Still Inspired By My Favorite Cash Flow Market
Kathleen and I were in Medellin for the weekend taking time to clean up some administrative things to do with our apartment there and also helping our kids, Kaitlin and Jackson, connect with local contacts for their emerging Trader Jack’s Bazaar business. The continued vibrancy of the city (well, at least of its El Poblado neighborhood, as we didn’t have time to roam much beyond El Poblado this trip) is inspiring.
New apartment towers are going up in our little corner of El Poblado. Thanks to the city regulations, which require so much park area per person, the increased construction density means we can probably expect another new park nearby soon. The city already purchased and then tore down a house across the street from our apartment last year to be able to expand the park adjacent to the lot.
Meantime, also new in our small neighborhood since our last visit a few months ago, are a number of stores and restaurants, and a new healthcare clinic is under construction a few blocks away. With the expansion of local amenities, we really don’t have to go far for anything we need. We can walk to get most everywhere we want to go, and walking really is a pleasure in this city.
It’s not only our neighborhood that’s growing. The entire city seems to be on a nice upward trend, as well as the country in general. More flights were coming and going from the Medellin airport this trip than any other time we passed through. One was a direct flight from Caracas to Medellin. More people from the region are discovering Medellin for the great travel spot it is.
More investors are finding their way to the country, as well. Sam Zell has been sniffing around for some time. Large investor groups are putting together funds to build shopping malls in un- or under-served mid-sized cities. Local construction companies are expanding into a form of “extended”-care apartment buildings. We small foreign retail investors are still a relatively small group, thanks to what I think of as the Escobar Factor, but as the adventurous visit the country, they can’t help but see opportunity.
In meetings with local contacts, I learned about at least five interesting investment opportunities, from franchises to agriculture and commercial construction. I’m sorting through the details and due diligence for the real estate-relevant of these to write up for my Marketwatch members.
One of the real estate opportunities in this city that I think is worth attention (and that I’ve written to you about before) is Casa Provenza. This small condo project was put together as a quick and easy way for people interested in establishing residency in Colombia to qualify for an investor visa. However, it has proven to be a decent investment, as well.
Colombia offers a handful of residency options, including one for anyone who invests in a local corporation. The required investment amount is 100 times the monthly minimum wage, which works out at current exchange rates to about US$33,000. Make that investment, and you can obtain legal residency in Colombia. Further, for this particular visa, Colombia requires you to be in the country only one day every six months, making this a great, low-cost, back-up residency.
In the case of the Casa Provenza opportunity, the corporation you’re investing in owns a building in the Zona Rosa district in Medellin’s El Poblado. The building includes three luxury units available for short-term rental, generating cash flow for the corporation. Based on occupancy and nightly rates since the building opened in January of this year, the investors to date are seeing annual yields in the 5.5% range. This is not huge but acceptable…especially as the focus of the investment isn’t the investment return but the easy Colombian residency.
With growing numbers of both tourists and business travelers, Medellin is a top market for this kind of rental investment.
“Lief, I have been following your commentary on opening bank accounts in countries outside the U.S. and have done extensive research on structured accounts. I’ve read where you are being asked to close your account if you do not comply with FATCA or the banks do not want to incur the expenses and hassle.
“I understand from other sources, that one can open an account with Atlantic Bank in Belize in a Trust and appoint an IBC either Belizean or from another country, i.e. Seychelles ( as long as this IBC does not do business in Belize ) and appoint a non-American resident as Nominee Trustee. I understand in this case, the account remains outside guidelines of FATCA yet remains within the current Belizean privacy laws. Could you please address this in your next newsletter, as I am preparing to open such an account in Belize? I am also looking at Panama as a possible choice for residency as well.”
While the bank account in the structure you’ve outlined may not have you as a signatory on the account, the trust will be reportable to the IRS assuming you (or any American) is the beneficiary of the trust. Additionally, if the beneficiary of the trust is an American, I believe that banks will still require you to provide a W-9 and sign the waiver document for bank secrecy (specifically regarding FATCA and the IRS).