To start investing in real estate with little money, you can take a participation in a specific project instead of buying a whole property, with results that depend on how that project performs.
It isn't the only route, and it doesn't suit everyone. Here we compare the most common ones and use an example in pesos to show what each takes to get in and to keep going.
How to start investing in real estate
Starting in real estate with little money comes down to how much you have today and how much control you want. These are the four usual routes.
Buying outright
You need the full price plus entry costs. It gives you the most control and puts all your money into one property.
Buying with a mortgage
It cuts what you pay upfront, but you still need a down payment and closing costs, and the installment keeps running even if the place sits empty.
Buying off-plan
You reserve a unit and pay the down payment during construction. You rely on the developer delivering and on getting a mortgage for the balance at the end.
Taking a participation
You contribute a fraction of a specific project. You get in with far less, in exchange for less control and an exit that can take time. Here's how fractional real estate works.
Is real estate a good investment?
It can be, if the numbers of the specific property or project make sense and your situation lets you leave that money alone for several years. Real estate is tangible and can bring in rent, but it's also slow to sell and expensive to carry.
Before looking at projects, answer these four questions.
Do you have a cushion for emergencies?
The usual advice is to set aside several months of expenses first. If an emergency forces a quick sale, you can come out behind.
Do you have expensive debt?
If you're paying high interest on a credit card, clearing it is usually the simplest move before thinking about investing.
How much can you leave untouched?
How much of your money to commit depends on your expenses and plans. Put in only what you can leave tied up for the full term.
How much liquidity do you need?
Liquidity is how quickly you can turn something into cash. A property or a participation doesn't sell overnight.
A worked example in pesos: apartment or participation
A made-up example: a 300,000,000-peso apartment against a 2,000,000-peso participation, which is 0.2% of a 1,000,000,000-peso project.
| To get in, in pesos | Whole apartment | Participation |
|---|---|---|
| Price or contribution | 300,000,000 | 2,000,000 |
| Notary | 500,000 | 0 |
| Registration | 4,500,000 | 0 |
| Title review and other | 500,000 | 0 |
| Money to get in | 305,500,000 | 2,000,000 |
With a mortgage for 70% of the price, the apartment would still take 95,500,000 pesos to get in: 90,000,000 as a down payment and 5,500,000 in costs. Who pays each cost is agreed in the purchase promise.
| Each year, in pesos | Whole apartment | Your share of the project (0.2%) |
|---|---|---|
| Property tax | 1,800,000 | 12,000 |
| Building fees | 4,200,000 | 28,000 |
| Insurance and repairs | 1,500,000 | 10,000 |
| Operator and management | 0 | 20,000 |
| Costs for the year | 7,500,000 | 70,000 |
The apartment costs you those 7,500,000 pesos even when it's empty, and you do the managing. With the participation, the project takes them out of its income before distributing, and its total costs are 35,000,000 pesos.
Look at the cost in proportion: the apartment spends 2.5% of its value each year, and the participation 3.5% of what was contributed, because it pays someone to operate. Getting in with less doesn't mean paying less per peso.
They aren't the same thing, either. With the apartment you decide and can use it; with the participation you can't. To see both side by side, here's our comparison of buying an apartment or participating in projects.
Investing in real estate in Colombia: what to check
Whichever route you take, these points change your numbers and your peace of mind.
The property's paperwork
The certificado de tradición y libertad shows who owns the property and whether there are liens or mortgages.
Property tax
The predial is a municipal tax paid each year based on the property's assessed value. Look up the actual amount before running numbers.
Building fees
The cuota de administración is due even if nobody lives there. Ask about special assessments too.
Taxes when you sell
If you sell a property that was a fixed asset and you held it for 2 years or more, the profit is usually ganancia ocasional, Colombia's capital gains tax, at a 15% rate. If you sell before 2 years, it's treated as ordinary income.
The project's documents
With a participation, read what your share represents, which costs come out and how you can exit.
The cost of getting out
Selling has costs too, such as commissions and paperwork. Include them from the start.
The risks of starting in real estate
Any property or project can turn out worse than estimated, and starting small doesn't change that.
What you can lose
The result depends on how the property or project performs. You can lose part or all of what you contributed.
The exit
Selling can take months, and a participation may have no buyer when you need one.
An empty apartment
With no tenant, the property tax, the building fees and any mortgage installment keep running.
The price
A property's value can also stand still or fall, and you feel that when you sell.
Concentration
If all your money is in one property or project, a problem there affects all of it.
Whoever manages it
With a participation you rely on an operator. If they do a poor job, your result suffers too.
How to take the first step, at your own pace
- 1
Look at your finances
A financial check-up helps you see how much you can commit without stretching.
- 2
Pick a route
Compare what each one takes to get in, to keep going and to get out.
- 3
Learn to read the numbers
If your budget is tight, carry on with how to invest with little money and how to calculate a project's return.
- 4
Evaluate one real case
Take a specific property or project and review its documents with this method.
- 5
Decide without rushing
If something isn't clear, ask before you sign. You can also decide not to go ahead.
Related questions
Projects
See how it looks in a real project, with its term, its information and its risks.
Project in Construction
Project in Structuring
Project in Operation
Project in Structuring
Project in Structuring
Project in ExplorationCasa Lago
La Pintada, Colombia
This project is currently under study. We will notify you when it becomes available for participation.
Keep going
- What fractional real estate isWhat your share represents and how income and costs reach it.
- What to invest in with little moneyHow to think about your options when the amount is small.
- Browse the projectsEach with its term, its information and its risks.
Educational content. It is not financial, legal or tax advice, nor a public offering of securities. The figures in the examples are made up. Every investment carries risk and its results may vary.