Real estate Investement

[frankv]

Hi Guys. I have been approached by a client seeking for advice about a real estate investment.

He wants to buy around 10 apartments (cost by apartment will not exceed $100k)

The apartments will be then used for rent and/or resell.

The question is in which country (or can be 2 countries) he can do so and expect a fair return and where taxes are low.

Ideas are welcome

 

[Martin Everson]

He can buy 10 brand new studio apartments in Hurghada Egypt on the red sea for $100k. Then rent them out to tourists or as short term nomad apartments in future.

 

[John Spectre]

100k$ is a quite small price.
He would required with small studios and/or as well with cheap/developing countries like a Georgia, Turkey, Egypt, ex USSR, probably Montenegro/Albania.

But almost all developing countries have a big burst of properties prices in last couple of years.
For example demanded apartments in Turkey which cost 30k$ in 2018 now cost 80k$+. So it doubtful if it make sense to buy them now without knowledge of each particular country/real estate market.

 

[fatcat1970]

In the USA you buy apartments for under $100K each...but of course we are not talking about in CA, FL or NY. I know of six 2-bd apartments available in AR for $540K. Each apartment rents for around $700 a month. Note that a nonresident alien can elect under Internal Revenue Code section 871(d) to treat rental income as effectively connected with a trade or business in the United States so they can claim deductions with net income taxed at graduated rates rather than a 30% flat rate. Other countries may not have such options for nonresidents.

 

[fatcat1970]

100k$ is a quite small price.
He would required with small studios and/or as well with cheap/developing countries like a Georgia, Turkey, Egypt, ex USSR, probably Montenegro/Albania.

But almost all developing countries have a big burst of properties prices in last couple of years.
For example demanded apartments in Turkey which cost 30k$ in 2018 now cost 80k$+. So it doubtful if it make sense to buy them now without knowledge of each particular country/real estate market.

The problem with these type of countries is their unstable currencies. An apartment you buy today for $100K (in local currency) could be worth less in the future in USD terms because of local currency loss in value. Don't ask me how I know this. Look what's happening in Turkey and Lebanon at the moment. Lebanon was the place to be only a few years ago; now it's hell on earth.

 

[RexS9999]

Consider REITS in Singapore. Less hassle. No dealing with plugged toilets.

 

[countryfree]

You shall forget western Europe, they're giving too many rights to tenants. Maybe in Ukraine (?), but I don't think of buy-to-let schemes as safe investments anymore. Most important, don't think about tourism. I have several friends who did that, and they've been through hard times, with covid putting a halt to foreign visitors in most countries.

 

[Silvio]

Consider REITS in Singapore. Less hassle. No dealing with plugged toilets.

Singapore is good, another option would be anywhere else in the world - you have REET and HAUZ, global real estate ETFs that pay nice dividends and are diversified across the entire world.

Investing $1M in a country with a language you don't speak, with laws you don't yet understand and with tons of things you don't even know you don't know...
The best way for your client would be to start by buying one apartment, rent it and see how it goes. Then he can buy some more. It's very easy to buy, the problems start later.

He would required with small studios and/or as well with cheap/developing countries like a Georgia, Turkey, Egypt, ex USSR, probably Montenegro/Albania.

You can find plenty of apartments in this price range even in developed Western Europe if you go to a 3rd-tire city.
Here is a list of such apartments in Bayern for example:
https://www.immobilienscout24.de/Suche/de/bayern/guenstige-wohnung-kaufen?enteredFrom=result_list
Also you are more likely to get a better yield in a 3rd-tire city. The problem is that it will take you longer to sell and rent as there are less people in these areas.

Don't forget about the most important thing which is rule of law and how likely you are to get justice if you need it. You don't want to buy apartments in Egypt because it's cheap and then realize that as a foreigner you have no rights and that your agent\lawyer\property manager steals from you with impunity. I've even heard of cases when people faked the property registry documents and sold apartments that they did not own themselves. Many things can and do happen so make sure you investigate properly before dumping money in shithole countries just because it's cheap.

Most important, don't think about tourism. I have several friends who did that, and they've been through hard times, with covid putting a halt to foreign visitors in most countries.

100% agree. Tourism looks good on paper but it is extremely cyclical. Most of the year these beach resort properties stay empty and rack up costs, and you better pray these people do come in the summer and don't find someplace else to spend their vacation.

 

[fatcat1970]

You shall forget western Europe, they're giving too many rights to tenants. Maybe in Ukraine (?), but I don't think of buy-to-let schemes as safe investments anymore. Most important, don't think about tourism. I have several friends who did that, and they've been through hard times, with covid putting a halt to foreign visitors in most countries.

Very good point; Western Europe and some US states are very pro-tenant; have a tenant in the Netherlands lose their job and not be able to pay the rent? Good luck in getting them out. In the state of AR, which I mentioned above; there is no legal obligation for the premises to be habitable. Also in AR, most tenants are evicted through civil court, but there is a statute on the books that allows landlords to file in criminal court. It’s called "Failure to Vacate". The law dates back to the early 1900s.

 

[fatcat1970]

I agree with maxmmm, going to a corrupt country where you don't know the language or how things work is a huge risk.

