Investment appraisal of a villa in Bodrum: experience of a Tranio’s client after 1.5 years of ownership
In the spring of 2021, Maksim, an investor from Russia, invested 3.2 million euro in a coastal villa in Bodrum. Revalued in June 2022, the villa has risen in price by 19% in euro. The investment did an excellent job at protecting the capital even without rentals. Maksim with his wife and child are spending their second season there, inviting friends and relatives, travelling to Turkey on a visa-free basis.
Turkish villas turned out to be more attractive than Spanish ones
Maksim and his wife became investors about two years ago, when it became necessary to manage their own capital. Prior to that, Maksim worked in the IT industry for many years. Maksim studied the books about investing and listened to advice from more experienced investors he knew. The couple distributed part of their savings in shares of public and private companies.
They decided to invest the rest in foreign real estate, expecting it to be a long-term low-risk investment with a protective function and a potential for value growth. The spouses decided against distributing a large amount of money over several properties, choosing to buy one promising project instead. They knew that managing several investment projects would require a significant amount of time, which they did not have.
Investments aside, we wanted to live in our foreign property ourselves at least for some time. Therefore, the first thing that came to mind was a villa on the coast of Turkey. We have long loved this country and we have a pretty good basis for comparison as we travel a lot and rarely stay in one place for more than two months. We like the Turkish mentality, cuisine, climate and beautiful sights.
Maksim contacted Tranio in March 2021. After consulting with the manager Inna Shchukina, the couple decided to consider alternative options in Spain. However, within a 3-million-dollar budget, Turkey could offer more attractive projects and infrastructure, so we decided to go there. Another point for Turkey was how easy it was to get to it. There is no need for a visa and there are regular flights from Russia that usually take only 4–5 hours. Given that the couple wanted to be able to invite friends and family over, accessibility was very important.
In fact, Tranio was not the first company we contacted. Prior to that, we had met with the representatives of another well-known broker, but that encounter left us quite perplexed. We were not heard at all, they offered us projects that we did not ask for. It was different with Inna; she understood our goals and connected us with partners who quickly found all the suitable offers on the market, constantly refining the search criteria based on our feedback. We were in touch even on weekends.
In a couple of weeks, we had a list of objects in Bodrum, Fethiye and Marmaris and went to choose. Our first destination was Bodrum.
Bodrum is the best place in Turkey to invest in the premium resort segment
In Turkey, Maksim and his wife were met by Tranio’s partner Evgeny. Together they looked at 6 properties in ascending order of price and in the end chose a villa worth 3.2 million euro in a newly constructed complex managed by a world famous hotel brand.
In Bodrum, we did not consult with Evgeny alone; he introduced us to a local Turkish agent, who had exclusive properties. After a few days of viewings, we were offered a villa which was way out of our budget. We agreed to look at the villa, because my wife and I had an agreement that we would pay a little extra if we really liked something. And so it happened. We both fell in love with this villa immediately. The purchase decision was made the very same evening at dinner. We no longer wanted to go to either Marmaris or Fethiye. We already knew we had found the best deal.
The couple liked not only the villa itself, but also the complex with its own beach, restaurants, gyms, cinema and delivery. Villas in the complex cost from 3 to 20 million euro.
From his conversations with local real estate agents, Maksim gathered that Bodrum was indeed the best place to invest in premium resort real estate. This region is chosen mainly by wealthy Turks (80% of owners), so the foreign demand has little effect on the overall demand for buying and renting properties in Bodrum. This is partly due to the peculiarities of the local climate, which are well-known in Turkey, with an established tradition and a special resort infrastructure that has developed here over the years.
It turned out that in Bodrum the sea is comfortable all season long thanks to the special wind rose between the Adriatic and Mediterranean seas. It is already warm here in March, and in the summer months, when the temperature on the Alanya coast is close to +400С, the thermometer in Bodrum will show +350С, which is felt as +300С due to the cool sea breeze. The service itself is also developed better in Bodrum than anywhere else in Turkey. We were convinced of this during our first visit. Everything is convenient and beautiful: cafes and restaurants, shops and shopping centres.
We did not apply for citizenship or residence permit: visa-free entrance was enough
The visa-free regime allows Russians to stay in Turkey for 90 days total every six months, and continuously for up to 60 days. This time is enough, because if you choose to stay longer, you will have to change your tax residency to a Turkish one. In Turkey, as in most other countries, there is a rule of 183 days a year: if you stay in the country longer, you will become a tax resident of this country. Maksim wants to remain a tax resident of the Russian Federation due to a more favourable income tax rate, as well as clear and familiar taxation rules. The family did not apply for Turkey investment citizenship or a residence permit. For their purposes, a visa-free regime was quite enough. Although, at the moment Maksim is thinking about applying for a Turkish residence permit, so as not to be limited to a continuous stay of 60 days only.
The villa has risen in price by 19% in euro in a year
Maksim with his wife and child spent the entire season of 2021 and almost the entire spring and summer of 2022 in their new villa. The rest of the time they live in Moscow. The villa has been owned by the family for over a year. They have no plans to sell it earlier than 2026: according to Turkish law, capital gains tax on the sale of real estate is not charged if the property has been owned for more than 5 years.
During his time in Turkey, Maksim made friends with realtors who helped him buy this villa. They now help Maksim monitor the situation on the Turkish market.
We last spoke with Evgeny in June. By that time, in our complex of 75 villas, less than 9 remained unsold, mainly the most expensive ones, which were still waiting for their buyers. It is noteworthy that during the year the selling price for those villas has increased. A villa like ours now costs 600 thousand more. Our villa is valued at 3.8 million euro right now. That is a 19% annual capital growth in the premium segment, which can be considered a success. Moreover, both my realtor friends and I are convinced that Bodrum is the least vulnerable to economic crises and not as subject to price fluctuations as other regions.
According to the Central Bank of Turkey’s data for May 2022, real estate prices on average in the country rose by a record 46% in dollar terms. According to market participants — brokers, bank employees, real estate appraisers and developers, the prices will continue to rise in Q3 2022, as is evident from a survey conducted by the Reidin analytical agency.
The premium real estate segment is experiencing a much smoother growth, thus remaining more resilient to possible price balancing and adjustment in the future, when peak demand for property in Turkey subsides.
I consider my investment successful, especially given the global economic changes of 2022. This investment not only fulfilled its protective function in a period of instability, but also increased the potential for possible profit beyond my expectations.
We express our gratitude to Inna for her sensitive approach, attention to detail and impeccable organisation.