How to invest in foreign real estate?

Buying real estate for investment is a responsible business. Especially when it comes to real estate in a nation where you are not familiar with the rules. But there's no need to be alarmed; purchasing property outside of your own country is a very serious endeavor. You'll discover the solution to your conundrum in this article, which will enable you to invest in foreign real estate.

Step #1: Geographic location.

The most common mistake made by investors is to choose a financial instrument based on its "familiarity" rather than its profitability.

Have you ever considered how most real estate investors are, first and foremost, influenced by their location? Only 90% of individuals would consider investing only in their nation's real estate, and they are commonly restricted to their city!

However, after all, we all know that real estate in Ukraine and Russia is not exactly the most attractive alternative.

Relatively low rental rate (apartments pay off with rent for 15-20 years), high risks when investing in new buildings, failure to meet construction deadlines, a high level of fraud, lack of control over the construction sector by the state, and most importantly, the disappointing growth dynamics of the country's economy, which does not allow for rising prices in the near future.

Is it possible that, if you broaden your horizons and look around? This will increase your investment opportunities thousand times over! There are many developing countries in the world where economic growth is creating greater living standards, thus real estate values are likewise increasing. Moreover, these countries often openly attract foreign real investment due to the transparency of their laws, convenient procedures for the acquisition and registration of real estate, as well as active lending to foreigners secured by purchased real estate.

Turkey, which has been in the top places in terms of GDP growth and economic size for ten years running, is one of the most prominent examples of a rapidly developing country.

After selecting a country, select a region. The most investment-attractive regions of Turkey are the cities of the Mediterranean and Istanbul. The confident first place in the eyes of European investors (23% of all real estate purchased in Turkey) in Alanya, the second - Antalya (17%), the third - Istanbul (14%).

Step #2: How to choose an investment object?

The first step is to determine the aim of your investment. The objectives may differ. Let's look at some of them in detail:

1. Long-term investment (5-10 or more years) in order to save and increase funds, as well as for recreation or residence;
2. Purchase for the purpose of subsequent leasing;
3. Speculative purchase at the stage of construction for the purpose of further resale after its completion.
4. Combination of 1 and 2 or 2 and 3.

Now in order. With long-term investments, everything is straightforward. This sort of consumer is more concerned with personal preferences and purchases "for themselves," based on their interests and desires.

When renting a property in Turkey, keep the distance to the sea and tenants' preferences in mind. In Turkey, you can earn 10-13% yearly on money invested. Profitability may improve by up to 18-20 percent if you use a loan at 7%. The most popular places to live in new complexes with decent infrastructure, no more than 500 meters from the sea, and small space (1 + 1, studio) may be said with certainty.

This is also the "portrait" of apartments acquired in new construction developments to be resold. They're the most liquid and sought-after by people who truly invest in property and rent it out.

Is it profitable to invest in real estate development? When buying apartments in complexes under construction, first of all, you need to take into account the reputation of the developer and the ratio of price to quality.  The risks of unfinished construction in Turkey are minimized for a number of reasons: state control, penalties for late commissioning of facilities, publicity of information about developers (a database is maintained at the state level, where for each developer there is open information about complexes built earlier, about complaints received from residents).

Developers also give warranties on load-bearing structures and finishes. Even taking into account the investment risks, however, preference should be given to developers who are at the top of the market and have considerable construction expertise.

Step 3: What to watch out for?

So, we've decided that the ideal approach for investment purposes is to acquire real estate from a prominent developer at the start of construction.

Investors invest in wholesale properties at low prices for a reason. They are the most liquid, inexpensive, ideal for renting, and most profitable of all. Buying two one-room units is usually preferable to purchasing one 2-3-room property.

The investor subsequently receives speculative profit for various reasons after purchasing apartments in this manner:

• the natural increase in property prices in Turkey at the level of 10-15% per year;
• increase in prices by the developer as the level of readiness of the construction complex increases by 20-40%;
• floor factor. Initially, many developers sell apartments on the top floor for 50% more than 1m. As the complex is being built, apartments are bought up from the bottom up and the developer often has only apartments on the upper floors for sale by the end of construction.  And this means that the owner of an apartment on the ground floor gets an undeniable advantage: by the end of construction, he can easily sell his apartment for 20% cheaper than the developer, which is a significant difference in price for the end buyer. However, taking into account the initial price difference of 50% and the factor of repeated price increases by the developer during the construction period, the investor ultimately receives a significant profit.