Slovakia Investment Property - Blog

SIP - 3rd anniversary...and review

noreply@blogger.com (sip) — Sun, 20 Aug 2006 04:46:00 +0000

So here we are.... it's August 2006, just a couple of months before Slovakia Investment Property's 3rd anniversary. The fact we've been here just before the opening of the Slovak property market to foreigners, along with being a pioneer in offering property in Slovakia to UK & Irish buyers and investors, fills me with pride and joy. And, the 3rd anniversary also seems appropriate to look back and review the initial expectations and forecasts, and the true changes and developments in the Slovak market in the last three years.

Naturally we are all very pleased with the economic development Slovakia has been undergoing in recent years. In 2003 and 2004 not many in the UK had as strong a faith in the country as we did, in spite of early signs of Slovakia's solid economic fundamentals and fast progress. With
further positive development and acknowledgements from internationally respected institutions such as the World Bank, IMF and main rating agencies, the focus on Slovakia started to grow exponentially.

Slovakia's stellar economic performance has attracted international media, and with it an increasing number of British and Irish residential property investors (as opposed to the earlier, mostly professional investors we have been dealing with in the early days, when the country only appealed to those comfortable with untapped, higher risk markets). Slovakia Investment Property was, thanks to our early vision and belief in Slovakia coupled with deep knowledge and years long experience in its property market, the pioneer in offering services to foreign investors.

Today, three years later, I am extremely proud we have maintained our position as UK's leading Slovakia property specialist, and built on it to provide our clients with an even better and more complex service. (After all, there is always room for improvement! :))

In acknowledgement of our position and quality of service, Slovakia Investment Property is frequently mentioned and quoted in British and Irish press. (For those of you curious to know more, please visit the following link: www.slovakiainvestmentproperty.com/coverage.php)
Our monthly Slovakia newsletter featuring economic and property news and analysis is republished on several renowned property news sites. And, of course, the highest recognition came in 2006 when Slovakia Investment Property was awarded with the most prestigious Homes Overseas Awards prize (category: Best Central and Eastern European Development).

Ironically, our position as a market leader is indirectly acknowledged by the many "Slovakia specialist" companies we have seen springing up since mid 2005. With the country's increasing popularity among British and Irish investors and buyers, many new Slovakia "experts" have set up in search of easy sales and commissions. Not only our clients, even we get confused at the many Slovakia websites all carrying remarkably similar names (I will leave it open whether this is due to an amazing lack of imagination or an attempt to benefit from someone else's reputation and PR). Our well researched website information and materials also keep enjoying very high popularity among the new Slovakia "experts", judging by the number of severe copyright infringement cases we've been dealing with over the last year. Keeps our solicitors happy, if nothing else! (Although in this regard, I'd rather keep them less busy, to be honest!)

It is also gratifying to see Slovakia Investment Property has been a trendsetter and a good year ahead of competition in terms of new investment "hotspots" within Slovakia. Throughout 2004 our focus was primarily on Bratislava property as the most suitable investment market. In early 2005 we have started offering Trnava as a high potential secondary market, as well as pointing towards similar potential in Zilina, and gradually in the tourist & ski resorts. Increasingly we have been warning about the importance of selecting the right area, due to the limited and very specific rental market in Bratislava (and other regions).

Meanwhile, 2005 has brought a number of new Slovakia focused agencies, recognizing UK investors' thirst for "easy, hands-off, high growth" off-plan deals in what has increasingly been considered one of Europe's top new property hotspots. The wealth of Bratislava off-plan opportunities offered to foreign buyers in the most unlikely investment locations lets me hoping the byers have not purchased with the view of rental returns (or unrealistic capital growth).

In 2006 - again, about a year after our early Trnava opportunities - Trnava has started to be promoted to the UK market as a new, "untapped" hotspot. Our Trnava investors will be pleased about having taken the plunge in 2005, and timing the letting precisely for the 2006 demand (when all the new car industry employees will have moved in and settled in their Trnava homes).

