“A Place in the Sun” recently ran a programme on the top 20 best places to make money on property in Europe. While many people will rush out and invest in one of the top five countries listed, a very important aspect was forgotten. The programme took no account into their calculations of whether you could borrow or not in that country, or what level of deposits were required. These are two very significant factors affecting anyone who is considering investing in property.

Let us present to you a couple of case studies, which show you how things really are:

Case 1

Two years ago I bought a large three bed apartment in Turkey for €53,000, and when it was ready I furnished it, for a cost of approximately €5,000. It was then rented out for €400 per month. It is now worth circa €80,000 including furniture – so:

Cost €53,000 + €5,000 (furniture) = €58,000
Rental Yield per annum €400 x 12 months = €4,800, that is 9%
Capital Appreciation €22,000 is 38% over 2 years, that is 19% pa

Case 2

Last year I bought 2 apartments off-plan in Latvia for €149,000 and €199,000 respectively.

I was required to pay a 10% deposit when I booked them and a 3% sales commission to the agency selling them. They will be complete very shortly and are worth approx. €177,000 and €237,000 respectively – so:

Apartment 1 Cost €149, 000 Rental Yeild n/a Capital Apprec €28,000 – that is 19%

Apartment 2 Cost €199,000 Rental Yeild n/a Capital Apprec €38,000 – that is 19%

So, we have the same capital appreciation on both per annum. We have no rental income from the apartments in Latvia, but that doesn’t matter because we have no mortgage to pay yet – remember these were bought off-plan so they are still in the building stage.

Now let us look at my return on money invested:

Case 1

Turkey
Money put in €58,000
Extra money taken out €22,000
Return on money invested €22,000 / €58,000 = 38%

Case 2

Latvia
Money put in – Apt 1 €19,370 (13% of €149,000)
Extra money taken out €28,000
Return on money invested €28,000 / €19,370 = 145%

THERE IS NO COMPARISON.

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