Colombia’s ability to attract foreign investors to support its economic growth, particularly in the real estate sector, has been hindered in the past by an anti-government insurgency funded by drug activities. Formal negotiations to end internal conflicts began in 2012 between the government and the primary guerrilla group, the Revolutionary Armed Forces of Colombia (FARC). These have led to greater government control and a sense of stability throughout the country.

U.S.-based investment firms, such as KIT Capital, anticipate greater opportunities in Colombian real estate as the country’s economy continues to grow. Investors such as Kaleil Isaza Tuzman, managing partner of KIT Capital Partners, purchased real estate in what was referred to as the “old city” section of Cartagena, Colombia, in 2003. They did so on the anticipation of growth in the real estate sector. Prices in Cartagena maintained a growth rate of five to seven percent through 2013.

According to the U.S. Department of Commerce, the economic picture for Colombia is a bright one with growth estimated to be 4.1 percent in 2013. The Trade Promotion Agreement between the United States and Colombia in 2012 removed tariffs from 80 percent of consumer and industrial goods. The immediate effect was a seven percent increase in Colombian exports to the United States.

Transforming itself into an attractive destination for foreign investors includes more than foreign trade agreements with the United States. Changes in Colombian laws have eliminated restrictions on foreign ownership of real estate in the country. Unlike in other countries in the region, a foreign investor can own or rent real estate with the same rights as a Colombian citizen. The new laws also removed restrictions on the ability of foreign investors to take the income generated by their investments out of the country.

Foreign investors can invest in developed properties or vacant land with only a passport. However, a permanent visa or national identification card issued by the Colombian government is required at the final deed signing. The process for obtaining a permanent resident visa is expedited if the applicant is investing more than $200,000.

Financing an investment in real estate in Colombia can be a challenge for a foreign investor. Most lenders outside of the country will not finance real estate acquisitions in Colombia. Colombian banks might not be available as a source of funding unless the investor has an established credit history in the country. Even if financing is available locally from Colombian banks, most lenders will only finance 70 percent of the value of the property. What’s more, interest rates can be significantly higher than foreign investors are accustomed to in their home countries.

Investment funds offer an opportunity for the foreign investor who wants to take advantage of the emerging real estate market in Colombia but who don’t want to become involved in the direct acquisition of properties. Investing in a company that has a portfolio of residential and commercial real estate offers an investor diversification with less capital risk than with direct acquisition in the Colombian real estate market.