I reckon that, in line with Slovakia Investment Property's forecasts for new market opportunities, the focus will be increasingly on tourist centres and holiday-let properties. Although we've been offering carefully selected opportunities in this market since 2005 (and will increasingly do so due to the very positive results), the holiday-let market, similarly to the long term rental market in Slovak cities, is limited and locations need to be selected with utmost care and knowledge (and realistic expectations!). Let's hope investors will do their own research more often than in the past ... sadly due dilligence is something many buyers seem to leave to the selling agents!

So, how has the Slovak property market changed over the last three years? Has it lived up to the expectations?

Yes - if your expectations were realistic! I can't stress it often enough - invest for the long term and you will not be disappointed. Believe any claims of outrageous gains and hands-off riches (preferably in the shortest time) and, well ...

The Slovak market continues to be driven by the strong domestic demand, particularly in Bratislava and the economically strong regional capitals of western Slovakia. Little is happening in the regions of central and eastern Slovakia, including the capitals Banska Bystrica, Kosice, Presov. Due to high unemployment and extremely low purchasing power of the local population these cities represent a high risk and low return for any residential property investor at the moment (and probably for the next 5 years).

Prices of new residential properties in Bratislava have been increasing by an average of approximately 10% p.a. (although this varies based on location, with slower growth in less desirable areas). Classic apartments in BA I (city centre, Old Town) have appreciated by approximately 15% p.a. (with up to 20% for top quality properties). This particularly strong growth on period property is likely to continue due to the high demand for city centre apartments and extremely limited supply with no sites for new construction in this area.

In terms of new built properties (locations BA II - V) the prices will develop in line with demand and supply, and location and quality will play an increasingly important role amidst increasing competition of new projects. As in the past, areas closest to the city centre are most sought-after, although there are exceptions and some locations need to be considered with special care (in particular the traditionally unpopular BA V - Petrzalka, south of the Danube). Good quality new apartments in popular locations should benefit from approximately 10% annual growth for the next few years. Similar development is likely to be seen in the towns of Trnava and Zilina, benefiting from solid local economies and good purchasing power.

The rental side has been the cause of some concerns. We have been warning on the limited and selective rental demand in Bratislava (and practically no rental market in other cities, with the exception of increasing demand in Trnava and Zilina over the last year). Due to the high owner occupancy and lack of rental culture among local population - students and migrant workers excluding - and strong preferences of the expat tenants for city centre location (classic apartments). Growing supply of rental properties means investors in new built apartments are going to be facing increasing void periods and, depending on location, difficulty in finding a tenant.

A similar situation presents itself in nearly all of the Central Eastern Europe markets, and a positive change cannot be expected in coming years. Here, once again, the importance of independent research and due dilligence process becomes apparent. In times when most British overseas property buyers look for (buy-to-let) investment as opposed to a vacation home, the 'weapon' most agents use to close more sales, more quickly, are claims of high yields and fantastic capital growth. Let me say this ... you will not get 8-10+% yields on rental apartments, no matter whether you buy in Poland, Hungary, the Baltics, Slovakia, or elsewhere in the region. Agents also don't mention the hundreds (and even thousands in some cases) of empty new apartments in Budapest, Prague, Bulgaria, etc ... with little or no prospect of finding a tenant in the next few years.

Now, that sounds worrying ... and it is, at least to those foreign investors who have purchased off-plan in one of these cities, and have not been able to let their "buy-to-let" property ever since completion, being forced to subsidize the full mortgage and costs. And, the lucky ones who have let their apartments are, in most cases, receiving a significantly lower rent than the overly optimistic promises by British sales agents.

So, does it mean Central and Eastern Europe (CEE) does not represent a good investment opportunity?

The answer is no. Or perhaps - depends. If you are buying with the view (or necessity) of covering your costs with rental income, and you cannot afford to keep a vacant property for at least 6-12 months, then you may want to seriously reconsider whether buying in CEE is a suitable option for you. (However, this will also apply to buying in most of world's markets.)
In fact, if your vision is to purchase a number of off-plan properties via mortgages that will be paid by rental income while your investments will double in value in a few years and make you rich ... well, in that case, my advice on whether to buy in CEE or not would be a definitive no.

At the risk of drifting yet further away from the main theme of this blog ...
You may now ask - "Well, what is an investor to do then?"

