Your property is only working half-time

In 30 seconds

An inherited apartment worth 350 million pesos, rented at 2,500,000 a month, yields 7.4% nominal and 1.16% real. That capital is standing still.

There is a fourth way out besides selling, doing nothing or spending a loan: borrow up to 60% of the appraisal against the property, invest that money in an asset that pays returns, and keep collecting the rent.

In the example, that means 902,000 pesos more per month (41% more income) and a 195 million financial asset that did not exist before.

Everything depends on a tax question only your accountant can answer, and on a long term. Here is the full calculation and the template to run it with your own numbers.

Marcela is 54 and owns an apartment in the north of Barranquilla that belonged to her mother. One hundred and twenty square meters, three bedrooms, a balcony nobody sits on anymore. She inherited it six years ago and has rented it out ever since.

Every month two and a half million pesos come in. Every year she pays property tax, every so often she fixes a leak, and once every two years the apartment sits empty for a month while she finds a new tenant. The numbers work. There is nothing left over, but there is something.

Marcela has never run any other calculation. And that other one is the one that matters, the one people who know actually run.

The uncomfortable number

The apartment is appraised at 350 million pesos. Marcela receives 30 million a year from it, of which, after discounting the month it sits empty and what she must set aside for maintenance, she keeps about 26 million net.

A 7.4% annual return on a 350 million asset is comparable to a term deposit, but with the extra work of dealing with tenants, repairs and property tax.

And that 7.4% is before inflation. With annual CPI at 6.24% as of August 2026, the real return on Marcela’s apartment is 1.16%.⁶ In other words: of the 26 million she receives each year, about 22 are not profit, they are just what she needs so her wealth does not lose value. What she keeps for renting, collecting, repairing and declaring is a little over 4 million a year on a 350 million asset.

Put another way: Marcela has 350 million pesos standing still. If that money were in an account, a fund or anywhere else, she would be asking whether she could make it earn more. With a property, almost nobody asks that question.

How much does your property really earn?

Before you read on, run the same calculation on your property. The simulation template that comes with this article does it for you: enter the appraisal and the rent, and see your real return and your monthly cash flow.

Run the numbers here

The three ways out everyone knows

There is a reason almost nobody asks that question: most of us only know three ways out.

• Sell. But then you lose the asset, pay tax on the gain and end up looking for somewhere to put the money, on top of the sentimental cost of selling an inheritance.
• Do nothing. Which is what almost everyone does, without realizing how much is being left on the table.
• Take out a loan against the apartment for consumption: a car, a renovation, a trip. That turns an asset into an expense, a common mistake.

But what almost nobody knows is that there is a fourth one, and it is what this article is about.

A debt-free property is tied-up capital. The question is not whether to sell it: it is whether it can work harder without ceasing to be yours, and start building another asset along the way.

The idea, in one sentence

A traditional bank lends you up to 60% of your property’s market value with the property as mortgage collateral. You remain the owner. You keep collecting the rent. And that borrowed money is invested in a financial asset that can earn more than the loan costs.

On Marcela’s 350 million, 60% is 210 million that today lies dormant inside the walls.

The operation makes sense if you have time for a medium or long-term strategy and the whole package, rent plus returns, minus the installment, minus costs, minus taxes, leaves positive cash flow.

Not just if the loan rate is lower than the investment rate. Those two things are not the same, and confusing them is the most common mistake.

How it is built, step by step

Step 1: the loan

Marcela takes a 210 million mortgage-backed loan over 15 years.¹ Let’s assume an effective annual rate of 12%. The monthly installment comes to 2,438,000 pesos.

Further on you will see why the 15-year term is not a detail: it is what gives the whole operation its margin.

Step 2: the reserve

Before investing a single peso, Marcela sets aside six full installments: 14,628,000 pesos kept liquid, in pesos, in a separate account. They are not converted to dollars, not invested and not touched: the debt is paid in pesos, and the reserve has to be in the same currency as the installment.

