Real Estate Investment in Turkey

Common mistakes made by real estate investors in Istanbul

Last edited:Oct 02, 2023
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Common mistakes made by real estate investors in Istanbul
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Introduction:

Since 2012, when the door to real estate ownership was opened for foreigners in Turkey, until today, tens of thousands of real estate investors have begun their investments in Turkey in general and in Istanbul in particular. The motivation for this investment was several factors, including the large profits expected through investing in an emerging country with enormous infrastructure. Including obtaining Turkish citizenship, especially after the September 2018 decision stipulating that Turkish citizenship be granted to anyone who buys a property worth at least 250 thousand dollars (the law was amended in June 2022 to make the minimum 400 thousand dollars), and there are also reasons related to the existence of previous knowledge about The country is for tourists and merchants who frequently visit Turkey.

 

Is buying a property in Istanbul a profitable investment?

It is natural and certain that any new experience will not necessarily be successful. Today, we find a section of these investors who are very optimistic and happy with the returns they have achieved upon resale or rental returns. On the other hand, we find a section of investors who consider starting investment in Istanbul to be the biggest mistake they have made in their entire career. Professionalism because the rental return for their properties is low and they cannot sell their properties and collect any profit from them.

From this we can be sure that real estate investment in Istanbul has laws and rules. If they are implemented, the investment will be classified as the first successful category. If these rules are neglected, the investment becomes dependent on luck. It may succeed, but it will often be an unsuccessful investment.

Today we will talk about the most prominent mistakes that a novice real estate investor makes in Istanbul. By “beginner” we do not mean that he buys the first property, but rather we mean the investor who has not yet obtained a successful investment. There are many investors that we know who own several properties and sometimes dozens of properties and the result of their investments is a loss. On the other hand, we find an investor who buys his first property and achieves a high return on resale. When he buys another property, he is not considered a beginner at all, as he has a successful experience.

 

What are the most common mistakes made by a real estate investor in Istanbul?

1- Not conducting sufficient research: Investors may make the mistake of not conducting sufficient research on the real estate market in Istanbul. Investors should study different areas and understand the factors that affect real estate value, demand and supply in those areas.

This point is considered one of the most important influencing factors because we see daily requests from clients who have not yet purchased their first property, yet they do not know anything about the regions of Istanbul and the advantages of each of them. Instead of collecting information first about the laws and regions, we find them requesting random offers from dozens of real estate brokers in an inappropriate manner. It is organized and the result is clear. They will make an emotional decision based on their feeling of pity because this broker is very tired or that beautiful girl. It is not appropriate to break her mind and not buy from her company. The result is regret later because this property will not meet his expectations for investment, and in the end he says that Turkey is a bad country and investing in it. impossible!.

 

2-Ignoring legal and financial factors: Investors may ignore some legal and financial factors related to real estate investment in Istanbul. Investors must understand local real estate and tax regulations, laws, as well as Turkey's banking and real estate financing system.

This point is not the most common because when you deal with a professional real estate broker, he will show you all these things even before you buy the property.

 

3- Not cooperating with a professional real estate agent: Cooperating with a professional real estate agent with experience in the Istanbul market is important. A real estate agent may help provide expert advice, guide investors toward the right real estate opportunities and facilitate the purchasing process.

No one disputes this point, but the important question is how will you know whether this agent is professional or not, since you do not have a solid background and a clear understanding of the Turkish real estate market.

Therefore, it is better not to communicate with many real estate brokers at one time so that you can develop your information and properly evaluate the experience of each of them.

The client who has the correct information about the Turkish real estate market finds it easy to discover professional brokers and often obtains results that are even better than his expectations. In contrast, the client who does not have prior information about the Turkish real estate market, and even if he communicates with a professional real estate consultant and actually guides him to an investment opportunity suitable for the client’s requirements, his expectations will be The client is much higher than reality and therefore even in this case he may feel frustrated and wish he had chosen another property!

 

4-General disregard for market trends: Investors should be aware of the current market trends in Istanbul. Understanding demand, supply and changes in real estate prices can help make smarter investment decisions.

This point is very important, as market trends are extremely important for doubling profits. For example, the Basaksehir area is a new organized area that is greatly supported by the Turkish government, and therefore for those who want to live in it and choose their properties before 2020, today they have achieved a profit equivalent to at least 300% on a dollar basis. Since they started purchasing the property compared to its price today, we said residential because most of its properties cannot be resold while achieving the full profit rate. Therefore, for those interested in investing, there are better areas even in 2020. The problem today is at the end of 2023 and prices in Basaksehir have actually doubled several times over the years. In the past, we still found an investor looking for an investment property, anticipating that prices will continue to double in the future!

 

5- Not planning for the future: Planning for the future is an important part of successful real estate investment. Investors must define their investment goals and needs and plan to obtain a sustainable, long-term return on investment if the primary goal is to rent, or a high and quick return if the goal is to resell the property.

The future includes the development that this region will achieve when you want to end your investment. For example, opening an important metro station in addition to hospitals and universities that have a strong reputation. This is considered beneficial for your investment, but be careful. Investing in Basaksehir or Arnavutkoy while waiting for the new Istanbul Canal is not considered this. It is a successful investment today for the simple reason that the Istanbul Canal project, even if it is actually going to be built, will require 10 years to be completed and is therefore equivalent to several investment cycles in other projects.