 

[Silvio]

Very good point; Western Europe and some US states are very pro-tenant; have a tenant in the Netherlands lose their job and not be able to pay the rent? Good luck in getting them out. In the state of AR, which I mentioned above; there is no legal obligation for the premises to be habitable. Also in AR, most tenants are evicted through civil court, but there is a statute on the books that allows landlords to file in criminal court. It’s called "Failure to Vacate". The law dates back to the early 1900s.

Theoretically this is a Western Europe thing but good luck trying to quickly vacate a tenant in Eastern Europe. If they refuse to leave you're pretty much fucked and it can take half a year via courts, if you're lucky. Most of these people renting cheap apartments (100k) in 2nd\3rd tire cities are poor people with no assets or money so even if you win the case there is nothing you can take from them to compensate you for the hassle and time.

At least in the US you can have legal insurance that covers you partially. In Europe this insurance can be quite expensive and makes the whole deal much less economical.
Vacating tenants everywhere is a big pain in the a*s, a lot comes to choosing the right tenant and mistakes can be costly.

Bottom line if all you want is yield, there are easier ways to achieve that. Real estate yield comes with big risks, not to mention liquidity issues- your investment is not liquid, it can take months to sell and get your money back and in the meantime you are exposed to currency risks (local currency deprecating against the USD which happens extremely often), legal risks (tenant issues), tax risks (the country can change the tax laws retroactively at any moment). JustAnotherNomad wrote few days ago about his experiences in Malaysia where a change of govt policy effectively killed the demand for new apartments by foreigners. Lots of unknowns that can affect your end result.

 

[Martin Everson]

He wants to buy around 10 apartments (cost by apartment will not exceed $100k)

Can you clarify if you mean 10 apartments for $100k each (i.e budget $1m) or 10 for total $100k?

 

[CyprusLaw]

Hi Guys. I have been approached by a client seeking for advice about a real estate investment.

He wants to buy around 10 apartments (cost by apartment will not exceed $100k)

The apartments will be then used for rent and/or resell.

The question is in which country (or can be 2 countries) he can do so and expect a fair return and where taxes are low.

Ideas are welcome

You can purchase one bed flats in Cyprus for around 100K. They can be rented out long term with around 5.5-6% ROI or short term as airbnb which will potentially have greater ROI depending on the location

 

[frankv]

Can you clarify if you mean 10 apartments for $100k each (i.e budget $1m) or 10 for total $100k?

1 M budget

I think he is willing to put more, like 2-3 M.

Good input from the guys here, the thing is:

- Reits seems more like a financial product than real estate
- He want to do under 100k to make it easy to cash out when needed
- Make it in different countries, there's the risk and the management problem

You can purchase one bed flats in Cyprus for around 100K. They can be rented out long term with around 5.5-6% ROI or short term as airbnb which will potentially have greater ROI depending on the location

Is Cyprus still interesting for real estate even after they stopped the citizen program

 

[Ccaterpillar]

Buying and renting fertile land is better idea, people don't have to go to the sea, but they have to eat.

 

[12345]

I heard that Kiev, Ukraine is giving nice yields, apartments prices dropped massively since 2014 and should not drop any further but could increase. More high end properties usually have the rent sum calculated based on EUR/USD
Also you could look into New Administrative Capital of Egypt or Montenegro (another benefit is low tax)
As another user mentioned it is better to diversify, start slow and then increase if everything is good, buying real estate abroad is more risk than at home, especially in developing country

 

[CyprusLaw]

1 M budget

I think he is willing to put more, like 2-3 M.

Good input from the guys here, the thing is:

- Reits seems more like a financial product than real estate
- He want to do under 100k to make it easy to cash out when needed
- Make it in different countries, there's the risk and the management problem


Is Cyprus still interesting for real estate even after they stopped the citizen program

To the contrary Cyprus real estate for purely investment purposes is booming after the ceasing of the citizenship programme as the developers were forced to drop the prices and only serious investors are attracted, as the ROI is good.

 

[JosephLL]

Is Cyprus still interesting for real estate even after they stopped the citizen program

A handfull of people buying citizenship can haedly move a real estate market. However, incentive to gain residenship through real estate purchase is a strong push and CY hasn't stopped that.

You can purchase one bed flats in Cyprus for around 100K. They can be rented out long term with around 5.5-6% ROI or short term as airbnb which will potentially have greater ROI depending on the location

That's a pretty good roi. Would you mind narrowing down areas worthy of consideration?

 

[CyprusLaw]

A handfull of people buying citizenship can haedly move a real estate market. However, incentive to gain residenship through real estate purchase is a strong push and CY hasn't stopped that.


That's a pretty good roi. Would you mind narrowing down areas worthy of consideration?

It depends on your budget. But frommmy experience the safest bet for long term rentals is Nicosia.
Protaras and Paphos are good for short term rentals in the summer period.
Larnaca is the up and coming city so if you want to risk a bit and make an investment for the future a new apartment near the beach in Larnaca is a good option.

 

[Martin Everson]

1 M budget

I think he is willing to put more, like 2-3 M.

That's a decent budget. The first thing you want to decide is choose one of the following five strategies for the properties:

1. Short Term Rentals
2. Long Term Rentals
3. Airbnb model
4. Non-rental Capital gains only (empty)
5. Mix of all 4 above.

You then need to look at the regions of the world that might suit your strategy. However it is never a good idea to start investing at top of market so investing in hot property markets is never a good idea.