Keith’s Weekly Property News April 24-2022

Due to time constraints during this unusually frenetic period, I will give brief notes once again this week, hopefully with less typos than last week.

CBI update:

Everything is a bit unclear at this point. When the news broke that there would be a move from investment level of 250K to 400K most industry experts expected the announcement in the Official Gazette to happen almost right away. 10 days later it still has not been published and thus ramps up the speculation mill. Most experts still believe it is inevitable, with many predicting before or after the Bayram Holiday (starts May 2. But because of the weekend and the May 1 holiday, it actually means earlier. Others seemed to have pulled the date of June 1 out of the hat. The truth is nobody seems to know for sure and the ones who do know are not talking. So that is all I really have to say about that. If you do want to do CBI at 250K, you should be in full hunt mode to find properties. I outlined the time frames for that in detail in last weeks notes.

I often try to address many of the issues that get brought up in the whatsapp chats. This week a few people pointed out that people who signed on tenants in lira contracts last year probably took a haircut in terms of USD based yields. That is indeed true, yet we should be non-alarmist in our assessment. 2021 was indeed a truly remarkable year in every sense for Turkeys property market. Certainly not every year will follow that trajectory, from Lira 8 to Lira 15. The consolation for lower yields due to lira collapse is that the properties appreciated anywhere from 20-40%…in USD terms. That is phenomenal and came as a great surprise to me. All we can do with under-performing lira rentals is to jack up the rent each year according to inflation index. Luckily, we did not sign so many of such contracts, but we definitely did some. We are doing many more now and we are much more cautious in our approach, Where possible, and if the property lends itself to it, we are trying to secure currency contracts. This is not possible for every type of property. Difficult, for example, if it is commercial property which has wider appeal  to Turkish market.  I believe we will find our way and these issues will not materially impact the quality of the investment over the long term. We are now also focusing more on securing expat tenants. I have wide experience with this and know all of the places to market, plus the ability to network with key agents in high density expat neighborhoods such as Beyoglu and parts of Sisli. We should be able to, going forward, secure perhaps 75% of our contracts in USD. Mid term rentals will comprise a certain percentage more.

Finally, on that point, we do have to accept some currency risk while investing in Turkey. Entry and exit points are not irrelevant. We need to buy in at the right price, with the time being less of a knowable element. We want to buy at the right price, end of story. Then you will need to exit at the right time. Give it 5 years, is my view, though longer term can be very sensible as well. Turkey has the ability to soar, why would you want to pull out early? Besides, it is a lot of fun and a wild ride, where hardly anyone gets hurt in the long run. Call it the “Pirate Ship” of international property investing. Lots of gut-wrenching swings, but a safe off ramp is mostly there. I am sure we cannot say the same for many other international real estate markets. I have not heard many success stories from many EM markets in the past 5 years. No doubt they exist, but…

Don’t fight the demographic. Turkey has that and it will matter more and more in the years to come.

Last week was an interesting week, as in our bid to close out some CBIs, we hunted high and low and looked in places we had never considered. Fruitful, but punishing on the whole staff, We have 1 more week until the Bayram Holiday, so we will try to sustain the pace until that period, after which there will be a slowdown from at least May 1 to May 6.

The people who are getting the job done are the “squeaky wheels” who give us clear directives and time lines. Don’t be shy about that.

Regarding renovations, the long used 300 to 350 USD per sqm model that I re-iterated for the past several years seems to be quickly getting outdated. Rising labour and material costs are contributing to this, as has the property boom. The property boom, as evidenced by record sales in March to Turkish nationals and foreigners alike, leads to pretty intense competition to retain good tradesman, which I believe we have. Our decision to use Turkish materials wherever possible (a wise choice in my view), allows us to keep pricing within the 4000USD per sqm mark, still remarkably cheap by Western standards. These are based on the net sqm, footprint of the property. Additions, such as terraces and balconies that did not previously exist, will of course push this number upwards, as will Franke kitchens and Gaggeneau fittings.

