Investing in Romania Property Market can be very profitable but you have to respect a few rules.
First of all you have to stick to some general successful proved steps:
1. SET YOUR OBJECTIVE
This is an obvious thing but many of the first time investors don't do this as it should be done. There is a difference between buying a house for you and your family and investing in a property only for a profit. There are different strategies if you intend to make a profit on short term or a medium-long investment.
Your main options:
Holiday house. Romania offers some extraordinary tourist destinations. Buying a mountain house is much cheaper then other places and new developments on Black Sea cost are interesting too. Danube Delta is a
fantastic destination with great potential.
Things to consider when buying a holiday property:
- Access. Cheap flights, good roads, train.
- Maintenance. You mast be able to keep your house in good condition with minimum effort.
- Finance. As you don't intend to live there all the time is better for you to rent the property. So you need someone to take care of things. Usually is possible to find or a private person or a specialized company to manage your property. It's harder in case of isolated properties.
Permanent house. An increasing number of foreigners are deciding to move permanently in Romania. They find interesting business opportunities or better jobs in multinational companies. Some of them decide to profit from the booming real estate market and invest in one or more properties.
Buy a property for pure investment. This is the main reason the investors buy real estate in Romania. There are two main options in doing so:
1. Buy to let. You buy the property and then finance the mortgage from rent. In the best scenario you will be able to have a small monthly income if the rent exceeds the mortgage. The profit will be made from increase value of the property. This is a medium-long term investment.
2. Buy to sell. This is a strategy that works extremely well in emerging markets like Romania. In general you put a deposit on a property that wasn't build and sell right before completion or immediately after. The profit emerges in case the property price will increase during it's construction.
Example: Suppose you want to buy a one bedroom apartment costing EUR100,000. Required deposit is 25%. Construction will last 3 years.
Your investment: deposit plus buying cost (estimated at EUR3,000) makes a total of EUR28,000.
If the property appreciate with a 20% annual rate in 3 years you will sale it for EUR172,800. Your profit will be EUR44,800 from a EUR28,000 investment.
In some cases you have to arrange to finance the property before completion and then selling or just assigning the property to another buyer without paying the balance (flip the property).
Some developers will require a different payment structure: 20% down, 20% with foundation, 20% with structure, 30% with roof, 10% with completion. In such cases is possible to get a mortgage that pays out with stages, so all you will have to pay is initial deposit.
Investing off plan has some fantastic advantages but comport some risks too:
- Price will not grow, or worst, it will fall.
- Developer will have problems.
3. Buy to renovate. This can be a very profitable business but a foreigner will always have disadvantages comparing to a local businessman.
2. HOW MUCH CAN YOU SPEND
This is crucial. Real estate is a serious business and it takes money. If you're not careful with your finance you will lose big time.
You mast take a long look at all potential costs. You may be exited by a fantastic penthouse with great view, but have the budget for a two bedroom apartment.
Costs should include trip, hotel, lawyer, agent, deposit, etc. Is possible that you will not be able to finance right away all the mortgage by the rent so consider supplemental monthly costs.
After you figure out what the budget may be add a 5-10% just in case.
3. CHOSE PROPERTY TYPE AND IT'S LOCATION
Romania is a big country offering a big range of real estate opportunities. After general research try to understand what type of property is best for you. This depends much on your objective and budget.
The location of the investment is an important step to your success as real estate investor. Once you get to know more about Romania narrow your search to an area that corresponds better to your personal criteria. This e-book offers you some information to start from. You should look deeper in places that correspond to your specific interests.
You have to remember that Bucharest is offering some fantastic opportunities, but you can find really good deals in other regions of the country.
4. LOOK AT THE DOWN SIDE
There is no such thing as risk free investment. Of course, Romania has potential and you can make good profit from investing in real estate properties, but the risk is always present.
When you decide to invest your contact persons will be the state agent, the lawyer and the translator. They are all paid only if you buy. Even if they are all honest people it will be natural for them to express optimism. You are the one that should be realistic.
5. USE LEGAL ADVICE
It is important to work with a trusted lawyer. He will review the agreement, verify titles, and carry out other checks for your protection.
6. CONTACT AN ACCOUNTANT
Depending on your situation, having an accountant can be very important. If you form a company to invest in Romania properties this is a legal obligation.
Proper advice can determine the best way to invest your money. This depends on the objective, type of property (if you invest in land you'll need to form a company) and the dimension of the property.
7. FINANCE
Consider the options you have. It is possible to obtain finance in Romania, but chances are that you'll get lower loan interests in your home country.
8. GO VISIT
There is no better way to understand a property market than visiting it. The longer you can stay the better. Prepare the trip carefully. Before arriving you should already have a solid idea about the market. You should precisely know what you are looking for (property type, location, budget).
- Make a list of questions.
- Have maps with attractions in the area.
- Dictionary
- Make a glossy for every property that you visit.
- Have a camera to take shots of the property, view from the property and surrounding area.
