Keith’s Weekly Property News August 1-2021
Fiendishly hot days here in Istanbul as the pressure and thermostat climbs, and the number of client inquiries this week broke all records. Sorry for the shortened 1 to 1 zooms; it was hard to process a lot of it. Not to mention, I received about 10 inquiries from Julian’s YouTube…all in French!!! I got the general idea thanks to the Grade 12 French class with Miss St. Onge.
In spite of the frantic pace, we take time out for our weekly zoom, the highlight of every week for me.
We continue to source interesting properties and slog through the process of trying to tie them up and close. Multiple challenges, as always, but progress is being made and deals are getting done.
We will keep it pretty informal this week: analyse a handful of properties, give a few illustrations of a number of properties that recently went into rental – looking at purchase price, renovation costs, timeline, and rental figures.
We will also look at our ‘cookie cutter’ property; the budget ones, in good locations, that require full reno jobs. We have a lot of these and they usually follow a pretty predictable trajectory which I hope we can demonstrate to clients, particularly newcomers.
Finally, we will look at some new build projects that are now on the secondary market and touch on a few details of projects in construction.
Cookie cutter.
We find this kind of property with some regularity; small, one to 2 bedroom apartments, in the 500-600.000 TRY range, good locations, poor condition, requiring full reno. Typically 70 sqm range. Renovation costs 150-170.000TRY. It costs approximately 700.000TRY. Expected rental return 3500-3750 TRY, perhaps jp to 4250 TRY if furnished. Time frame from purchase to tenanted, 3 months. Value added to assets right away 10-15%. Copy/paste/repeat.
We make it look something like this at end. Kitchen cabinet colour flexible (:
https://www.mybricksrealestate.com/listings/istanbul-nisantasi-flat-for-selling/
Here are a few real life examples from the past month of our recent projects:
Property 1
purchase price: XXXX
reno costs 260.000
size: 100 sqm
all in cost: XXXXX
current market value: 1.3 – 1.4 mil TRY
new lease: 5750 TRY (we could have achieved 6500 TRY
if furnished…possibly)
time frame all: 4 months (3 week lockdown led to delay)
time on rental market: signed within 2 weeks
https://www.mybricksrealestate.com/listings/istanbul-kurtulus-apartment-2-bedrooms-renovated/
Property 2
purchase price: XXXXX
reno costs 170.000
size: 68 sqm
all in cost: XXXXX
current market value: 825-850.000
new lease: 4000 furnished
time frame: 3 months
time on rental market: signed within days
https://www.mybricksrealestate.com/listings/istanbul-kurtulus-property-newly-renovated-2/
Property 3
Property 3: XXXXX
reno costs: 170.000
size: 68 sqm (property is one floor above Property 2, different owners.
all in cost: XXXXX
Current market value: 825-850.000 TRY.
new lease: 3500 (unfurnished)
time frame: 3 months
time on rental market: signed within days
Property 4 (‘outlier’)
Currently negotiating with 2 potential tenants.
Expected yield 8-9%
all in costs: NA
Current market value: 2.75-2.9 milTRY
Property 5 (again, an ‘outlier’, Boss’ casa)
expected yield: 8-8.5% (9000 TRY)
size: 140 sqm
time frame: 3.5 months
It is the first property in the video. Property 2 and 3 are also shown in the video.
https://www.mybricksrealestate.com/listings/istanbul-sisli-bomonti-renovated-apartment/
https://www.youtube.com/watch?v=GZvboOb3D8s&t=260s
And now on to a few picks for the week.
New builds on the secondary market: Contrarian corner.
Last week we looked at the 3 categories of new build projects, luxury 5 star hotel-like towers, bespoke projects, still high quality but with less grandeur in terms of facilities and the ‘Mom and Pop’ small new replacement building, without facilities other than a lift and perhaps parking.
This week, we will answer the question, ‘Why might clients be interested in new builds on the secondary market?’ I certainly have no hard facts to answer this question, but I will put forward a few tentative propositions that make sense to me at least:
1-Construction costs have risen quite a bit in the past few years. Developers will be struggling to undercut prices of previous projects, especially in areas where land is scarce. They may be able to do so in far-flung areas, but not in more central areas.
2- Land costs have risen…DOH!
3- The ‘pain’ factor or, more colloquially, the GMTFO factor (Get me the f..out factor). Some owners, due to financial reasons, may need to get out fast. It is very easy for us to scan prices on these developments (when you have 20 properties for sale in the same project, finding the one that stands out as a good deal is not that hard. You are comparing apples with apples. 2 months ago we picked up a great office like that. 8 similar ones were for sale at 600-625 in the same project, one even next door. We got ours at 500. Done deal.
4- You do not have to wait for completion and you usually have an idea of the yields (you can scan the rental market to get an idea of that).
5- There are often other clues. Are there too many from the same project on the rental market? You have to look at the number of units in the project. If there are 200 units and a year after it has been delivered, there are still 40 units for rent, that indicates a problem, Houston. Abnormally high number of units offered for resale? Developer still has a lot of stock on hand after a year? The chatter on the streets, and so on.
6- You can see how the landscaping, social areas, gyms etc turned out. Has it turned into a ghost land (Bati-Sehir), where many Arab buyers bought and where the restaurants and markets all became very low quality because the flats lie empty? (The Starbucks to Star(f)ucks deal). Or is it a lively and dynamic living space as the CGIs promised?
Again, I am just pointing out the possible edge you may have in new builds on the secondary market. There are also many advantages of buying off the shelf new builds: early bird discounts, rental and buy-back guarantees, being able to select the more favourable units (best selection goes to first-ins)
Still, I believe it is a useful debate to have.
So here are a few tips that keep in mind the above points
Not in our usual area, but it is a nice project. Decent field for new build, approx 4-4.5%. Maybe some room for negotiation. Nice, safe play. Ideal for CBI done on the fly. WYSIWYG. High percentage of Turkish ownership.
Property links distributed during weekly zoom session
Tagged: Istanbul property, buying property in Istanbul, central Istanbul, Istanbul apartments, Istanbul buildings, Istanbul investment, Istanbul property, Istanbul property sale, Istanbul real estate, Istanbul renovations, Property in Istanbul.
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