Prices seem to have stabilized for the time being and we are seeing good opportunities pop up sporadically. Those usually have to be moved on quite quickly in terms of execution, if we want to capitalize. I have set aside some cash to fast-track deposits on the properties I like. We do the initial due diligence and if all looks good, I am ok with backstopping a deposit til a buyer teps in. It is often an effective way of speeding up the process. We are typically getting evaluations returned within 48 hours and are doing our best to get Land Registry appointments as fast as possible. Average time looks like 5 days if there are no procedural snags.

There is a always a lot more to say, but I am sure it will come up in the zoom discussion.

Here is a shorter than usual list of viewings we hope to have this week, subject to availability and initial CBI checks. (distributed in meeting).

Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.

We invite you to join us for:

#IstanbulInsights with Keith

On Sundays at 20:00* Istanbul time

*13.00EST/ 19.00CET/

20.00TRT/ 02.00SGT (Monday)

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Every Sunday we will share more info about the best property deals of the week, market developments, followed by Q+A time.

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https://www.mybricksrealestate.com/keiths-weekly-property-news-april-24-2022/

Keith’s Weekly Property News April 17 -2022

This week everything will be abbreviated, including our zoom session, which I will have to end at 21.15 sharp.

Basically, as I am sure everyone knows, it has been announced that the CNI amount will be raised from 250K to 400K USD. Beyond that there is not much we know for sure, nor will we til the decision is published in the Official Gazette, along with all the relevant details.

There has been much speculation, which essentially centers around 3 points:

  • Will people who have their Doviz Alim Belgesi (Or exchange certificate from the Central Bank) automatically be accepted in the 250K USD regime. Keep in mind, to get this document, you already need to have the property details of the property or properties  you intend to buy.
  • It is believed, but not confirmed, that people who have applied for the “certificate of conformity” will continue on with their citizenship process without any effect or change. I also believe this to be true.
  • Whether or not there will be some future date extension for people to complete the CBI program, or a deadline. I am very unsure of this, leaning slightly towards the opinion that there will not be, though hopefully I will be proven wrong.

I repeat that the above items are speculation. There is even speculation that the decision will be reversed or not published at all. I am highly skeptical of this.

Unfortunately, there is not much we can do apart from wait for all the details to be published, likely this week, but again not guaranteed to be.

By way of advice, I cannot really even offer clients much. We have clients who are travelling to Istanbul this week. With quite a bit of luck, we may be able to beat the clock, especially if there is some kind of extended deadline.

One thing for sure is you should be careful about agencies or developers trying to get you to sign onto deals very quickly with the guarantee that they can get you the deed ina few days and apply for the passport. This is a clear falsehood. No one can make such guarantees. There are time farmes for each step, from wiring money to securing valuation reposrts to getting an appointment to close at the registry. Yes, there aqre ways we can TRY to expedite all of the above, but guaranteeing it is just misleading.

For those who really want to close out their CBIs the secondary market is the slow way to go. That is why we have taken steps to source deals from developers, which are in theory faster. However, if that kind of property does not appeal to you, we understand. I suppose in any event, the practical thing to do is to carry on your property searches.

We are currently working one to one with many clients who have their POAs and Turkish accounts funded or at least open, in the belief that it may be possible to get them over the line.

Everyone has to make their own decisions regarding what is the best step for them. Getting a POA issued remotely? Doing the same with the account? Buying online, and so forth. Some will also be in whether it is 250K or 400K, so me advising people in all cases does not seem reasonable as everyone has much different motivations, budgets, timelines and buying preferences.

If you really do want to get it done and done fast, reach out to me and I will try to offer quick but safe solutions. For example, we may want to introduce escape clauses with developers, meaning that if the amount gets raised to 400K mid-process, we have the right to have deposit refunded. In many cases, it may not be accepted, but we can at least try. This will not work, period, on the secondary market.

So, in a way, folks, that is it for updates at the moment. Tonight , we will discuss in more detail how we may want to proceed, in theory, at such a time.

We also have the highly problematic “dangling” CBI, where the client has purchased maybe one or two properties, but has not reached the 250K mark. Obviously, we are leaving no stone unturned for these clients.

