Guide to Investing in Associative Projects in Medellín: Benefits and Risks

Introduction

Medellín has established itself as an epicenter of innovation and development in Colombia, attracting investors seeking opportunities in the real estate sector. One of the most notable options is investment in cost-based partnership projects, allowing investors to participate directly in property development and share both the benefits and risks.

This guide offers a detailed overview of this investment strategy, focused on investors looking to maximize their profitability in the Medellín real estate market.

1. What are Cost-Associative Projects?

Associative projects at cost are a type of real estate development in which a group of investors join together to finance and develop a project from its initial stages. Unlike traditional models, where a construction company assumes the costs and then sells the units at market prices, in this scheme, investors contribute the capital necessary to cover the direct costs of the project, eliminating the developer's profit margin. This results in lower acquisition prices and direct participation in the project's development.

Main features:

• Direct participation: Investors enjoy the same price benefits as the promoter group.

• Financial transparency: By being involved at all stages, investors have access to detailed information on costs and expenses.

• Cost savings: By eliminating the developer's profit margin, acquisition costs can be 20% to 30% lower than the traditional market.

2. Benefits of Investing in Associative Projects in Medellín

a. Profitability Potential

Investing in associative projects at cost allows for the acquisition of properties at below-market values, which translates into a higher profit margin at the time of sale or a more attractive return on rentals. Furthermore, Medellín has experienced a steady appreciation in the value of its properties, further enhancing the profitability of these investments.

b. Active Participation

Investors have the opportunity to influence key aspects of the project, ensuring that development objectives are aligned with their expectations and financial goals.

c. Portfolio Diversification

Participating in associative projects offers an alternative for diversifying investments, combining real estate assets with other financial instruments, which can mitigate risks and improve the portfolio's profitability profile.

d. Access to High Quality Projects

Medellín stands out for its innovative architecture and high-quality boutique projects. Investing in these types of developments offers properties with cutting-edge designs and luxurious finishes, appealing to both local and foreign buyers.

3. Risks Associated with Associative Projects

a. Construction Risk

As with any real estate project (including traditional ones), there are risks associated with delays, cost overruns, or technical issues during construction. It's essential to conduct thorough due diligence and work with a trusted development team.

b. Risk of Increases in Construction Costs

In an association, construction cost conditions can vary due to economic factors, affecting the final value per square meter and, consequently, the final property prices. It's normal for an association project to experience some increases at the end, and for these increases to be jointly borne by all investors.

c. Financial Risk

Lack of adequate financial management can lead to liquidity problems or project insolvency. Professional management and control mechanisms such as external technical and administrative audits are vital to mitigate this risk.

d. Legal Risk

The absence of clear contracts and noncompliance with local regulations can lead to legal conflicts. It is essential to ensure that all aspects of the project comply with current legislation and that you have the support of specialized legal counsel.

4. Key Considerations for Professional Investors

a. Due Diligence

Conducting in-depth project research, reviewing the legal status of the land, and analyzing financial projections is essential for making informed decisions.

b. Legal and Tax Structuring

Designing a legal structure that protects investors' interests and optimizes tax implications is crucial to maximizing profitability and minimizing risk.

5. Success Stories in Medellín

Medellín has witnessed several successful associative projects that have transformed areas of the city, such as El Poblado. These projects have generated high returns for their investors and have driven the growth of high-end architecture in the city. The associative model has allowed developers to be more disruptive and innovative in their designs and real estate proposals.

Conclusion

Associative projects at cost represent an attractive alternative for investors seeking to share the benefits of the real estate development group and achieve above-average returns. However, a clear strategy, a detailed risk analysis, and a well-defined structure are essential.

If you're interested in exploring investment opportunities in partnership projects in Medellín, our team at Standout is ready to advise you and help you make informed decisions.

Make your investment in Medellín a success with a smart and well-planned strategy!