Year-long Capitalization Rates & Rental Yields by Neighborhood in Medellin
Investing in Medellin real estate isn’t just about finding a beautiful property—it’s about knowing where your money works hardest. In a city with diverse neighborhoods and rapidly evolving demand, cap rates (capitalization rates) and rental yields vary significantly depending on location, property type, and rental strategy.
This blog breaks down year-long average returns by neighborhood to help investors make data-driven decisions in Medellin’s competitive property market.
What Is a Cap Rate and Why Does It Matter?
The capitalization rate (cap rate) is a percentage that reflects the annual return on a real estate investment based on its income, not including financing. It’s calculated as: Cap Rate = (Net Operating Income / Property Value) × 100 A higher cap rate generally means higher returns, though it may also reflect increased risk or management complexity. Medellin offers cap rates that range from 4% to over 12%, depending on the rental strategy and neighborhood.Best Performing Neighborhoods for Short-Term Rentals
Short-term rentals (Airbnb-style) typically offer the highest cap rates, especially in areas frequented by tourists, expats, and digital nomads. Here are top-performing neighborhoods:El Poblado (Provenza & Manila)
- Cap Rate: 8% – 11%
- Why It Performs: Medellin’s most touristy zone, walkable, full of nightlife, coworking spaces, and restaurants.
- Risk/Reward: High demand, higher upfront costs, and regulations evolving.
Laureles (La 70, Segundo Parque)
- Cap Rate: 7% – 10%
- Why It Performs: Local vibe meets growing foreign interest. Popular with longer-stay visitors and younger travelers.
- Risk/Reward: Lower prices than El Poblado, strong occupancy but less premium nightly rates.
Envigado (Central & La Magnolia)
- Cap Rate: 6% – 9%
- Why It Performs: Family-friendly, safer reputation, and rising appeal among digital nomads and remote workers.
- Risk/Reward: Slightly slower appreciation than Poblado but lower buy-in and stable growth.
Best Performing Neighborhoods for Long-Term Rentals
If you’re targeting monthly or yearly tenants—especially professionals, students, or locals—long-term rentals offer stability with lower turnover. Here’s how Medellin’s neighborhoods rank.El Poblado (Outside Tourist Core)
- Cap Rate: 5% – 7%
- Why It Performs: Professionals, foreign workers, and expats seeking quiet but central homes.
- Tenant Profile: Longer-stay foreigners, remote workers, couples, students.
Laureles/Estadio
- Cap Rate: 6% – 8%
- Why It Performs: Consistent demand from university students, families, and professionals.
- Tenant Profile: Locals and foreigners looking for affordability and walkability.
Belen / Los Colores
- Cap Rate: 6% – 9%
- Why It Performs: Budget-friendly with rising value. High demand for year-long rentals from middle-class Colombians.
- Tenant Profile: Families, students, and workers in health and education sectors.
Key Factors That Influence Yield
- Furnishing: Furnished units can yield 20–30% more
- Admin fees (HOA): Can eat into profits in newer buildings
- Regulations: Airbnb is restricted in some buildings—know your zone
- Seasonality: High season spikes (Dec–Jan, June–Aug) lift short-term returns
- Property management: Quality local partners help maintain income and reviews
What Returns Can You Expect in 2025?
Across Medellin, investors can expect:- Short-Term Rentals: 7% – 12% cap rates (with strong demand and pricing)
- Long-Term Rentals: 5% – 8% cap rates (less volatile, steady tenants)