Multifamily properties for rent in Colombia : an opportunity waiting to be seized at The Massachusetts Institute of Technology

Abstract

This paper seeks to reveal an overlooked opportunity to develop and invest in multifamily properties for rent in Colombia by examining all of the variables that make up a suitable investment. With more sophisticated investors entering the market, sky-high housing prices, desirable demographic trends for a growing economy and the highest share of renters in a Latin American city, Bogota has the perfect mix for developing an institutionally-owned and managed rental housing market. It is addressed to developers, property managers and investors who can seize this opportunity in years to come. Also, is meant to provide a holistic research that summarizes the present situation and provides clear guidelines for future ventures. There are clearly some challenges that this new market will face. Low rental yields, an insufficient legal and regulatory framework, and a lack of specialized funding vehicles are three of the main obstacles that these developments will encounter. From a competitive perspective, it is clear that a fragmented though efficient rental market exists. Even though it operates largely in an informal manner, this supply of units satisfies the needs of todays' rental community. These obstacles, among others, will be analyzed in this thesis to show that the existing risks can be managed and mitigated and it is indeed the right moment to develop new investment platforms. The research will contemplate the whole Colombian rental market but will focus on Bogota's mid and high-end spectrum of the housing market. While affordable-housing projects for rent can also be identified as a substantial opportunity, the fact that most likely the regulatory framework around the subject will soon change, exposes any recommendation to becoming irrelevant. In order to further develop the institutional real estate in Colombia, the country will not only need more sales and steady price increases. A central piece for becoming a sophisticated and modern market will come from a change of approach towards the process of conceiving, analyzing and investing in real estate. Even though this will take decades, the objective of this paper is to emphasize that for the rental housing market this evolution should start now.