Investing in Istanbul

What are the principles of real estate investment in Istanbul?

Last edited:Jul 10, 2023
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What are the principles of real estate investment in Istanbul?
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In this article, we will discuss the principles of real estate investment specific to Istanbul and address some frequently asked questions in this field.

Firstly, it is important to define real estate investment correctly to understand its principles.

Real estate investment refers to investing a specified capital over a defined period to generate additional returns on the capital invested.

Investment can take the form of purchasing a property under construction at a price X and selling it after two or three years at a price of 2X, thus achieving a 100% return on investment over three years, which translates to an annual ROI of 33.4%.

Investment can also involve purchasing a ready property and leasing it, either furnished or unfurnished, for a certain period, such as three years, and later selling it at the same or higher price.

For example, if we buy a property valued at X and lease it annually with a 7% return, after three years, we can sell the property at the same price we bought it, resulting in an investment return of X1.21, which is a 21% return over three years. Therefore, the annual ROI is 7%.

If we manage to sell the property after this period at a higher price than X, it means the annual investment return exceeds 7%, and if we sell it at a price lower than X, it means the annual return is less than 7%.

However, if we cannot sell the property after the investment period, regardless of its market value at that time, it would be considered a losing real estate investment (which is the case for at least 60% of property purchases in Istanbul today).

To avoid making a losing real estate investment, it is essential to study the principles of investment correctly and apply them with the assistance of a real estate expert.

 

What are the principles of real estate investment in Istanbul?

1- The Right Location

Many real estate investors understand that investing in off-plan properties can achieve the highest capital appreciation, as mentioned above. However, they make a simple but devastating mistake when choosing a location where prices have already significantly appreciated or where resale opportunities are nearly impossible. Regardless of the capital appreciation achieved, investing in a property with an unsuitable location can result in losing most or all of the returns obtained by the investor.

Therefore, choosing the right location is the starting point for selecting a sound investment property.

 

2- The Right Property

Forms of real estate investment have diversified, driven by the failure of some real estate brokerage companies to demonstrate the true beneficial investment to the client.

Sometimes, there are offers to invest in land located at the ends of the Istanbul Canal, and the price per square meter of suitable land for construction can reach $200 today. However, this is merely an idea, and it could take 50 years from now to develop these lands when the Istanbul Canal project is completed, or the project could be postponed entirely.

If the investor is aware of this point and understands that reselling the land currently is impossible and aims to invest for their descendants, there is no problem. However, from our daily experience, many investors believe that the prices of these lands will multiply fivefold in the coming years!!

Sometimes, there are offers for commercial properties as a form of change without clarifying that this type of investment is suitable only in the long term. Furthermore, the continuous devaluation of the Turkish lira makes long-term lease contracts a diminishing source of investment, even if they start with attractive figures like 7%, they will end after five years with a return that does not exceed 2%.

We do not recommend these types of investments, as there are certainly better options in the market. However, we must clarify the reality behind these presented offers.

Sometimes, there are offers for pre-owned apartments or even villas at prices lower than the prices of new properties. These opportunities may be suitable only for those who seek permanent residence, and their percentage among foreigners who own properties in Turkey does not exceed 2%. As for investment, even if you furnish them anew and achieve an initially impressive return of 8%, this return will be eroded over time due to the depreciation of the Turkish lira against the dollar. The greater disaster is your inability to resell your property later when you want to end your investment.

 

3- The Right City

Although it is clear as the sun that Istanbul is the only city where you can resell your property if you choose it correctly, we still receive investors to this day who are eager to buy properties outside Istanbul, tempted by their low prices and investment potential!

If the goal is to spend a vacation and you buy a house in Trabzon, Yalova, Bursa, or even Antalya, it seems logical because you are not concerned with the opportunity to resell it later.

The problem arises when some investors believe that buying a property outside Istanbul is suitable for high-yield rentals and easy resale in the future. Some even say that they will use the property during summer vacations and rent it out when they are not in the country. However, this idea cannot be achieved because no one wants to rent your property during the eight cold months.

 

4- Off-Plan Properties

Although many off-plan projects may not be suitable for investment due to the following reasons:

An unknown developer may not deliver the project on time or according to the agreed specifications, or may not deliver it at all.

The area may not be suitable for real estate investment as the future demand for it is limited, and there are many competing ready-to-move-in options.

The property may have a high price from the start, without clear advantages that justify this increase, making it difficult to resell later because it is higher than the market average.

However, if you receive proper real estate consultation, the return from an off-plan property is still at least four times higher than the rental yield in ready-to-move-in properties. Additionally, the possibility of reselling an off-plan property when it is ready for use is higher and easier than selling a property that was already ready, especially if you benefited from renting it out for several years.

 

5- Uniqueness

The previous conditions alone are not enough to produce a 100% successful real estate investment. They must be combined with consultation from an expert in the field who can assess the future demand for properties and assist you in choosing the most suitable one.

Do not hesitate to always contact us and get our latest offers.

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