The door to real estate investment in Turkey was opened to foreigners for the first time in 2012 (approximately two years after our company was launched), and since then, tens of thousands of real estate investors have engaged in numerous purchasing transactions with the aim of making a profit. Undoubtedly, some of these investments have been successful, while others have been either unsuccessful or only successful on paper.
This is because real estate investment in Istanbul has its own foundations and methods that may differ from other cities around the world. We have witnessed hundreds of inquiries that came to us after the purchase, clearly indicating that the decision to buy was based on investment experiences in other cities or through brokers who did not have sufficient knowledge about achieving a successful real estate investment.
In this article, we will focus only on the fundamental aspects of successful real estate investment in Istanbul, and I will provide you with links to previous articles that discuss in detail various aspects of successful real estate investment.
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We have always noticed that real estate investment needs to have a suitable price in order to be successful and yield high returns, whether through rental income or future resale. This is the crucial equation that largely determines the success or failure of an investment and the loss or gain of significant opportunities. When we provide examples, these ideas will become clear to everyone.
Buying a property below market value is essential. For instance, if the average price per square meter in a specific area is $2,500 for moderately serviced modern complexes, the price per square meter for fully serviced luxury complexes with sea views and complete transportation facilities could reach $3,000. Let's assume we have an apartment with an area of 100 square meters in such a luxury complex. The total price of the apartment would be $300,000. In this case, the apartment could achieve a rental yield of up to 6% on average, in addition to a 30% increase in its price after 3 years. This means that the price of the apartment would be $390,000 after 3 years, along with rental returns of $54,000 over 3 years, equivalent to 18% of the initial investment. Consequently, when this investment is concluded after 3 years, the owner would have gained an initial amount of $300,000 and concluded the investment with $444,000, resulting in a profit of $144,000 over 3 years, which is equivalent to $48,000 annually. This translates to an annual return on investment of approximately 16%.
Despite the simplicity and ease of the above calculations, when applied in reality, the results can vary, either increasing or decreasing. We will discuss both cases in detail. However, let's emphasize the importance of buying a property below market value.
Now, imagine that the aforementioned property in the fully serviced luxury complex was acquired at a price of $2,300 per square meter instead of $3,000, and the property is still under construction, requiring, for example, 3 years to be completed. Let's recalculate based on the previous equation and highlight the significance of this point.
In this case, there will be no rental yield since the property is still under construction. However, after 3 years, when the property is delivered, having achieved a 30% profit margin, the price per square meter that was purchased for $3,000 could be sold for $3,900. This means that the price per square meter in this second scenario would exceed $3,900 because this property, after 3 years, would be new and unused. Therefore, we can anticipate that the price per square meter would be $4,200. Consequently, the apartment with an area of 100 square meters, still under construction, purchased for $230,000, could be sold after 3 years for $420,000, resulting in a profit margin of approximately 81%. This equates to an annual return on investment of 27%, along with acquiring a new property that has not been previously used, in addition to the possibility of obtaining Turkish citizenship for those interested.
Furthermore, there is another crucial point that many investors overlook. After the property is delivered, if the investor decides to rent it out and assumes that they can achieve the same rental yield of 6% per year, this yield would be based on the property's value at the time of delivery, not its initial purchase price. Consequently, 6% of $420,000 would be $25,200, which, compared to the initial investment amount, equals 9.12%. In this way, you can actually achieve a high rental yield in Istanbul.
Note: The above numbers are not necessarily accurate, but the percentages are precise.
The important question here is how to obtain a price below market value in order to achieve higher returns.
Unfortunately, the answer to this question depends on many different factors and cannot be reduced to a fixed rule.
For example, the average price per square meter in the Şişli area in central Istanbul for modern complexes may be $5,000 per square meter. At the same time, it is possible to find a unique property with a view of the Bosphorus at a price of $7,000 per square meter, which could be an excellent investment option. On the other hand, you may find a newly built property in the market without amenities at a price of $2,000 per square meter, which may not be a high-yielding investment. This is because the success of an investment does not solely depend on the price factor. Many investors have refused to purchase a property because they found a lower price per square meter in the same area, only to realize after three years that the cheaper property generated negative returns, while the property they thought was overpriced yielded substantial profits, doubling their initial capital.
Successful real estate investment depends on various factors, including supply and demand. When the demand is high, the investment tends to be good. However, one might argue, "I purchased a property in the Başakşehir district, and despite the high demand in the area, I could only sell my property at a loss. How is that possible?"
The reason is that the high demand should be genuine and local, not driven by a group of brokerage companies specializing in selling to foreigners who were enticed by high commissions in the Başakşehir projects. They convinced thousands of investors to buy in this area because it was close to Atatürk Airport (which is now closed after the opening of Istanbul's new airport, and it was not a secret at all that the government would use it instead of Atatürk Airport once it was ready!).
Additionally, the high density of projects in this area and its surroundings has led to an oversupply. Even if there is demand, this contradicts the principle of real estate investment, which assumes a significant difference between supply and demand for easy resale.
Does this mean that no investor has profited in the Başakşehir district?
Certainly not. Some investors entered the market during the initial stages at prices below the market value and later sold their properties at significantly higher prices, making substantial profits. However, unfortunately, their percentage is very small compared to those who invested in this area.
To accurately assess market prices and seize opportunities that offer prices below the market value, you can contact our specialized team and obtain free real estate consultation.