Ok, although many readers will not like to hear this (trust me, I've seen a scary share of "I set my mind on buying this property and making money with it and don't want to hear any reason why it may not be a suitable investment" attitude), here it goes:

1. Buyers/investors need to take full responsibility of their decisions!

Most agents will always promise you exactly what you want to hear - it's unfortunate but understandable, and will happen in any market, always. The difference lies in the ease of doing your own research - which is clearly easier in your home country (not that this seems to have prevented many jumping on "high-profit discounted off-plan" deals that led to severe losses for many UK investors in the last few years).

Even if you don't speak the local language, in virtually any market where British and Irish investors have started buying property most local agencies have some english speaking staff - a simple visit and talk to independent local agents will generally reveal very different facts than what your UK based promoter claims. To know you are told the truth about the rental demand and achievable rents, try posing as a tenant. You will likely see agents are willing to drop the asking rents down quite significantly (up to 50% is not unusual when the market is static and demand slow).

2. Don't believe everything you read in that nice sales brochure!

More often than not agents present you exactly those "facts" you want to hear. After all, that is the way to get your cash. In most cases I've ever seen, UK based promoters are remarkably more "optimistic" with these "facts" than the local agents (who truly know the market and who you will depend on to rent your property, or eventually sell it on). In most cases, I'd say, count on 50% of the promised rents as being truly achievable. And, to be safe, picture in a 6 month void period before you manage to find a tenant. Which is not to say you can't be lucky and experience a better scenario. However, if you do it the other way around, you may be stuck with a property producing a loss you cannot afford to subsidize.

3. Compromize on your requirements in favour of your main goals

One thing keeps puzzling me ... the number of investors with a mind set on a very particular property type (you guessed it - new build!) while disregarding the local market, demand, and any other issues. Yes, it may be true that profits were made in UK off-plan property in the years of a strongly rising market (although more than a few got into trouble with these very same properties as well) but, does that mean off-plan is necessarily where the best potential lies in CEE?

Well, if you want to find someone to rent your property, the answer in most CEE markets is a no! It does pay to know (and research) your market well. If you do, you'll find out that in most CEE capitals the city centres have the highest rental demand and the best chances for letting ... and, as it happens, most city centres in Central Europe consist of classic (period) properties rather than new builds. And guess what, it's the (classic) city centre apartments that are in highest demand and shortest supply, reason why they are seeing the strongest appreciation.

If you have a goal, a purpose why you're buying a property abroad, research the local market in order to find the right type of property and location that will ultimately lead you to achieving that goal. Starting with a closed mind and strong set preference for something (based on your personal likes or experience from other markets) is only likely to result in disappointment, or, worst case, in a disaster.

4. You really need an exit strategy!

So, you bought a nice new flat, but no tenants in sight? Several months later and several thousand pounds shorter you decide you need to sell on. You may be willing to forgo any profit due to the short holding time and are happy to just recoup all your costs. So far so good ... but, have you researched the local resale market BEFORE you bought? If not, you may simply find out there is none, and you are stuck with a property and no potential buyers.

Admittedly, this is quite an unrealistic scenario in the Central European markets with healthy domestic demand such as Slovakia, Czech republic, Poland... But, what about, for instance, Bulgaria? Cases of investors unable to rent or sell their Bulgarian property are mounting, and, I'm afraid to say, will only be increasing in the next few years with thousands of new properties nearing completion. The point is - you need a clear and realistic (meaning well researched) exit strategy! If there is none, I definitely wouldn't risk my money on even the most promising investment opportunity.

So, starting with our 3rd anniversary, review and prospects of the Slovak market, and finishing with general concerns and solutions applicable accross all of Central Eastern Europe, let me conclude this post by saying THANK YOU.

Thank you for all your support, trust, patience and understanding. Slovakia Investment Property will continue working hard to offer you help, advice and some excellent property opportunities.

Channel 4 phenomenon or good old greed?

noreply@blogger.com (sip) — Sun, 02 Apr 2006 23:19:00 +0000

Property programmes have been popular with British TV viewers for a good number of years. With this in mind, TV stations never fail to come up with yet another property series. The more spectacular the better. Giving the audience what it wants... no harm in that. Or is there?

