How to Co-Invest in Real Estate in Colombia — A Practical Guide for Foreign Investors

Colombia's real estate market has attracted significant international attention over the past decade — and for good reason. Medellín and its surrounding municipalities, particularly Envigado, offer a combination of price appreciation, rental demand and quality of life that is increasingly difficult to find in Latin America at these entry points.

But solo investment — buying and managing a property independently from abroad — has real frictions: legal complexity, currency management, property administration and the difficulty of identifying the right projects without local knowledge.

Co-investment solves most of these problems. Done correctly, it allows a foreign investor to participate in a development project with a defined stake, professional management, transparent reporting and a clear exit — without the overhead of managing a property directly.

At Inversiones OTA, we have structured co-investment partnerships for projects in Envigado with groups of two to four investors. This article shares what we have learned from that experience.

1. What is real estate co-investment?

Real estate co-investment is a structure where two or more investors pool capital to participate in a property project — whether a development, a renovation flip or a buy-and-hold rental — sharing costs, profits and risks in proportion to their stake.

It is different from a real estate fund or REIT in that co-investment is typically project-specific: you invest in a defined asset, with a defined timeline and a defined exit. You know exactly what you own, where it is and what it is supposed to return.

In Colombia, co-investment in real estate development typically takes one of two forms:

• Development co-investment: Investors participate in a construction project from early stage (land acquisition or pre-construction) through delivery and sale. Returns come from the profit on sale of the finished units. Timeline: 18–36 months. Higher return, higher risk.
• Renovation flip co-investment: Investors fund the acquisition and renovation of an existing property — typically a house or small building — for resale. Shorter timeline (6–18 months), lower capital requirement, faster return of capital.

A third model — buy-and-hold rental co-investment — is less common in Colombia because managing a rental property with multiple owners adds administrative complexity. It works best when one partner takes on the management role locally.

2. Legal structures available in Colombia

Colombian law offers several ways to structure a co-investment. Each has different implications for liability, tax treatment and administrative complexity:

• Cuentas en participación (Participation accounts): The simplest structure. One partner — the developer — acts as the visible party and manages the project. Other investors participate as silent partners with a defined contractual share of profits. No separate legal entity required. Fast to set up, lower cost. Most appropriate for project-specific investments with a trusted developer.
• Sociedad por Acciones Simplificada (SAS): A simplified joint stock company. Creates a separate legal entity owned by the investors, which then acquires the property or development rights. More complex and costly to set up, but provides stronger legal separation between the project and the investors' personal assets. Preferred for larger investments or when partners don't know each other well.
• Co-ownership (Copropiedad): All investors appear directly on the title deed in proportion to their stake. Simple and transparent, but creates coordination challenges — any decision about the property requires agreement from all co-owners.
• Promissory note structure: Less common, but used in some projects where the developer issues a debt instrument to investors with a defined return and repayment timeline. Closer to lending than equity participation.

3. How a co-investment deal works — step by step

Based on the structure we use at Inversiones OTA for our development co-investments:

• Step 1 — Project presentation: The developer presents the project: location, legal status of the land, development plan, projected costs, sales price targets and expected ROI. A pre-feasibility document should be available for review.
• Step 2 — Due diligence: Investors review the developer's track record, verify the land title (certificado de libertad y tradición), confirm the construction license status and review the financial model independently. This step should never be skipped — not even with a trusted developer.
• Step 3 — Investment agreement: A formal participation contract is signed — typically a contrato de cuentas en participación or equivalent — specifying stake percentage, capital call schedule, reporting obligations, profit distribution mechanism and exit conditions.
• Step 4 — Capital calls: Investment capital is deployed in tranches aligned with construction milestones — land acquisition, foundation, structure, finishes, delivery. This protects investors by linking disbursements to verifiable progress.
• Step 5 — Reporting: The developer provides periodic financial and progress reports — ideally monthly for active construction phases.
• Step 6 — Exit and distribution: When units are sold, proceeds are distributed according to the agreed formula — typically: recover capital → pay preferred return if any → distribute remaining profit by stake percentage.

4. What returns to expect — and what's realistic

The Colombian real estate development market in Medellín and Envigado has historically offered attractive returns for well-structured projects. But it is important to separate what is realistic from what is marketed.

