Both selling and buying: Tranio employees invested in rental property in Alanya
In April, at the start of sales in a boarding house under construction in Alanya, Tranio's clients and employees bought several apartments in the 50,000–60,000 euro price range with a rental yield of 7% per annum in euro.
One apartment went to our regular client, an investor from Russia. The second one was bought by the commercial department’s employee. The third one was bought by our colleague from the editorial office, Anya, and her mother. Anya recounts her reasons for moving assets from Russia to Turkey and tells about a rush demand for quality real estate in this price range.
Since the summer of 2021, Anya and her mother have been searching for housing in a warm climate, where they could spend the winter and which they could rent out for the rest of the year, earning income. The family lives in Ufa, Anya works remotely, and her mother is about to retire. They planned to invest around 50,000 euro in this project — such were the proceeds from selling two small investment apartments in their hometown.
“We excluded the Russian south almost immediately — when we started comparing, it turned out that in terms of quality–price ratio, properties in Greece, Bulgaria and Turkey were better than in Russia with commensurable living expenses.”
Over several months of unhurried searching, Anya and her mother figured out several common problems with housing in warm coastal cities: heating, infrastructure, and rent management. For example, in Bulgaria, where the average winter temperature is about 5°C, there are many residential complexes without central heating. Even a small apartment is expensive to heat. In order to rent out resort real estate in the summer, you need to take into account the peculiarities of local legislation, look for tenants yourself or give up to 40% of rental income to management companies.
At the same time, such a management company cannot be easily found everywhere — this applies to any country. Therefore, the family began to consider modern residential complexes with attractive infrastructure for tenants and their own management company. After the declaration of Bulgaria and Greece as unfriendly countries, the choice narrowed down to Turkey.
Decision needs to be made fast due to a rush demand in Turkey
“There is a huge demand for housing within our budget in Turkey right now; the search for a property can hardly be called a choice. You need to monitor scanty new complexes daily, and if you like the offer, immediately book and make a deposit. We missed out on the first project that we liked. It was a residential complex under construction in Avsallar (Alanya). During the first few days of sales, all apartments with suitable prices were sold out, and we were not able to register a reservation in time.”
Two managers worked with Anya and her mother: Inna from Tranio and Gulnara, our partner's consultant in Turkey. Inna defined the search criteria and helped Anya's family evaluate properties, while Gulnara searched for new options and sent details: project descriptions, apartment layouts and prices.
After three weeks of searching, a project under construction was found in Kargicak (Alanya), which met all the criteria. Anya booked it and made a deposit on the same evening. At the same time, two more apartments in this project were booked with Tranio’s help: one was bought by an employee of the commercial department of Tranio; the other — by our client, an investor from Russia.
Completion in: 2024.IV Total of 120 apartments
Total area 220 m² Land area: 500 m²
Investment with a 7% annual rental yield
The main advantage of the project was the guaranteed rental income condition, which was included in the purchase agreement. The developer's management company provided the owners with an annual yield of 7–10% in euro, depending on the purchase volume. For Anya and her mother the investment yield will be 7% per annum.
The project’s concept is a five-star boarding house with basic medical care for the elderly. On the upper floors of the complex, 56 full-fledged apartments of various sizes are being built, and on the lower floors — a swimming pool, restaurant, library, sports complex, SPA and recreational areas for guests. The complex is located in the Kargicak area at the foot of the mountains, the beach can be reached in 5–10 minutes by a free shuttle service that runs every 30 minutes.
The developer plans to complete the project in March 2023 and provides buyers with instalments for this period. The first payment of 30% can be made within a month after the deposit, and the remaining amount — in instalments of 10% until the construction’s end. At the same time, a guaranteed yield of 7–10% is accrued to buyers immediately after making a full payment, even if the apartment is not yet ready for rent. Such conditions are justified by the demand for rent: by April 2022, the management company has already received more than 700 preliminary applications for accommodation; most of them are from elderly people from Finland and Sweden.
According to the contract, it is the management company’s responsibility to maintain the apartments, pay utilities and taxes, as well as search for and move in tenants. Guaranteed rental yield under the contract is the net profit of the owners, which will be paid every six months.
An important feature is that the owners will receive residential apartments equipped with appliances and furniture, and not commercial apartments, as is often the case in similar projects in European countries. Such a property will be easy to sell in a few years with an increase in value.