Property sales in March were very high, the highest number on record at over 130.000. Turks view property as the only hedge in these uncertain inflationary times.  I expect one of the original aims of the CBI, to sell  the over-supply of new builds on the periphery of Istanbul or other cities, has largely become superfluous.  The need for hard currency no doubt still exists, but we must also consider that there are many non-CBI buyers of Turkish property and the proliferation of new passports being given largely to individuals from a few nations, was becoming a bit of a political hot potato. Nonetheless, there is little doubt that foreign buying will continue, though the CBI numbers will likely drop significantly.

Unfortunately this week we will be doing without a staple of our weekly zoom sessions, the presentation ofm property picks. This is being done mostly on a 1 to 1 basis, but we hope to return to our original format next week. This week we will do more Q&A and let Aybike, CBI lawyer, share a few thoughts. I thank everyone for ntheir patience in waiting for me to get to their whatsapp messages this past week. I believe I returned to everyone. However, if you are really in buying postion, ping me again tonight and we will do extra work and assign staff to your request.

Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.

We invite you to join us for:

#IstanbulInsights with Keith

On Sundays at 20:00* Istanbul time

*13.00EST/ 19.00CET/

20.00TRT/ 02.00SGT (Monday)

Via Zoom:

https://us02web.zoom.us/j/7931208182?pwd=ZndocVNmbXAyTE5uMnNscC9sK0xSZz09

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‘Just Click’ the above link and be part of the Istanbul Insights with Keith’s property market updates.

Every Sunday we will share more info about the best property deals of the week, market developments, followed by Q+A time.

For more info:

Keith’s Weekly Property News April 17-2022

Keith’s Weekly Property News April 10-2022

It was a bit of a frustrating week. We had big plans to ramp it up, but were let down later in the week by lots of last minute cancelations of viewings for a host of reasons. Nonetheless, we have a full line up of 6 viewings tomorrow and we hope to add many more for the week.
I will also be holding a zoom session on upcoming Izmir Round 2, so quite excited about that.
To Airbnb or not to Airbnb, that seems to always be the question.
I have made my views known on this several times, but also backtracked a few times as well. Obviously, I want to do what is commercially in the best interest of my clients, but I am also cognizant of the environment that we operate in. Rather than engage in my usual verbosity, I will put in point form the salient and relevant points.
Pros
-You collect payment in currency (some properties are also suitable for collecting in currency as mid term and long term rentals, by the way, so I am not sure how vital this pro is