It is the cushion that keeps a late tenant, or a return that arrives late, from turning into a problem with the bank. Anyone who skips this step is building on sand.

Step 3: the investment

The rest, about 195,372,000 pesos after the reserve, is converted to dollars and invested in a financial asset that pays periodic returns.² At an exchange rate of 3,100 pesos per dollar, that is about 63,000 dollars.⁹ Let’s assume it earns 14% effective annual on that capital. That is about 692 dollars a month, 2,145,000 pesos at the same exchange rate.

A warning almost nobody gives

A dollar asset that pays 14% does not do so out of generosity. The risk-free dollar, a US Treasury bond, pays much less. Much of whatever sits above that is the risk premium: the extra return paid by an issuer whose credit is not that of the US Treasury.

An above-market return always has an explanation, and that explanation is part of what you are buying. If nobody gives it to you, ask for it before going further.

But the fact that risk exists does not mean all risks are equal. Between two assets that pay the same there can be a huge difference in what backs that payment: whether there are real guarantees, where you stand in the order of priority, who audits the issuer, how many cycles it has delivered on. That difference does not show in the rate, it shows in the structure, and telling them apart is a large part of the work.

Step 4: the apartment keeps working

Nothing changes for the tenant. Nor for the owner, as far as using it goes. Marcela keeps collecting her rent. The apartment is still hers, only now it carries leverage and 195 million working in parallel.

Marcela’s first month, in numbers

This is what any month looks like, all included:

Marcela goes from receiving 2,177,000 net to receiving 3,079,000: the 2,177,000 from the rent plus 902,000 more. Almost eleven million more a year, without selling anything and without putting in a peso of her own.³

It is not a fortune. It is 41% more income on the same asset. And above all: it is a 195 million asset that did not exist before and is now hers, while the debt amortizes month by month until, in fifteen years, the apartment is free again, and, if the capital was preserved along the way, with that asset still there.⁷

The part nobody tells you

Look at the table again. The operating rent is 2,177,000 and the installment is 2,438,000.

The rent is not enough to cover the installment. Ever. It falls short by about 260,000 pesos every month.

That means the apartment covers 89% of the loan on its own, and the financial return has to cover the rest and also generate the profit.

This is not a flaw in the scheme: it is its nature. But you have to go in knowing it, because every risk that follows stems from it. If the return fails, Marcela ends up paying that difference out of pocket, and that is what the six-installment reserve is for: it gives her more than fifty months of runway before the problem becomes serious.

Why fifteen years and not ten

It is the decision that changes the result the most, and it is almost always made backwards. Intuition says “the shorter the term, the less interest I pay”. That is true, and irrelevant compared with everything else:

With a 12% loan, both terms leave positive cash flow. The difference is no longer whether the operation works, but how much margin for error it tolerates. At ten years the cash flow is 379,000 a month and the scheme stops working if the peso strengthens more than 27% or if the return falls below 10.1%. At fifteen the cash flow is 902,000, the peso can strengthen up to 63% and the return can fall to 5.0%, less than half of what we are assuming.

In other words: at ten years you need the world to behave more or less as projected. At fifteen, you can be badly wrong on all three variables at once and the operation still produces cash.

And one more advantage: if the loan allows prepayment without penalty, a long term does not lock you in. You can pay extra whenever you want. What you cannot do is extend a short term when things get difficult.

Your three thresholds, in two minutes

The three numbers in this table (how far the rate can rise, the peso can strengthen and the return can fall) change with every appraisal, every rent and every term. The template calculates them for your case while you move the term from 10 to 20 years and watch the margin grow or shrink.

Download the free template

Fifteen years at a glance

So far we have looked at one month. But Marcela’s decision is not about a month: it is about fifteen years. Seen that way, the comparison changes shape.

