KISS in Colombia

KISS… You’ve likely heard the acronym used before: Keep it simple, stupid!

It can be applied to anything in life, except for perhaps keeping one’s wife happy which is why man invented quantum physics. I was reminded of this when a friend recently began complaining about his very expensive luxury imported car and the cost to get it serviced.

Truthfully, it’s a horrible looking ostentatious thing which I’ll refrain from mentioning for fear of offending some readers (OK, it’s a Jag). But nevertheless – I realized that my cheap and nasty Nissan Land Cruiser has no such problems. It’s almost impossible to break and even when not serviced just keeps on running like a well watered 20-something Kenyan.

I like simple. Investing in real estate, like my trusty Nissan, is simple. The factors to consider when determining any real estate purchase are easy enough to understand and the cashflows are typically stable and easy to quantify. Leverage can usually be added and quantified.

Real estate can be as lively as an Ibiza disco to your income statement, while at the same time appearing to look like a slum from the outside. I have proof. It has the ability to turn pennies into pounds when bought well, and when well positioned has been the cornerstone of many millionaires beginnings.

It is therefore a tragedy that central bankers have made such an enormous mess of our credit markets and incentivized ever increasing layers of debt.

As a result, when we scour the globe for opportunities it’s incredibly rare that we see huge opportunities in much of the developed world. Paradoxically, markets which have been cut off from the monetary spigot often present far more compelling opportunities.

Real Estate in El Retiro

Colombia is a country we’ve had on our radar for some time and in line with keeping things simple, I provide a few factors prevalent that have us interested:

  • The income of the average Colombian has doubled in less than a decade, bringing a massive shift into the middle class bracket.
  • Leverage is very low and interest rates high. Unlike the insanely indebted Western world, Colombia still suffers from a banking and credit system which is still in its infancy. This is a good thing for risk reduction.
  • A banking and credit sector that is growing rapidly meaning that while leverage is low now that is not likely to remain the case indefinitely.
  • Strong GDP growth.
  • Low(er) unemployment.
  • Controlled inflation.
  • A growing housing deficit due to demographics and disposable income.
  • Closely tied to the point above is the fact that there exists a lack of capital available to developers, further constricting supply.
  • Large scale infrastructure projects underpinning growth.

On the topic of Colombian real estate I recorded a brief call with Hector Quintana of Zen Global.

We discussed Colombian real estate and opportunities we find most interesting there. I think you’ll find our conversation valuable and invite you to listen to it below:

– Chris

“Simplicity is the ultimate sophistication.” – Clare Boothe Luce


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