-You can reserve the property for personal use. (You can also do this for mid-term rentals, which are currently in very big demand as well.
-You MAY be able to outperform the yield you would get on a long term rental (do not forget to add your sweat equity and time into that equation). No Airbnb management company takes care of your taxes, btw. Other things will come up that will require your attention and time.
Cons
-It is very hard to operate an Airbnb legally in Turkey. You have to get a special license, which in itself is a headache. But the deal killer is you need the permission of all owners in the building to get that license. Good luck with that. As a result, 99% of Airbnbs operate illegally, to put it bluntly. Of course, most of them operate without issue or interference from the authorities. However, there are many notable exceptions, such as:
1- Because you are operating illegally, there is actually no mechanism to pay the taxes and your income can always be queried. To put it shortly, paying taxes is up to you and it is all very fuzzy because you are basically declaring that you are running an unofficial hotel and proving to the authorities your real income is a pain.
2- Somebody, somewhere does sift through Airbnb to check about taxes. I have personal experience through contacts of fines for Airbnb listings.
3- Turkey is home to strict anti-terrorism laws. Most Airbnb operations do not record their guests with the authorities, as proper hotels do. If a terror event occurs, and it turns out that the perpetrator stayed in an Airbnb, widespread closure is not off the table. As is some messiness in the investigation. Very unlikely scenarios. But add in the fact that local hoteliers have some easy leverage here. I suppose they are pleased these days with occupancy, but should that change, Airbnb is low hanging fruit in terms of a target.
4- Neighbors are also a factor. They OFTEN complain and sometimes even try to extract payment from the situation. I was on the paying end in Istanbul and Budapest, so that is no myth.
I ran the #1 TripAdvisor property in Galata for about five years back in the early 10s. There is much more I can tell you about the experience. Suffice it to say, there are many surprises and unknowns. Just crushing out a big fat yield every year is more fantasy than reality. Below are my tips on what makes a succesful Airbnb in Istanbul (and perhaps Turkey).
The property should be in excellent condition. The half renovated places mostly stay emtpty. The successful one are in good hotel standard, Expect to spend from 5K USD to 10K USD on all furnishing and basic set up cost.
If your property is on an upper floor and there is no lift, it had better have a nice view, otherwise it will not perform well.
For Istanbul, the main areas are Sisli and Beyoglu. Fatih is as well, but it is much harder to find properties in the touristic areas. Besiktas can work as well, but some parts are unsuitable. Kadikoy may work, but I suspect the buy price vs income would not be favorable. Areas like Kagithane and other suburbs are largely untested and would probably have marginal appeal.
Sea view always gets a premium, but decent city view with a balcony or terrace can help.
If your property is such that it would likely not generate 70 USD per night, the endeavor may not be worthwhile. I think the successful Airbnbs are a bit higher end. Better profile of guest, greater income to offset unexpected costs and just, lets say, more worth the headache for everyone involved.
“Aile” or buildings that have many families in them will be unsuitable. In Turkish culture, people really want to know their neighbors.
Neighborhoods where there might be elevated security concerns are also off the table as far as I am concerned. No windy, unlit stairwells leading to secret access through back entrance etc.
Garden apartments have limited appeal. People do not travel with their pets or are not so concerned about having a garden for their children when they travel, and these are the appealing sides of those properties.
Proximity to Metro is key. Not more than 10-12 minutes walking.
Expect low bookings in Jan, Feb, March.
There are many other tips you can get from websites. I have just tried to be specific about Istanbul and the property end of things.
Again, I hope I have not discouraged or alienated too much of my client base. I am trying to present a balanced view on an important issue and one in which I myself have been struggling to articulate in the past months.
We are, and will continue, to run Airbnbs, and most likely, more of them.However, I would like to stick to Airbnbs that meet the above criteria. I am happy to evaluate your property and let you know if I think it is suitable for Airbnb or not. Regarding income, with the ever shifting landscape of dare I say post-Covid, I am reluctant to give projections on income, but could probably give you a good idea about nightly rates.
Now what I really suggest is that you target the mid-term market, which is really under-supplied. I get emails every day asking for rentals for anywhere from 1-6 months. I almost never answer. With these types of rentals, you can achieve all of your objectives while also being on more solid ground legally and in better stead with your neighbors:
-paid in currency
-can reserve property for personal use.
-Ultimate flexibility in tax terms (more on that later).
You can also transition into a long term rental or an Airbnb rental if you are not happy with performance in the first 6 months. I suggest this as an excellent avenue and I will fully support it, as well as apply resources to the enterprise, as I feel it aligns with my interests more closely. I have some concerns about being the repository of unofficial, mediocre Airbnbs lol.
Putting aside being tongue in cheek, it really does seem to be a good path. There are so many digital nomads and remote workers, people coming for extended medical treatments, Erasmus university exchanges, business travelers and more. It is a market long time group member, Andreas, has long been a proponent of. I agree with him fully.
Now on to the market. We are looking for a better week than last week and are taking all steps to make it happen. If you are in country, please be vocal. We are here to try to help you meet your needs and I still feel, in so many ways, that we are the best agency to do this, though we are constrained in some ways by the clients demands for the more popular neighborhoods.
Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
We invite you to join us for:

IstanbulInsights with Keith

On Sundays at 20:00* Istanbul time
*13.00EST/ 19.00CET/
20.00TRT/ 02.00SGT (Monday)
Via Zoom:
https://us02web.zoom.us/j/7931208182?pwd=ZndocVNmbXAyTE5uMnNscC9sK0xSZz09
Password for logging in: 1234
‘Just Click’ the above link and be part of the Istanbul Insights with Keith’s property market updates.
Every Sunday we will share more info about the best property deals of the week, market developments, followed by Q+A time.

For more info:

Keith’s Weekly Property News April 10-2022