Before the numbers, a clarification that matters: in both scenarios Marcela keeps the apartment, so the property’s appreciation happens equally in both and does not tip the balance either way. What follows compares only what differs between the two paths.⁷

Doing nothing. Marcela keeps receiving her 26 million net a year. If the rent is adjusted for inflation, as it usually is, that income keeps its purchasing power but does not grow above it: in real terms, Marcela receives the same money fifteen years from now as today. At the end of the period she has what she had at the start: a debt-free apartment.

The structure. Marcela receives the same 26 million in rent plus about 11 million more a year in net cash. At the end of the fifteen years she has the same debt-free apartment, because the loan was amortized, plus a financial asset of about 195 million that did not exist at the start.

It is worth pausing on what that comparison means. Marcela ends up with everything she would have had anyway, the same apartment, debt-free, appreciated just the same, and on top of that a financial asset that did not exist. She did not swap one asset for another: she added one. And she did it without selling, without putting in her own capital and without the tenant even noticing.

Those 195 million are pesos fifteen years from now; in today’s purchasing power they are worth about 125 million.⁸ That is still a third of the apartment’s value, built entirely with money borrowed against a property she was going to keep anyway. That is the argument, and it needs no embellishment.

The condition that decides whether this works for you

This structure is designed for fifteen years. It is not an aesthetic preference: it is what gives it margin. At fifteen years the operation withstands the peso strengthening up to 63% and the return falling by half; at ten, those margins shrink to less than half. And the final asset does not appear overnight, it is built month by month through amortization.

If you are thinking of a three or five-year horizon, if there is a real chance you will need to sell the property within that time, or if the idea is to go in and out depending on how rates move, this is not your strategy.

Not because it is bad, but because it is designed for a different term. Forcing it into a short term does not make it more agile: it turns it into an operation with half the margin for error, and when it comes to preserving wealth, that is the last thing we can afford.

And the cost of that difference must be said too: in the do-nothing scenario, Marcela has no currency risk, no counterparty risk and no obligation to reinvest seven to fifteen times at whatever rate exists on the day.

They are not two equivalent paths with different returns. They are two different paths, and the second pays more because it asks for more, like everything in life.

The three things that can go wrong

1. The dollar can turn against you

Marcela’s debt is in pesos and her investment in dollars. If the peso strengthens, that return is worth less in pesos.

At fifteen years, the operation withstands the peso strengthening up to 63% before it stops producing cash. At ten years, it withstands 27%.

In pesos per dollar it is easier to see. Starting from 3,100, the fifteen-year scheme stops working if the dollar falls below about 1,150; the ten-year one, below about 2,270.¹⁰

Now the number that gives the scale: in the last twenty years the dollar never went below 1,652 pesos, its lowest point, in June 2008. To see a dollar at 1,150 you have to go back to 1997. That is, not even the strongest peso of the last two decades would have broken the fifteen-year operation. The ten-year one, yes: 1,652 is well below its 2,270 threshold.

And the peso’s strongest appreciation in a single year within that period, almost 26% between mid-2006 and mid-2007, would take the dollar to about 2,305: the long term would barely feel it, the short one would be right at the edge.

None of this guarantees anything: history describes what happened, not what is coming. But it does say how big the move would have to be, and that size has no recent precedent.

2. Today’s return is not forever

Financial products mature in twelve or twenty-four months. The debt lasts one hundred and eighty. Marcela will have to reinvest seven to fifteen times over the life of the loan, each time at whatever rate exists that day.

Before investing, check in writing what happens if you need to exit before maturity: many products include early withdrawal penalties.⁴

If in year five rates are much lower, the sensible answer is not to accept whatever is on offer: it is to use the capital to pay down the debt. A reasonable rule is to set a threshold in writing from the start, for example, if at maturity you cannot get at least three points above the cost of your loan, you prepay instead of renewing, and you stick to it without arguing with yourself.

3. The tenant

It is the most manageable of the three, and even so you should model it badly on purpose. If instead of one empty month every two years Marcela has two, and the rent drops to 2.2 million, the cash flow falls from 902,000 to about 620,000 a month. Still positive, but the margin narrows. Always model the worst case, not the prettiest one.

