia The potential problem is that the bank in Colombia doesn’t know about the need for an ‘intermediary’ bank and insists that this information is not necessary. However, both the foreign bank and the bank in Colombia should be able to find out the ‘intermediary’ bank details. Example of the information you will need to give to your foreign bank: Intermediary bank Name / Country / Swift / ABA Destination Bank Name / City, Country / Bank’s account no. / Swift: Client Name / Passport number / Account no. / Bank / Branch / City, Country 10. Should I transfer US dollars or Colombian Pesos? You have to denominate all currency in US dollars. For example, if you have British pounds you will have to change them to US dollars and then, when the money arrives in Colombia, it will automatically be changed to Colombian pesos. In other words, don’t change your money to pesos, as it would simply be changed back to US dollars while going through the US ‘intermediary’ bank. 11. How much does it cost to transfer money to Colombia? Your foreign bank will almost certainly charge you a small fee to transfer money to Colombia. This fee will be in the region of $30 to $60 US dollars irrespective of the amount you are transferring. You will also be charged by the bank in Colombia to receive the money. If you are transferring $100,000 US dollars you will be charged approximately $350 US dollars to receive the money in Colombia. 12. How long does it take to transfer money to Colombia? Most foreign banks will guarantee that your money arrives within 5 business working days. Actually, it will probably arrive within 1 to 3 days. However, you may have to wait up to a week for the bank in Colombia to release your money. |
Receiving Money 13. Do I need to verify that my money is ‘clean’? It’s possible that you will need to provide a copy of your bank statements. You may even be asked for a letter from your foreign bank verifying that the money you are bringing into Colombia is indeed your own money. That said, in all likelihood, you will not need to show any documentation at all. 14. What forms do I fill in when my money arrives in Colombia? When you transfer money to Colombia you will need to sign some forms upon receipt of the money. Under normal circumstances you will sign forms 11 and 5. However, if you do not want to be taxed when taking your money out of Colombia, you MUST sign forms 11 and 4 instead. Furthermore, you should be proactive in ensuring this is the case, as the bank in Colombia will sign form 5 by default. It’s a good idea to photocopy or scan these forms as soon as possible. |
Making an offer 15. How do I make an offer on real estate in Colombia? The property market in Colombia is like any other. Many sellers raise their asking price knowing that they will always receive a lower offer. Upon receiving an offer, sellers might claim it is lower than another they’ve just received in order to pressurize the buyer into increasing the offer. Others might state their asking price and refuse to budge. The most important thing to keep in mind is that, if you have done your homework and looked at enough properties, you should be clear about what you want and what you expect to get for your money. So, in many ways, it’s irrelevant what people are asking for. Given that many people in Colombia will need to sell their property or finalise their mortgage before they can buy, you should try offering a little less if you are a cash buyer, as this removes a lot of waiting time for everyone involved. 16. Should I register less than the full value of the property? It’s common practice in Colombia to register a much lower price than the real value of a property when finalising the deeds. This is so that the seller incurs fewer taxes upon sale of the property. If this makes you a little nervous, insist on registering the real value, but be prepared to offer a little more, maybe $1,000 US dollars. |
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Finalising 17. How can I verify real estate records and sales contracts? You can hire a lawyer to authenticate the existing real estate records and the contract between you and the seller. Regardless, this process will end in the local notary so unlike many other parts of the world, it’s not entirely necessary and certainly not the law to hire a lawyer. The agent should ensure that the following documents are in order: a) The property’s ownership history b) The property’s tax history a) The property’s ownership history The property’s ownership history and a no-lien certificate (Certificado de tradición y libertad), which should date back no more than one month, includes the property’s real estate registration number, owner’s name, and the property’s record summary. Requests for the ownership history and no-lien certificate can be made at the local Government’s records office (Oficina de Registro de Instrumentos Públicos) in the area where the property is located. The certificate costs about 10.000 pesos ($5 US dollars). b) The property’s tax history Requests for an account statement of the property can be made from the treasury office (Oficina de Catastro) of the city or district where the property is located. 