The rich also cry: what problems when buying a profitable property abroad, Russian-speaking investors face?
Buying property abroad is not easy for those who purchase it for the first time, and for already experienced investors. What difficulties do Russian-speaking buyers most often face? At the beginning of 2018, the international real estate broker Tranio conducted a survey of 476 real estate market experts from 33 countries in which they spoke about their experience of working with Russian-speaking clients: what factors most often impede or disrupt profitable real estate transactions?
What factors most often complicate or disrupt transactions with Russian-speaking investors?
Inflated Yield Expectations
The most common problem faced by foreign realtors when working with Russian-speaking investors is inflated expectations of profitability, 56% of respondents think so (respondents could choose up to two answers, so the sum of all results exceeds 100%). The survey showed that, on average, rental property buyers expect to receive a yield of 6.7% per annum – if in some countries this figure is close to reality, then, for example, in a reliable real estate market in Germany, the yield on long-term rent is only 2-3% per annum . Higher rates in the German market are possible except for a very positive scenario, says Tranio CEO Georgi Kachmazov: “Today in Germany you can get 7–8% per annum only if you meet three conditions: you need to take a loan, think over an effective tax solution and successfully sell the object in 3–10 years. ” It is interesting that comparing the results with the answers to another question – about which price category customers of real estate agents most often buy real estate – it can be concluded: the higher the transaction price, the less often realtors point out the problem of high expectations.
The profitability of rental business varies depending on the type of real estate, and in the case of residential real estate – depending on the type of rental. For example, long-term lease can bring 2-3% per annum, short-term – 4-5%
The profitability of rental business varies depending on the type of real estate, and in the case of residential real estate – depending on the type of rental. For example, long-term rent can bring 2-3% per annum, short-term – 4-5% peshkov / Depositphotos
The second most popular answer is the search or selection of a suitable object, however, it received two times less votes (26%) than the leading option. In last year’s Tranio survey, this problem was chosen as the most common, and, according to Georgy Kachmazov, the situation will only get worse in the future. “Finding interesting offers will be even more difficult,” he comments. “Because of the abundance of money in the market, there are very few objects at reasonable prices, they are quickly bought by professional players.” This problem is particularly acute in Greece – this option was chosen by 73% of Greek realtors. According to George Kachmazov, this is quite understandable: the crisis in Greece led to a shortage of quality supply in this market.
In most cases, good objects are quickly bought up by local investors and no longer reach foreign buyers.
In most cases, good objects are quickly bought up by local investors and no longer reach foreign buyers. ArturVerkhovetskiy / Depositphotos
Confirmation of the legality of funds
Another common problem noted by a quarter of respondents is the confirmation of the legality of funds when opening an account in a foreign bank (compliance). As a rule, an investor may be required to submit both tax returns and documents confirming the receipt of inheritance, dividends, sale of property or rental income. “Customers need to pay attention to the requirements of the bank for the documents provided: for example, one bank has a simple translation, and the other requires that it be notarized or executed by a local certified translator,” Tranio lawyer Ekaterina Shabalina comments.
Buyers with a large budget face the problem of compliance more often than customers planning to buy an inexpensive property.
Buyers with a large budget face the problem of compliance more often than customers planning to buy an inexpensive stockasso / object
More often than others, realtors from Latvia, Austria, USA, Spain and the Czech Republic complain about difficulties in verifying the legality of funds. “In the USA and Spain there is a historically strict attitude towards the confirmation of funds,” explains Georgi Kachmazov. – In Latvia, the situation has deteriorated especially against the background of the collapse of ABLV Bank and other news about the pursuit of “Russian money”. In the Czech Republic, until recently, it was free, but apparently, they began to tighten the screws. ” Probably for the same reason, many Russian-speaking clients find it difficult to get a loan – this problem was noted by 22% of the surveyed realtors.
Delaying the transaction and incompetence
A fifth of the respondents noted the sluggishness of Russian-speaking buyers as the main factor, because of which the deals are disrupted. As the analysis of the survey results shows, this is especially true for clients with a budget above the average.