And now the question that decides everything

Look again at the first-month table. There is a line of 715,000 pesos in income tax. That line assumes something we have not discussed yet, and it is the most important point in the whole article.

It assumes that the loan interest can be deducted in the income tax return against the income the investment generates.

If that deduction applies, the operation works: 902,000 pesos a month in additional cash.

So why can’t it be answered here? Because the answer depends on each person’s facts and requires an independent tax analysis. In most cases it does apply, but there are some in which it does not.

There is a rule that allows deducting interest on a home loan, but it does not apply when the home was already yours and the loan did not finance it. That is exactly Marcela’s case, and the case of almost everyone who inherited or has finished paying.⁵

There is another route: the ordinary deduction of financial expenses against the income the investment produces. It has a reasonable basis in the Colombian Tax Code. But there is no ruling from the tax authority (DIAN) on this specific case, and whether it applies depends on very specific things about each person:

• How much you earn from all sources, which sets your real marginal rate.
• How the promissory note was worded and whether the bank asked you to state the purpose of the money.
• Whether you can show with statements that the loan money reached the investment without being diverted along the way.
• What portion of the disbursement stayed in reserve and produces no income.
• Whether the asset’s issuer is supervised in Colombia, which changes how the returns are taxed.

No article can answer this for you. Yours cannot either. What you can do is frame the question correctly and take it in writing to a tax specialist, before signing anything.

And if the investment is held abroad

In Marcela’s example the capital is invested abroad, and that adds a layer worth understanding. Colombia taxes its tax residents on worldwide income: a return earned abroad is taxed here just like one earned here. Anyone looking for a tax advantage simply from investing abroad will not find it.

What does exist is a mechanism to avoid paying twice, the credit for taxes paid abroad, with limits, and, if there is a double taxation treaty with that country, a possible reduction in withholding tax. In exchange there are two formal obligations: declaring foreign assets above a certain amount every year, and adding that asset to your net worth for wealth tax, if the threshold is exceeded.

The reason to invest abroad, then, is not tax: it is access to instruments and not concentrating all your wealth in the same sovereign risk. Those are good reasons. The tax advantage is not among them. And none of this makes the structure unworkable, it just requires building it knowing the rules, which are known and written down.

What Marcela did

She did the only sensible thing: she turned the doubt into a concrete question.

First she asked for a written tax opinion. Not a generic one (“is the interest deductible?”) but one that described her exact case: the loan she was going to get, the collateral on her apartment, the traceable destination of the money, the asset she was going to buy. With twelve specific questions and the requirement that each answer state how certain it was.

It cost her some fees and three weeks of waiting. Against a 210 million operation over fifteen years, it was the best money spent in the whole process.

With that answer in hand, the decision stopped being a bet and became a calculation.

Start by finding out whether it works for you

Before thinking about banks, dollars or products, there is a calculation you can do in an afternoon: with your real appraisal, your real rent and your tax situation, does this structure leave you money or take it away?

Simulation template, free download

The same sheet we used to build the numbers in this article, ready for you to enter yours.

What you need at hand: your property’s market appraisal, the rent you receive today, the term you are considering and the rate your bank offers you. Four figures.

What it gives you back, instantly: the monthly installment, the liquidity reserve you should set aside, how much capital is left to invest, the net monthly cash flow, how much your income rises compared with today, what share of the installment the rent pays on its own, how many months your reserve lasts and the three break-even thresholds (maximum loan rate, minimum asset return and how far the peso can strengthen).

How to use it in three steps: 1) download it, 2) enter your four figures in the marked cells, 3) move the term from 10 to 20 years and watch the three thresholds change.

The assumptions come preloaded with reference values you can adjust to your case: marginal income tax rate, exchange rate, expected return, vacancy, maintenance, property tax and months of reserve.

Download the template

And if you would rather we look at it with you: send us the market appraisal and the rent you receive today, and we will send you back the reading with numbers. We would rather tell you no in time than walk you into an operation that does not suit you.

Notes