See, I have nothing against TV (of any sort). I do, however, have a problem with media creating unrealistic expectations, or building up a false picture of the reality - in particular when it comes to the viewer's money or investments. Tens of thousands have seen Channel 4's recent programme "A Place in the Sun - 20 Best Places to Make Money". I honestly hope none of them have taken it too seriously. It's entertainment, and should be viewed as such.

Anyone who might have concluded that buying property in the new EU (or anywhere else) is a sure way to massive returns should think again. There are many points the Channel 4 show's missed (more about that later), but my main objection is this:

Do you really believe an average property in Hungary, Slovakia, Poland, Romania etc will cost GBP 400-500,000 in 10 years?! Even in the 'old EU' very few places - with the exception of, perhaps, London - reach such property values. Local wages in Budapest, Bratislava, Warsaw, Bucharest and anywhere else in the CEE region will likely take 50-80 years to reach today's wages in central London, even with their current fast economic growth. Is it therefore reasonable to expect an apartment in these cities to reach central London prices in 10 years?

Then of course there is the gross generalization. No property market is homogeneous... there are always regions and cities performing better than others, within any country. You can hardly expect the same appreciation on a rural home in a remote area as on a prime city centre property. The same, by the way, is true about current property prices. While you can buy a remote country home in Romania for GBP 5,000, you will struggle to find a good period apartment in the centre of Bucharest for less than 80,000.

And, although few would doubt that the 'new EU' has years of property growth still ahead, investors need to be careful to analyze associated risk factors - particularly in the less developed markets and economies. Legal issues, title problems, lack of a domestic resale market, financing, and other issues associated with the immaturity of certain markets.... if Channel 4 had assessed any of these, the ranks may well have looked very differently.

Now, as you may know, Slovakia has ranked very well.... at number 7 to be precise. So, what am I complaining about, after all?

Although I fully believe in Slovakia's excellent investment potential, and as such am pleased with the increasing awareness of the British public (and yes, in part thanks to media coverage over the last two years) , unrealistic expectations do - over the long term - more harm than good.

Sadly, we at Slovakia Investment Property have, over the last few months, seen a strong rise in a particular type of enquiry - investors with a mind set on huge returns, clearly believing buying in Central Eastern Europe is a licence to print money.

Now, don't get me wrong. We wouldn't be selling Slovak property if we didn't believe in its outstanding potential. However, I also think doubling your money in, say, 10 years (without taking gearing into account) means you've made a good investment. (And no, we can't guarantee you will, in fact, make a 100% return; nobody can predict growth rates for a decade ahead!)

I do have an issue, however, with speculators expecting to see their property rise in value three- or four-fold in 10 (or less!) years. The justification is always the same - they've read, heard, or been 'offered' such returns elsewhere. No surprise here... there will always be unscrupulous estate agents ready to promise the world. But are they the only ones to blame? Or are they simply creating (an illusion of) what greedy investors want to see?

By late 2003 Slovakia Investment Property was the only company selling Slovak real estate to the UK market. Two years later, in time with the country's increased popularity with UK and Irish investors, several companies - all claiming to have long experience and be an authority on Slovakia - have started offering (mostly off-plan) property to trusting British buyers, often with the promise of massive and fast returns.

Unfortunately, some agents will always have an interest in creating a false picture of the market, be it with regard to rental returns or likely capital growth. At Slovakia Investment Property we will not jeopardize our reputation and trade it for short term commission profits. And, personally, I much prefer serving buyers and investors looking for viable long term financial returns than those hoping to make a killing in a year or two (and hands-off, of course).

So, by all means, invest and profit from new Europe's property markets, but don't forget to do your own due dilligence and research first. Don't go out and spend your hard earned money on the basis of a TV show's advice or, worse still, false promises of greedy agents selling anything they can get a commission for.

