Cali, Colombia is emerging as a high‑yield real‑estate market, especially for investors looking to acquire whole buildings and rent them out as luxury short‑term rentals. A recent project in the Verdes neighborhood illustrates the cost structure, occupancy dynamics, and expected returns.
Project overview
- Location: Verdes, a quiet residential area a five‑minute walk from the bustling Granado entertainment district (AA‑grade location).
- Building: Eight‑storey structure with an underground garage; one apartment per floor, plus a two‑storey penthouse (3 bed/3 bath).
- Acquisition cost: US $350,000 for the entire building (≈ $1,000 / m² or $90 / ft², all‑in).
- Renovation budget: Total project budget US $1.2 million, covering full luxury finishes, furniture, and a private terrace with jacuzzi.
- Current status: Construction delayed by ~2 months due to global supply‑chain issues and the 2022 Colombian elections, which pushed the peso from 3,500 to about 5,000 per US $. The building is expected to be guest‑ready by late February 2024, with 46 apartments already leased at 100 % occupancy.
Rental profile
- Occupancy: 87 % portfolio‑wide occupancy in the past year; the Verdes building is at 100 % currently.
- Guest mix:
- Medical tourism: 20‑30 % of stays (patients and families stay 1‑3 weeks, prefer private Airbnb settings).
- Local tourists (including Colombian diaspora): ~20 % (10 % local, 10 % abroad).
- Traditional tourists & digital nomads: ~50 % (longer stays, higher spending on internet and amenities).
- Revenue advantage: Rental income is collected in US $, while acquisition costs are in Colombian pesos, creating a natural currency arbitrage.
Financial performance
| Metric | Value |
|---|---|
| Expected net yield (pre‑tax) | ~12 % |
| Net yield after corporate income tax (turn‑key option) | ~8 % |
| Occupancy target for yield calculations | 70 % (actual 87 % achieved) |
| Timeline from purchase to first guests (renovation) | 16‑17 months |
| Timeline for new construction (AAA location) | ~24 months (6 months permitting, 14‑16 months build) |
New development in an AAA district
- Site: Adjacent to the Marriott Hotel, classified as AAA.
- Scale: 2,100 m² built area on an 800 m² plot; 19 units across five storeys plus underground garage, electrical backup, water reserve, terraces, sound‑reducing windows.
- Cost: US $1,100‑$1,200 per m² (≈ $110 / ft²) fully furnished, reflecting higher land price and new‑construction premium.
- Management: Local construction firm (builder of the Marriott) charges an 8 % management fee and provides full engineering and architectural supervision.
- Projected yield: Same 12 % pre‑tax target, assuming 70 % occupancy.
Risks and considerations
- Currency risk: Peso depreciation can increase local‑currency expenses; however, dollar‑denominated investors are insulated from this effect.
- Political risk: Recent election of President Petro introduced inflationary pressure; similar patterns have occurred in Chile, Argentina, and Brazil.
- Supply‑chain disruptions: Global shortages have already delayed the current project by two months.
- Due diligence: Investors should verify title, local regulations, and management capabilities. A turn‑key option is available at a higher per‑square‑meter cost but offers an 8 % net after‑tax return with minimal active involvement.
Practical takeaways for investors
- Cost efficiency: Whole‑building purchases in Cali can be acquired for as low as US $1,000 / m² fully finished, markedly cheaper than comparable markets in North America or Europe.
- Yield upside: The combination of high occupancy, premium medical‑tourism guests, and currency arbitrage can deliver double‑digit pre‑tax returns.
- Portfolio diversification: Adding a Colombian asset provides exposure to an emerging market with cash‑flow‑positive properties from day one.
- Timeline management: Expect 16‑17 months from acquisition to operational status for renovations; new builds may require up to two years.
Cali’s blend of affordable luxury real estate, strong medical‑tourism demand, and favorable exchange‑rate dynamics makes it a compelling option for investors seeking high‑yield, short‑term rental assets in Latin America. Careful assessment of currency, political, and construction risks remains essential.
