Case Study - I'm almost sure we are very close to retirement (Bogota, Colombia)

[PichirrePeroContento]

Case Study – Buying an apartment for rent on a possible housing bubble

I (Pedro) have been married with the wife Cristina (Cris ;), for 3 years. Living  in Bogota, Colombia since. I work in retail (ugh!)

Income:
Pete: 118,800,000 COP Yr + intereses de censantias 650,000 COP
2,700,000 x 2 (June – December) direct payment to bank account
5,400,000 a yr “Cesantias” unemployment severance pay: Can be used to buy new or used housing or education.

9,000,000 COP MONTHLY *GROSS INCOME**
*2,400,000 COP Saved automatically as a programmed savings called (Pension Voluntaria): Condition to be used on housing (buy new or used) or education).
Tax cuts: Salud, Pension, Fondo Solidario, Retencion en la Fuente: 775,000

Take home income: 5,825,000
First half of month:  3,084,000
Second Half of month:    2,741,000

Monthly Expenses:
Property tax: we rent (moving into our own new payed for apartment in September 2015)
Rent: 1,122,000
Building Administration: 202,000
Electricity
Gas
Phone/Internet:
CellPhone: Work pays for both our cellphones
Groceries
Credit Card: We don’t enslave our finances
Restaurants:
Transport (Taxi, Bus, Bike parking):

Assets:

Apartment: bought for: 292,000,000 COP Estimated at: 315-330MM COP. **A large number of people are talking about a housing bubble…
Oversees Investment: 20,000$ possible return end of 2016 for about 35,000
Checking Accouny in United States: 15,000 (zero interest gain).

**PROJECT:

1. Retire by 40!
2. Thinking of buying a 90Mts apartment for 270,000,000COP which is composed of in 3 small studiosLofts that could rent at 1,800,000 (all three together.. or closer to 2,000,000 through airBnB). *This could imply a 7-8% Year return on investment (not sure the apartment can have an increase in value **Its over 15yrs old.
3. Learn about bonds and stock investment and Fx trade.

Cris might be starting a job soon (1,500,000 – 2,000,000COP). This could change our home arrangements in that we might have to hire someone to help with hose duties and a place to keep our dog during the day (we might find a workaround as I have “flexible” working hours).
It could also imply a large rate of savings (hopefully Cris will be willing to put away around 1,000,000 a month)

[NYExpat]

Hi Pedro, I lived in Medellin for several years, so I understand the exchange rate. However because of the difference, it makes the numbers seen daunting on a heavily American/Canadian forum. Why not use site like http://www.xe.com/currencyconverter/ and change your values to the US dollar. It will be easier for others to provide feedback.

[zolotiyeruki]

Hi Pedro, I lived in Medellin for several years, so I understand the exchange rate. However because of the difference, it makes the numbers seen daunting on a heavily American/Canadian forum. Why not use site like http://www.xe.com/currencyconverter/ and change your values to the US dollar. It will be easier for others to provide feedback.

Or all of us could just ignore the trailing 3 zeroes on all the numbers, and it'll at least be within an order of magnitude of the numbers we're used to looking at :)

[ShoulderThingThatGoesUp]

I would think a 7-8% return on investment on real estate in a country with an active Marxist rebellion would be frowned on by most real estate investors here. Just too low to justify the risk.

Why do you have a giant checking account in the US earning no interest? You might as well have that invested in an US index fund if there's a way you can do that.

[PichirrePeroContento]

The exchange rate is actually changing a bit (throughout this year it has gone from 2360COP to dollar TO 2,677COP to dollar). I could have used that to my advantage but didnt... I would use 2400 as an average number to work with.

As for the 15,000$ sitting in a Citi account... I tried oppening a Money market account with no luck. I even tried to start a Prosper/Lending Club account but both were imposible due to not having a social security number or Tax Identification Number... Any other suggestions?

[Rubic]

As for the 15,000$ sitting in a Citi account... I tried oppening a Money market account with no luck. I even tried to start a Prosper/Lending Club account but both were imposible due to not having a social security number or Tax Identification Number... Any other suggestions?

Consider establishing an IVJ (http://en.wikipedia.org/wiki/International_joint_venture) with an American you trust and apply for a Tax Identification Number.

[PichirrePeroContento]

We are going to pay for our appartment in "cash"... that would mean another 1,100,000COP (another 450$) that would go to savings.. Which will put us over 50% savings... yeah!

[PichirrePeroContento]

Around 25% of our savings are "Pensiones Voluntarias" which are condition to be used ONLY for education or HOUSING purchase or betterment... That know, should we get a mortgage at around 10% annually (to be payed in 6yrs) to buy a second place to rent (return) at around 7% annually?

[asgaroth]

I hope you are closer to retirement now!, I have started my own journey in Medellin (original from Bogota), planning to retire before 40s as well.

I tried the real estate investment here, but it as others mentioned the returns are not good, I'd say, unless you really focus on it, possibly as a full-time kind of work, it's very hard to find profitable properties in Colombia, not sure about this but I think you forgot about inflation which averages about 5%/yr.

I know this post is a bit old, but I'd be interested in hearing your results/thoughts now that some time has passed. did you continue with real estate investment or did you move to another vehicle with better returns?