And, above all, be realistic with your expectations. They may well be exceeded, but will certainly be a lot closer to reality than any hype created by the media or unscrupulous agents. After all, no matter which country, property prices will, in the long term, only rise based on wage growth and affordability of domestic buyers. So, the next time somebody promises you 300% returns, ask them to guarantee it per contract! :)

Germany - a market re-emerging

noreply@blogger.com (sip) — Sat, 19 Nov 2005 10:16:00 +0000

A brief glance at the property section of any main paper or specialist magazine and you will easily spot the most popular destinations of british investment money. The traditional markets of Spain, France or Florida are competing with the new favourite, Central and Eastern Europe, and destinations in the Far and Middle East, Caribbean, South America or North Africa appeal to the more adventurous property buyer.

And yet there is one market that despite its position in the centre of Europe seems to have slipped through the property investor's radar. A market that offers opportunities not available anywhere else in Europe (and possibly the world) - Germany.

Are you mad?! - I hear you saying. Hasn't german property been in decline and the country's economy sluggish? Yes, however, Germany is the world's 3rd largest economy, and I believe it will turn around...sooner or later. And property prices are - after more than a decade of stagnation and in fact decline - at the very bottom.

Now, I am not suggesting investing in Germany for capital growth. Price growth is very difficult to predict in any market, but nearly impossible in Germany. (Although, I am sure the time will come when german property comes back to more realistic - read higher - price levels.) The truly amazing thing about investing in Germany are the rental yields - some of the highest in the world. Depending on area and property, 10% net yields are achievable.

The reason is simple. For one, Germans have the lowest property ownership rates in the developed world (under 45%, and as low as 14% in Berlin). Over the last 10+ years, with poor economic performance, high unemployment, and fall of property values, most Germans have seen an advantage in renting rather than buying...and that in a country where renting has already had a strong tradition and tenants often stay in their property for 10-20 years, or even for life. Of course the currently extremely low property prices also contribute to the high rental yields german market offers.

Now, it may all sound great...but things aren't that easy. As ever, you need to know the market and do your due dilligence before jumping into such a particular market as Germany. The country may offer some of the best property opportunities around, but get it wrong and you can lose everything.

You see, there is no such thing as a unified german property market. Some areas have enjoyed good economic performance, low unemployment, and consequently higher demand for property - cities like Munich and Stuttgart are a good example. Such locations are not likely to suffer a drop in property prices; in fact, prices should be increasing slowly as Germans from other areas keep migrating to the economically stronger regions. On the other hand, much of the former East Germany suffers from massive unemployment, and the overall lack of perspective drives many people to move out - these areas are already seeing a de-population, and the situation is to get worse over next years. And then there are very particular markets like Berlin.

Berlin, despite being the german capital, offers some of the lowest property prices in the country (60-70% cheaper than other west german cities). After a lot of enthusiasm and excitement post re-unification (as well as generous tax benefits from the government) an oversupply was created in Berlin. However, the expected arrival of large number of companies never materialized, and once tax subsidies were abolished, prices crashed. Today, we are seeing first signs of a market picking up, prices are slowly starting to strenghten, and the overall mood is a more optimistic one.

Foreign investors are increasingly putting their money into german property, be it large real estate funds purchasing thousands of apartments, or individual investors and smaller companies (Israeli, Irish, Dutch, British, US...the usual suspects) buying high-yielding apartment blocks. Perhaps more surprisingly, Germans are also starting to realize the opportunities, and single (usually tenanted) apartments are proving increasingly popular with small local investors. And while net yields of single flats are rarely higher than 4-5% p.a. (as opposed to 7-12% in case of apartment blocks), they still look more than reasonable - compared to the 1-2% interest rates german banks pay on savings.

So, with 10% net yields achievable on apartment blocks and mortgage rates of 4-5% p.a., it looks like a no-brainer, correct? Well...not unless you know what you're doing. For one, the german market is heavily regulated... particularly the rental side. You can't get a tenant out of a property (except if they don't pay the due rent), so you need to be aware that your tenants will stay as long as they wish - in many cases this is 10-20 years, and even longer. Which is not necessarily a bad thing, especially considered that tenants in Germany maintain the property, furnish it (even buy their own kitchens in some cases) and take care of most everything. They also pay all service charges, property tax, utilities; while you get the net rent.

