The renovation of a 240 m² penthouse in Medellín’s San Juan Kin neighborhood provides a concrete example of the costs, returns, and practical challenges of investing in Colombian real‑estate.
Purchase and renovation costs
| Item | Amount (USD) |
|---|---|
| Purchase price (unrenovated) | $165,000 |
| Initial renovation budget | $78,000 |
| Final renovation cost (including architect fee) | $133,000 |
| Total cash outlay (including furnishings) | > $300,000 |
The project was a full “gut‑job” carried out largely remotely. Key changes included:
- Reconfiguring the layout from six bedrooms/four bathrooms to five bedrooms/five bathrooms, adding en‑suite bathrooms to each bedroom.
- Removing a wall to create an open‑kitchen concept.
- Upgrading all wardrobes, bathrooms, and finishes to a higher‑end specification than originally planned.
- Converting the top floor into a co‑working space with a large desk, monitors, chairs, and a whiteboard.
- Installing a rooftop jacuzzi, which required negotiation with a neighboring unit and HOA approval.
Renovation costs rose by roughly 10‑15 % because the Colombian peso appreciated against the dollar (from ~4,400 COP/USD at purchase to ~3,900 COP/USD during construction) and because inflation ran at about 10 % per year. An additional one‑off expense of $25,000 was incurred for upgrades such as extra air‑conditioning and a larger jacuzzi.
Rental performance
- Targeted rent: $3,100 / month
- Actual rent after renovation: $3,330 / month
- Initial occupancy: 92 % (now fully occupied with a one‑year lease)
- Net rental yield (pre‑income tax): 9 % (original projection 9.2 %)
The higher‑end finishes appear to have contributed to the 7 % increase over the target rent and to the full occupancy achieved.
Sale outlook and market context
- Expected listing price: $380,000 (≈ 20‑25 % appreciation over two years, or about 10 % per year).
- Typical time on market in Medellín:
- Standard unit: 12‑18 months
- Renovated, rented‑out unit: ~6 months
- Cost per square metre after renovation (including furniture): ≈ $1,500 / m².
- Comparable new‑construction price: ≈ $1,800 / m², varying with amenities and rental model.
Practical considerations for investors
- Currency risk – Peso‑dollar fluctuations can add 10‑15 % to renovation budgets; plan a contingency fund.
- Inflation – Local inflation can further increase material and labor costs during multi‑month projects.
- HOA and neighbor relations – Renovations often require approvals from building administration and adjacent owners; early engagement can prevent delays (e.g., the jacuzzi installation).
- Professional fees – Hiring an architect/manager like Filipe adds cost but can streamline remote coordination and ensure quality; cheaper local contractors are an option but may increase management burden.
- Target tenant profile – High‑end finishes attract U.S. digital nomads and short‑term renters willing to pay premium rates, supporting higher yields.
- Liquidity – Proper pricing of a renovated, rented unit can reduce sale time to about six months, but market conditions (price growth, new supply) affect speed and final price.
Current market yields
- Average net rental yield for new investors in Medellín is now around 7 %, down from pre‑pandemic levels due to price appreciation and increased supply.
- Well‑positioned, high‑quality renovated units can still achieve yields near 9 % as demonstrated by this penthouse.
Ancillary services
For U.S. investors needing document legalization, a local service can obtain FBI background checks and apostilles in roughly two weeks—significantly faster than the typical 6‑10 week turnaround elsewhere in Colombia. This can be critical for visa or citizenship‑by‑investment applications.