18. What is a real estate pre-purchase agreement? Once you have made an offer, the offer has been accepted and you are content that the property’s documentation is in order, a preliminary contract is written by your agent. This contract forms the basis upon which the final contract is written. For example, if you wish to negotiate the inclusion of furniture or domestic appliances into the sales price, this should be included into the pre-purchase agreement. The pre-purchase agreement also details a timeframe within which the final contract must be signed and full payment given to the seller. The pre-purchase agreement should also specify a penalty clause in the case that either the buyer or seller breaks the agreement. 19. Why do I need to pay a deposit? Sometimes the deposit is the same amount as the penalty clause specified in the pre-purchase agreement. Or, it might just be 2% of the property’s agreed sales price. Clearly, if the penalty clause or deposit received is too low, there is a greater chance that either the buyer or the seller will back out of the deal before signing the final sales contract because the consequences will not be very significant. You may face a small logistical issue when needing to pay the deposit due to restrictions on the amount of money you can withdraw from a cash point in any 24 hour period. If all else fails, it's simply a case of visiting the cash point over the course of 2 or 3 days. 20. When and how do I sign the final sales contract? Once the pre-purchase agreement is signed and you are in a position to pay for the property (i.e. you have opened a bank account in Colombia and transferred the necessary sum of money) you can go to the notary and sign the final sales contract. Generally, the seller, the buyer and the agent will all attend the notary together, though it is not absolutely essential. The only documentation you need to take is your passport. You will need to be ready to pay the seller, probably using a cheque obtained from your bank in Colombia (unless some other payment method has been agreed). Both the seller and buyer will pay the necessary taxes and sign and fingerprint various documents. Approximately two weeks later you will need to go back to the notary to collect the updated deeds on the property. |
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Obtaining the Investor Visa 21. What is an Investor Visa? If you are buying property in Colombia you should be clear about how you intend to stay in the country legally. In other words, what visa will you have? One very effective way to bypass the need for a visa is to obtain residency. If you invest $100,000 US dollars in Colombia you can obtain residency. 22. Can I invest less than S100,000 US dollars? If you are on a tight budget, you can buy property for less than $100,000 US dollars, let’s say $85,000 US dollars, and get a contract for work to be carried out on the property worth $15,000 US dollars. But, remember, even if you do not spend the $15,000 US dollars remodelling the property you still need to transfer the full $100,000 US dollars. 23. What steps need to be taken to obtain the Investor Visa? a) Get form 11 stamped at Banco de la Republica Take your signed form 11 to Banco de la Republica in the city you reside and get it stamped. Banco de la Republica will hold onto your form 11 and a few weeks later you should receive the same form, but with a date and number of ‘Radicacion’ in the top right-hand corner. If you purchased property for less than the required $100,000 US dollars you will also need to send a contract for this work to be carried out, along with form 11. b) Request ‘Certification’ from Banco de la Republica Once you have received form 11 from Banco de la Republica, write a letter to Banco de la Republica requesting ‘certification’. Of course, it would be quicker and easier if this part of the process was integrated with the previous step, but it isn’t. You can pay a lawyer to write the letter on your behalf or simply contact us for a free template. You should receive a response from Banco de la Republica within 15 days with the appropriate stamped documentation. c) Go to the Ministry of Foreign Affairs in Bogotá Once you have received the letter from Banco de la Republica, you can go to the Ministry of Foreign Affairs in Bogotá and confirm your residency status. You will need the following:
If you do not have a Cedula de Extranjeria, you may also need to obtain a ‘Salvoconducto’ from your local DAS office before going to the Ministry of Foreign Affairs.
24. Do I need to apply for the Investor Visa within 6 months? According to Banco de la Republica, you cannot file form 4 and apply for the Investor Visa if you have been in Colombia for more than 6 months. This is because, according to Banco de la Republica, if you are still in the country after 6 months you must have some kind of residency status already. However, lawyers generally cannot agree as to whether the 6 month rule includes your initial 6 months in Colombia as a tourist. Furthermore, it seems both DAS and the Ministry of Foreign Affairs do not follow the same logic as Banco de la Republica. The good news is that, in all likelihood, when you send form 11 to Banco de la Republica they will not ask to see the entry stamps on your passport and when you go to the Ministry of Foreign Affairs they will only insist on seeing your ‘certification’ letter from Banco de la Republica. |
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