But the rules don't stop there. You are not allowed to raise rents by more than 20% in 3 years, and rental values too are regulated. As a landlord you shall not demand rents higher than the area's rental limits (Mietspiegel) - the penalties are severe, so you may want to think twice before breaching it. The rental values for a property depend on many factors (area, standard, whether the property has bathroom and WC, modern heating, etc - you would be surprised how many older flats in Berlin do not have these amenities!). Typically, Berlin rents (net) range between 1.5-3 euro/m2 per month for very simple/low standard flats, 3-6 euro/m2 for better quality, and 6-8 euro/m2 top.

And while rents are extremely cheap for a major European capital (where else could you live in a nice, renovated 2 bed apartment in a good central area for less than 400 euro a month?), the purchase prices are very low too. Today, an "Altbau" (late 19th/early 20th century) block of (10-100) flats in a medium to good area of Berlin can be purchased at 400-600 euro/m2 - unrefurbished. Add the cost of renovation (200-700 euro/m2 depending on extent and standard) and you will have spent less than 1,000-1,5000 euro/m2 for a beautiful and fully renovated building. In top areas the cost is likely to be around 2,000+ euro/m2 for a renovated block, while in not so nice locations buildings (in need of renovation) can be had at just over 200 euro/m2.

So, the german market offers some exciting opportunities...but, where should one start as a first time investor in Germany? Well, there are a few strategies (for residential investment), each offering benefits as well as disadvantages.

1. Buying vacant property for renovation and rent/sale
By buying apartment blocks in need of full renovation and doing them up the best m2 price can usually be obtained. In many cases extention or roof conversion can also be pursued (subject to planning). After renovation the units can be rented out or, if appropriate, divided into separate titles and sold.

A word of caution - if this is your strategy, you may want to look for vacant buildings: renovating apartments while tenanted gives the tenants the right to stop paying rent until the disturbance comes to end. While buying for renovation is one of the best strategies in Berlin, it will require a larger investment, as german banks are generally unwilling to finance purchase of vacant blocks, neither lend on the renovation work itself. Once your property is refurbished and let, local lenders will typically offer up to 70%LTV mortgages, at 4.5-5% interest (and paying back 1.5-3% principal) - provided you are able to prove sufficient (personal) income.

2. Buying tenanted property
Most apartment blocks in Berlin are sold tenanted or partially tenanted. This offers the advantage of easier access to financing, but also means you will not be able to raise rents more than permitted. For this reason the best way tends to be waiting until an apartment becomes vacant, to then renovate (the vacant units) and re-rent at a higher rent (or sell where appropriate; before selling a unit all apartments must be divided into separate titles).

Other possible investments include purchasing land plots (at currently very low rates even in prime areas) for later sale or development. However, the current market does not offer potential for new development (except in very particular cases) since the cost of building is higher than the prices of the final product at present. Buying land should therefore be viewed as a long term hold strategy.

This is one of the reasons you will not see many cranes around Berlin...extremely few new blocks are being constructed (and these are either office buildings in top areas or a few small apartment blocks in the most exclusive parts of the city, where the final price allows for new construction cost). Berlin is also one of the few markets in Europe where investing in new built flats is a sure way to lose money. New builds tend to lose value after completion, as well as being far less popular with most Germans than classic period turn of century flats (Altbau). Rental yields on new property are also extremely low, as opposed to classic (renovated or unrenovated) properties.

And, finally, you may be well advised to buy in a good area, in demand with tenants as well as buyers. The Berlin market is still too risky to invest in anything than a solid area. While net yields of up to 15% can be achieved in less popular locations, further price drops in such areas are more than likely.

Berlin certainly isn't for everyone, but for those looking for good quality, high yielding income properties at rock bottom prices there aren't many markets offering the advantages Berlin does. Just don't expect any capital growth...it will be an added benefit when it comes (and it will...whether in 2 years or 20...for the right property in the right area). After all, this is the capital of Europe's largest and world's 3rd largest economy.

Capital growth or rental yields?

noreply@blogger.com (sip) — Fri, 21 Oct 2005 08:11:00 +0000

As overseas property investment is becoming increasingly popular, large shares of British buyers are looking for big profits in countries they have often never set foot to. Seasoned investors seeking better returns that those achieved at home, novices keen to jump on the property bandwagon but priced out of the UK market, first-time buyers opting to purchase overseas while renting back home...