A few important caveats:

• Returns are in COP unless structured otherwise. Currency appreciation or depreciation against the USD affects actual returns for foreign investors. The COP has historically been volatile; factor this into your model.
• ROI projections depend on sales velocity. A project that takes 24 months to sell all units returns more per year than one that takes 36. Sales conditions in the target market matter as much as construction margins.
• Promised returns above 30% for a development project in Colombia warrant serious scrutiny. They are not impossible, but they require market conditions or margins that should be verifiable in the financial model.

5. Risks and how to manage them

Co-investment in real estate carries real risks. The most important ones in the Colombian context:

• Developer risk: The most significant risk. If the developer lacks experience, financial discipline or integrity, the project suffers regardless of market conditions. Mitigate by verifying track record, visiting completed projects and checking references with previous investors.
• Construction cost overruns: Materials and labor costs can exceed initial estimates, compressing margins. Mitigate by reviewing the cost structure in detail and ensuring the developer has a contingency reserve built into the budget.
• Sales market risk: Units may take longer to sell than projected, extending the investment timeline and reducing annualized returns. Mitigate by reviewing comparable sales data in the specific neighborhood.
• Legal and title risk: Acquiring land with unclear title, pending litigation or encumbrances is a serious risk in Colombia. Always verify the certificado de libertad y tradición independently.
• Currency risk: For investors operating in USD, COP depreciation reduces USD returns. Some investors mitigate this by structuring their exit in USD-equivalent terms, though this requires specific contractual language.
• Partner relationship risk: Co-investment with partners you don't know well creates potential for disputes, especially when the project encounters difficulties. A well-drafted agreement with clear governance provisions is not optional — it is essential.

6. Specific considerations for foreign investors

Foreign co-investors face a few additional considerations that local investors don't:

• Registering incoming capital: Any funds brought into Colombia for investment purposes should be properly documented through the banking system. This is critical for your ability to repatriate capital and profits when the investment exits. Your Colombian bank will handle the foreign exchange declaration (declaración de cambio).
• Tax treatment in Colombia: Foreign investors participating in Colombian real estate projects are subject to Colombian withholding tax on Colombian-source income. The rate depends on the structure and your country of residence. Consult a Colombian tax advisor before investing.
• Power of attorney: If you cannot be physically present in Colombia for key transaction steps, a Colombian notarized power of attorney — apostilled if issued abroad — allows a local representative to act on your behalf.
• Due diligence from abroad: Conducting due diligence on a Colombian project from outside the country is harder than it sounds. Video calls are not a substitute for visiting the site, meeting the team and seeing completed projects. Budget for at least one visit before committing significant capital.
• Communication and reporting: Agree upfront on the language, frequency and format of project reporting. Monthly updates in a format you can actually read — including financial statements and construction photos — are a reasonable expectation for any serious developer.

7. What to look for in a local developer partner

The single most important decision in a co-investment is choosing the right developer. In Colombia's fragmented real estate market, the quality difference between developers is enormous. Here is what separates a reliable partner from a risky one:

• Completed projects you can visit: Not renders, not promises — actual buildings that were delivered on time, at the agreed quality. Ask to visit them and talk to residents or buyers if possible.
• COPNIA license and professional credentials: The technical director of the project should be a licensed civil or architectural engineer registered with COPNIA. This is a legal requirement in Colombia and a basic professional accountability mechanism.
• Financial transparency: A serious developer will show you the financial model for the project — land cost, construction budget with AIU breakdown, sales projection and profit distribution. If the numbers are not available or the developer is evasive, walk away.
• Own capital in the project: A developer who has no skin in the game has less incentive to manage costs and timeline carefully. Confirm that the developer has a meaningful equity stake alongside the co-investors.
• Clear governance structure: Who makes decisions? How are disputes resolved? What happens if a co-investor wants to exit early? These questions should have clear answers before you sign.
• Local market knowledge: The developer should be able to explain exactly why this specific location, this specific product and this specific price point will sell — with comparable data to back it up.

8. The right questions to ask before you invest

Before committing capital to any co-investment in Colombia, these are the questions you should have answered in writing:

• ✅ What is the legal structure of the investment and how is my stake documented?
• ✅ What is the total project budget and what is the contingency reserve?
• ✅ What is the current status of the land title — can I see the certificado de libertad y tradición?
• ✅ Does the project have a construction license (licencia de construcción) or what is the timeline to obtain one?
• ✅ What is the capital call schedule and what triggers each disbursement?
• ✅ How and when will I receive financial and progress reports?
• ✅ What is the profit distribution formula and when is it triggered?
• ✅ What happens if the project takes longer than projected?
• ✅ What is the developer's stake in the project?
• ✅ Can I speak with investors from previous projects?