“We hurried to make a deposit, but still were too late to book the cheapest apartment available (50,000 euro), so we had to take a more expensive one for 58,000 euro with a larger area of 60 sq. metres. In order to balance the overpayment, we will have to take several unplanned steps. Firstly, I took a payment holiday for another purchase in Russia and placed the freed funds on a deposit to make the most of the current high rates. Secondly, I have some savings in bitcoin that can also be converted, but I want to wait with this, as cryptocurrencies usually rise in price by the end of the year.”
According to the management agreement, the owners are not allowed to live in their apartments, as those are intended for rent. Anya and her mother, as the owners of Turkish real estate, have the right to obtain a residence permit in Turkey and live there without time limits, use medical services, and even get an official job. Investment income of about 4,000 euro per year will be enough for a comfortable stay in Turkey during the winter. In addition, the developer made a gift to investors: 2 months of free accommodation in one of the developer’s finished projects. Anya and her mother plan to travel to Turkey at the end of summer 2022, stay in the developer's apartment and visit the construction site.
“We are glad that in the summer we will have a somewhat free vacation in Turkey. Thus, we will benefit from this purchase before the construction is even completed. We will visit the country again in March 2023 to receive a TAPU, pay a 4% tax on the transfer of ownership, and conclude contracts with resource supply organisations for connecting electricity, water and the Internet. Then we will be able to apply for a residence permit in Turkey.”
Completion in: 2025.III Total of 202 apartments
Completion in: 2025.IV Total of 616 apartments
Completion in: 2024.II Total of 656 apartments
Completion in: 2025.II Total of 769 apartments
Completion in: 2024.III Total of 171 apartments
Payment went through Tinkoff by a SWIFT transfer
Anya and her mother distributed the proceeds from the sale of Russian apartments among dollar and euro deposits in three banks: VTB, Absolut Bank and Raiffeisen Bank, and partially cashed out in March 2022. In order to pay for the purchase of an apartment in Turkey, the family deposited funds in accounts in Tinkoff Bank. Anya sent a 1,000 euro payment for the reservation from her euro account to the developer’s Turkish account by a SWIFT transfer.
“Like many Russians, we thought that such transfers were closed. It turned out they worked if the conditions for the country and the destination of the transfer were met. The transfer fee was 15 euro. The money hit the seller's account in 2 days. We plan to transfer the next instalment of 17,400 euro before the May holidays. We will need to convert the remaining funds from dollars to euro, but this can also be done online in the bank application. The payment schedule allows us not to rush: perhaps we will find more favourable currency exchange conditions.”
Investors’ risks are minimised
The project is being constructed by a Turkish developer from Alanya with more than 30 years of experience. The company specialises in coastal residential complexes with hotel infrastructure and is running several projects in parallel in 2022. The Turkish government is attentive to the real estate and construction industry, and supports it, calling it strategic. At the international MIPIM conference, Turkish Minister of Environment and Urbanism Marat Kurum noted that the construction sector played a key role in the country's economy.
Developer has provided a TAPU in Turkey (certificate of ownership), a building permit and a site plan:
If Anya and her mother ever want to withdraw from the investment, the developer guarantees to buy back the property at the purchase price. However, real estate prices in Turkey are rising and in a few years such an investment apartment can significantly increase in value. The owners will be able to sell the apartment to other investors at the market price.
Investment as a new hope
Along with two successful investment projects in Russian construction with a yield of 15–18% per annum in roubles, the family also had an unsuccessful experience of investing in Russia. At the end of 2019, Anya and her mother bought a third investment apartment, the construction of which was supposed to be completed in December 2020. Due to the COVID–19 pandemic and the subsequent rise in construction costs, the completion of the project is still being delayed. The owners have not received compensation and are currently suffering losses due to the issued mortgage, which they have had plans to pay off after the sale of the finished apartment, exiting the investment.
Another misfortune was related to rent: before the sale, one of the apartments in Ufa was rented out to unscrupulous tenants; the resulting damage to the apartment exceeded the rental income. Although owners are not fully insured against troubled tenants anywhere, in most European countries, including Turkey, the rental market and management companies are better developed than in Russia.
The family no longer plans to reinvest in Russian real estate.
“The deal in Turkey gave me new hopes related to both the Turkish market and our team. The fact that my colleague from the commercial department had invested in the same complex was significant to me. I trust the experience of my colleagues and believe that our partners in Turkey will achieve the business goals, which they announce to investors. According to my observations, Turkey has good potential for rental income. While the hotel market has dwindled during the pandemic, the permanent residences’ segment aimed at elderly Europeans is sure to grow.”