New property companies and investment clubs are springing up and new destinations aiming to be tomorrow's "hot spots" are being added nearly daily. In all the confusion and sales frenzy, is it surprising that investors, worried about missing out, often sign up for The ultimate opportunity just to find out their big profits dream has turned into a very real nightmare?

The time of awakening generally comes...on completion.

A quick glance at overseas property agents websites and you will see the new mantra: off-plan buying equals huge profits. Have a closer look and you may be shocked to see how many of these property investment "specialists" sell you the dream you only need a tiny deposit to make fantastic profits - there is no need for you to have the funds, or even ever take out a mortgage...simply buy off-plan and sell before completion with a massive profit! What could be more appealing to a first-time investor or buyer on a budget?

Well, it may all sound exciting, but there is a far bleaker side of the story. While most look at buying abroad (especially in Central and Eastern Europe) for the benefit of potentially high capital gains, one should never forget capital growth is far from guaranteed and should only be viewed as an additional advantage, never the only purpose of investing!

But, I hear you say, many have made money flipping off-plan properties. True, but at least as many have gotten into trouble, unable to either complete or sell the properties, or completing and having a vacant property on hands, as there haven't been much of a tenant demand in the first place... I know of plenty of such investments gone sour, both here in the UK and overseas.

This is why I can't stress it enough - do your research! Research is what makes a difference between a lucrative investment and a money loosing headache. Do not - EVER - buy a buy-to-let property in an area that does not already have a good rental demand! There is nothing more foolish than purchasing a rental investment (whether it be tourist letting or long-term lets) where there is no rental market at the time you're investing.

Yes, if you are extremely lucky, a rental demand may suddenly be created by the time your new property is ready to be let...BUT, if you are that lucky, you will do better still playing lotto! Ie, in my experience, if an area does not offer good rental returns today, it will likely not do so in 1-2 years either.

Ignoring rental yields is a very risky strategy. A vacant property will quickly erode any potential profits, and selling may not be as easy as you had been told at the time of signing at the dotted line. After all, what makes a case for massive capital growth in such a short time scale as 1 or 2 years?

Undoubtedly, most of the Central and Eastern European countries offer good long-term prospects for property price growth. However, in order for this to happen, the population needs to get more prosperous, investment needs to keep flowing in for many years after their EU entry, economic growth has to continue strong. There are massive differences between the levels at which each of these countries is today. Some are reasonably wealthy, some still incredibly poor. However, none of them will achieve UK's or Ireland's prosperity levels overnight...and neither in 1 or 2 years.

So, the safe strategy has to be a medium to long term one. And, once you are set to hold your property for a number of years, I'm sure you realize the huge importance of a solid rental market...

True, there are also markets where short-term capital gains have been made. A closer look will reveal the source of such sudden growth: foreign (mostly British buy-to-let) investors. If you ask me, this is the riskiest of all investments, with no back-out strategy at all.

Buying in a country/area where virtually all property is sold to foreign investors, with no local buyer demand (and future rental potential being based on elusive international holiday makers) is a sure way to disaster. You may manage to sell on to another keen investor, but what happens when all the off-plan apartments start coming onto the market, chasing British investor buyers (who at that time may well have lost interest and found another international "hot spot")?

So, to sum it up...Unless you are a gambler, forget short-term profits. Buying a good property in an area with solid rental demand and holding for the medium to long term will almost certainly pay off. Flipping may work out for you if you're lucky, but the only sure beneficiary of such strategy is the property agent who sold you the investment.

Now, don't get me wrong. We too sell new built properties. Am I just being hypocritical?
Well, not quite. Although nobody can guarantee future rental demand (in any market), we only offer investment property in areas where you can rent them out TODAY (we believe our buyers are investors, not gamblers, and counting on future tenants where there are none today is not a good option).

Even more importantly, we offer all types of property - residential (new and classic), commercial, land, vacation homes - and will always advise potential buy-to-let investors on the most appropriate location for rental first, with options for new or resale property in second.

And you will most certainly never ever hear us promoting flipping (ie selling on before completion) -> The way to property prosperity (in Slovakia and most other markets) is holding and letting your property for the medium to long term.