 

6- Not declaring the budget: Investors must specify a clear investment budget. This will help the real estate consultant provide them with appropriate opportunities.

When you tell the real estate consultant that your budget is not specified, or you specify to him part of your real budget, this will make him present to you options that are not the most appropriate for you. For example, if you declare $200,000, this will make the real estate consultant search for you for a distinctive property in an extension of the central area, about 10 km from the center, while if you declared your real budget, which is 400 thousand dollars, the real estate consultant could have made you an offer in the center of Istanbul, which is easier in terms of resale and has a better rental return.

 

7- Diversification in real estate investments: It is a very famous saying that you should not put all your eggs in one basket, and it is true, but with conditions. For example, if a real estate investor has a million dollars in which he would like to start investing, and the price of the property in the upscale center of Istanbul suitable for investment starts from Half a million dollars, and therefore it is better to buy a property in each project instead of buying two properties in the same project, and here this proverb is correct, but when, for example, a real estate investor owns an amount of 400 thousand dollars, is it better for him to buy two non-central properties with the aim of distributing the eggs among more than one basket, or to buy Is one central property easier to manage and more profitable for investment? Of course one drug is better in this case.

 

8- Not evaluating investment returns correctly: Investors may make the mistake of not evaluating potential returns correctly. Investors must calculate the expected return on a real estate investment, and take into account the potential rental returns and increase in the value of the property over the long term.

A professional real estate advisor will help you with all of this. Therefore, when you find that the advisor you are talking to does not speak the language of numbers, and if he speaks it clearly and exaggeratedly, know that this advisor is not an expert and you should move to a more experienced advisor than him to maintain the safety of your investment.

Always remember that a successful investment cannot be described as successful except when it is completed, the property is sold, and profits are collected. We find many investors today buying a property in an area that is not suitable for investment within a non-investment project, but due to the general rise in prices, the evaluation of their property has become higher than the price at which they purchased it. We see them here rejoicing and advising their friends to buy in the same place, and the result in the future is that their friends are implicated in buying overpriced properties that are not an investment.

 

9-Ignoring cultural and social factors: Investors must take cultural and social factors into consideration when choosing an area to invest in in Istanbul. Local customs and traditions, community and social level can affect the demand for real estate and the possibility of renting or selling it.

Here we find the Basaksehir area a good example of this, as it is a conservative residential area and very suitable for families who prefer a conservative character in housing, but the prices per square meter in it have risen to get closer to the center of Istanbul and therefore it is not suitable for investment, especially after real estate prices rose in all of Istanbul and in Basaksehir in particular.

 

10- Not checking ownership records and legal declarations: It is important to check ownership records and legal declarations for the property before purchasing. Investors must verify the authenticity and ownership of the property and ensure that there are no legal problems or issues with the ownership.

You will find all of these things in the Professional Real Estate Consultant Company, as it certainly includes a specialized legal department that will help you avoid projects that have legal problems.

Despite the importance of this matter, we meet every day investors who are involved in incomplete projects out of greed for their low prices when they were initially offered, and here we find the great harm caused by the approach of randomly requesting the cheapest offers without knowing the reality of these offers and the reason for their cheapness! .

 

11- Not evaluating the local market accurately: Understanding the local market and changes in it is an important part of success in real estate investment. Investors should evaluate local factors such as demand, supply, economic and regulatory developments that could impact the Istanbul real estate market.

If you consider yourself a foreign investor targeting a foreign tenant and want to resell your property to a foreign investor as well, then you have limited your investment to a percentage that does not exceed 3% of the total number of sales that take place in the real estate market. However, if you want to act like a local investor who constitutes 97% of The number of properties sold, you are much closer to achieving greater returns that you will be satisfied with.

 

12- Lack of real estate insurance: Investors may overlook the importance of real estate insurance. It is important that investors protect their real estate investments from potential risks such as fires, natural disasters, or other damages that could affect the property.

More important than insurance is choosing a good property from the beginning. We are surprised by investors who realize that the price per square meter, for example, in the Besiktas area starts at $4,000. Later, you find this investor proud that he bought a property off the plan from an unknown developer at a price per square meter of only $2,500! What about earthquake resistance? What about the correct delivery date? What about the materials used in construction? What about the view he promised you if your apartment doesn't have the same view?

Dealing with a reliable developer with a previous history in the real estate market is extremely important, and do not be tempted by low prices.

 

13- Poor planning for property management: Investors may make the mistake of not planning well for property management after purchase. Investors must decide how to manage the property, whether they will do it themselves or by hiring professional property management. It is necessary to consider leasing, maintenance, marketing and communication with tenants.

Irrational calculations are destructive to real estate investment in ready-to-rent properties. Although this type of investment requires a lot of experience, we find dozens of foreign investors rushing to buy ready-made properties, whether new or under construction, with the aim of renting them out today and calculating returns of up to 20%. Annually if the property is rented on a daily basis, and in the end, if these calculations are wrong, the return will be less than 5%, and more importantly, it will be difficult to resell it at the same price.

 

Therefore, it is better for an investor who begins his first investment in Istanbul to buy a property under construction and sell it upon delivery of the project, and later when he owns several properties that he can manage properly and achieve returns that actually reach 10%.

 

14- Excessive optimism or pessimism: Investors may be affected by excessive optimism or excessive pessimism about the real estate market in Istanbul. Investors should be realistic and rely on available data and information about the market and current trends before making investment decisions.

 

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