Istanbul property – investing in a building for yield

As the thermometer tilts towards 35 degrees and we buckle under the mid-summer Istanbul heat, the people just keep pouring in. Istanbul real estate deals are getting done and buyers seem hungry to investigate the market and see what they can shake off. In short, the Istanbul property market appears to be in very robust health. Eager sellers seem willing to finally cut deals and the asking price is often not reflected by the price where the hand shakes occur. Most of our clients these days seem to be looking for pied de terre type properties. Others, however, have other plans.

One of the most popular, and often most profitable, investment tools in Istanbul is a small building with multiple separate units, often located in the most central of locations. These buildings offer a wide range of opportunities for the owner. They can occupy one of the units themselves, while renting out long term or short term the remaining units.

Others have greater space requirements, and where not bothered by the verticality and stairs, use one or two floors as atolyes or office space, and use the upper floors for a luxurious 3 storey townhouse of sorts, capping it off with a terrace for entertaining in the evenings. Some even put lifts in, a real luxury, not to mention value adder.

Most frequently, investors are looking for a good return, and have an expectation of between 10-12% per annum. On the long term rental side this looks to be a stretch. But with the seemingly constant demand for short term accommodations, this rate of return can be met, particularly with a property with the right characteristics combined with marketing savvy and a hands on approach. I know of one owner who is so obsessed with maximizing her returns, that she bounces around from floor to floor in her building according to which unit has not been rented for the week. Naturally, she prefers to stay on the beloved terrace floor, but as that is often rented, any other floor seems to suffice. And, hey, when the building is fully booked, what do you do? Take a short trip to the Princess Islands and stay with a mate. Got to get that return!

So, at this point, you may be asking, what exactly does a property like this look like and perhaps of more pertinence, how much does it cost?

14 copyLet us give you a real-life example of one of my favorite properties currently on the market. First, the asking price is 1.75 million TL. Now that may sound like a big number, but given the TL woes, that equates to less than 600,000 Euro, and keep in mind, that is the asking price. And you are getting a whole building, in pretty decent condition as well.

Currently, the property is fully operational and is getting good results through the ubiquitous AirBNB. Two years ago, I would have thought that was a low budget airliner knocking around the Balkans, though I know better now.

The building has a basement floor which, in itself is very versatile, either as a residential unit, office or commercial space. On the entry level, again all of these options exist. The top three floors seem best suited for residential, though with what appear to be lax zoning laws, the possibilities are always open.

10 copyThe top floor has attic space under the roof where additional space can be gained through some bureaucratic efforts. The plot size is 85 sqm and the apartments themselves are 80 sqm. Standard high ceilings, modernized kitchens and washrooms, original wide plank wooden flooring, and bay windows style A La Greco.

Although the property itself is in very good overall condition, some redecorating would go a long way to maximizing nightly prices. The units would peak out at about 150 TL/ night. Occupancy rates…well, as demonstrated by my eager return seeker, it is a matter of will and determination. And, of course, having the right kind of property is a must.

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