Story of real estate investment in Istanbul
Istanbul is one of the top rated cities in the world by tourists and visitors. The only negative verbal feedback one can hear is around ‘traffic’ in rush hours. Some of the positives are food(cuisine), view(unique geography of Bosphorus), cultural heritage(The Basilica Cistern), dozens of city legends(Hezarfen), and warm people(hospitality of highest level). Related sources will be at the end.
As a reader, you probably don't follow global media, but everyone still gets affected somehow and they are good at creating perception.(creating consent is a great book on the topic)
Let's get to business. Shall we? A friend talks about his search for specific real estate and not being successful. However, in the story, he mentioned that there are always great opportunities but it's not his priority. Since I was never good at investing and knowing this guy is an expert on this. I built up the courage and asked him about the latest opportunity. Here is the dialogue:
IST- What was the opportunity, if you don't mind me asking?
FRIEND- Yeah sure, I am not going to take it, you might as well go for it. It's literally money on the table.
IST- How so?
FRIEND- Well, I regularly talk with real estate experts for my own purposes. If I am in the mood and feel chatty, I ask ‘’what other opportunities’’ are there. If its nothing catchy, they won't bother me with it. So, I have good experts on my regular calls list. They notify me if something specific, but I call for additional information and measuring the markets live from their job.
IST- I didnt know they worked that way.
FRIEND- It is free of charge. You just need to build the relationship and know the credible experts. Integrity is not easy to find. Anyhow, the opportunity is there is a commercial real estate(building with 2 floor around 200m2 sq) store and office.
IST- Ok commerical real estate sounds good.
FRIEND- My realtor tells me that the price is a catch and the owner wants to sell. He gave me a price range he thinks the owner will be satisfied with.
IST- Was it valued under the market?
FRIEND- Maybe a little bit but thats not what makes it an opportunity. Timing and rent-payback time was the opportunity.
IST- How so?
FRIEND- There was two related laws change in recent weeks forcing some businesses to move to other places and every second-hand car sold now must go to a car expert beforehand. both of these laws do affect this area and type of property in a great way.
IST- Wow… That is very interesting. So, how is the math?
FRIEND- Asked price for the property is one-million USD. I asked the realtor about the ‘’expected rent’’ and I think he was reasonable with his expectancy. So, turns out the property will pay-back the initially invested 1M USD in 10–13 years. If you want risky tenants 10 years, if you want more consistent it may go up to 13 years.
IST- Is that good?
FRIEND- Yes, getting your main money back in 10 years is great in real estate. Knowing this place will never have a hard time finding tenants. Appreciation will happen as well on the price. So you sell this 10 years later, you get the money you paid 1 million USD + now the new value of the property will be yours as well.
IST- Isnt that too good to be true kind of offer?
FRIEND- Not at all, Istanbul is a big city and we are going through interesting times. People have changed after pandemy.
IST- Can I take the deal?
FRIEND- Yes, because you know me. I have lawyer, accountant, realtor and know how on this. You need a bank loan?
IST- Maybe, how are the rates.
FRIEND- Around %10 annual interest. Its high for western standards but your income is in USD. you might get lucky and Turkish lira might devaluate so your partial payments would be in lira.
IST- Yeah that is good. However, no I have the capital. I dont want to use a bank.
FRIEND- OK the KPI’s are good. We have the photos , here isthe ‘title deed’ ‘land register’’ documents. Here is the address and here is the realtors info.
IST- So what I do with this.
FRIEND- This is on silver-plate deal already. You check photos, you go check place, list your questions, go to the municipality, check if any problem with documents, call realtor for meeting with owner. go to notary, do the payment and sign the papers. done.
IST- I think this will be too troublesome, you know I am not good with this stuff.
FRIEND- Ok you just pay the damn money, I will organize the rest. my assistant will drive you around, my lawyer will double check details, we will get expert appraisal the property from a bank, we will talk with municipality since I already know people there.
IST- Thank you.
That's how it went. I was basically his puppet, I double-checked with him via his assistant driver on the phone. He said sign, and I did. He said, pay and I did. Next day I was the new owner.
However, what happened basically few days later was a shock to me. I was offered 50K USD above the price I paid. That meant two things: people want to pay a premium for this place, knowing the price I almost paid yesterday. Secondly, I could make 50K USD in 3 days if I accepted to offer.
I have declined. Yet the offers didnt finish. I wasnt even looking to sell it, there was no listings etc. 6 months later I was offered 150K USD above the price I have paid. I have declined both offers. I didnt need the money, I wasnt sure if I could find or even my friend would help me another time. The rent amount was also as we planned. I gave a personal decision to realtor. I wanted no risk tenant. So it meant little cheaper in rent but consistency wise it pays off.
My friend? Yes, he knew the appreciation. It was all his contacts anyway and I did mention to him. He was not surprised so I asked him:
IST- How do you not care about this? You basically lost 100–150K usd in few months.
FRIEND- Real estate never will end and it is a great investment. That was not the type of real estate I want to put my money in. Just because I have enough real estate locked for long-term renting. It will be just one more property for me to follow up. You still dont know what I did with my 1M USD from that time. Maybe I only gained %5 on my capital unlike your %15 but your profit has not been realized because you didn't sell. My capital did grow %5 and I had the luxury to use it anytime I want in the mean time. For you? you had to sell that property to have 1 million USD back again. I think you understand better now. You were very lucky, thanks to me. You won't lose money, I have never seen anyone lose money in real estate in Istanbul. You wont earn as much as fast and as easy if you do it alone tho.
He was right. He was experienced and this guy was a business person. Works hard reads hard and thinks hard. I love how he is able to communicate his perspective easily. Anyhow, I hope to invest from his rejected deals again.
Before ending the costs:
2.000 USD for legal work (due diligence with lawyer, expert appraisal, notary included)
30.000 USD for realtor commission (my friend says the realtor could’ve sold the place from higher price increasing his commission but he chose to do business because they are partners)
Realtor is most expensive but considering the deal, I think he deserves it. He could easily wait for better offer from listings etc. I am sure I had dozens of benefits.
This is now my favorite story to tell my friends. I was never good with numbers and my family is far from trade and commerce. I feel much secure and I hope to invest more when I make my buck again. This time with financing options. I learnt its not best to use all your cash for investment.
Sources :
Cultural Heritage example:
City with stories:
Turkish cuisine picks by CNN:
Turkish hospitality perspective by student of erasmus:
