Investing in real estate in Turkey has always been a reasonable investment decision that can bring benefits. Moreover, foreigners can buy different types of properties: housing, commercial spaces (warehouses and offices) and mixed residential-commercial areas. The latter consists of apartments in hotel complexes: they do not give the right to obtain citizenship and are more expensive than ordinary apartments in Turkey, but the owner does not need to keep them clean all the time and can rent them out without hassle. Meantime, they provide a much higher and more stable income than an independent rental business can provide: all issues are handled by management companies owned by hotel brands.
Another option is purchasing land plots for various purposes (unlike housing, land has not fallen in price over the past 12 months, while residential real estate has slightly decreased in price for some months) and complex tourist facilities.
Let's look at the pros and cons of different options.
Content:
- Investments in residential real estate
- Investments in commercial real estate
- Investments in land
- Investments in tourist facilities
- Summary
Investments in residential real estate
Advantages
Financial return from:
- a gradual increase in price when buying off-plan properties for sale in Turkey (the cost difference between the early stages and the final option — pre-built apartments and houses — becomes more significant);
- a "natural" increase in value in both annual and monthly terms.
In addition, there is the chance to generate consistent income by renting out. Just a friendly reminder that both a one-year contract with the option to extend and a short-term tourist rental are acceptable here. Engaging in the more profitable option requires specific housing requirements to be met, and the individual renting must hold a valid licence, whether they are the owner or a trusted intermediary (such as a realtor, agency or travel agency). We wrote about some nuances and updates about the law on short-term rentals here.
Risks
- Market fluctuations: for example, housing from winter to early summer in some provinces has fallen slightly in price, from 2-3% for new buildings to 15-20% (for a short time) for secondary properties in less desirable areas.
- Management challenges: continuously engaging with guests and covering maintenance costs for the apartment, whether it is being rented or kept empty for investment purposes, remains necessary to maintain the residential complex. The size of properties in Istanbul competes with the high rental prices of sought-after neighbourhoods.
What to pay attention to?
You should pay attention to the "new generation's homes". We are discussing buildings that are a bit pricier, but they are more cost-effective to upkeep (including potential monthly expenses) with various advanced technologies. These are low-rise buildings that are also more secure during earthquakes. They are equipped with a Smart Home system that regulates the room temperature and turns off electrical appliances, lighting and underfloor heating to reduce heating costs. These advantages involve gathering and reusing water, having electric car chargers in residential development projects in Turkey, a recent initiative approved by authorities, and more.
Market analysis
The desire for eco-friendly homes equipped with smart technologies is increasing in 2024 and expected to persist in the future. Developments situated on the outskirts of urban areas are experiencing a rise in popularity offering residents the opportunity to be close to nature while still having easy access to transportation and important facilities like schools, hospitals and shopping centres. If you need assistance in choosing properties, reach out to TurkEstate: our network of reliable partners provides real estate in convenient areas.
Investments in commercial real estate
Advantages
- High yield potential: rental income and long-term tenants. Commercial properties, such as offices, warehouses and other premises, are rented out for a longer period than flats in Turkey.
- There are certain tax advantages as well (for locals) that allow you to reduce costs.
Risks
- High initial cost: such investments are more expensive than one or two apartments.
- Loss of income in crisis situations for the economy, when the former tenants move out, and the new ones do not stay for some time.
Market analysis
Furthermore, following the pandemic and the rise of "hybrid" workspaces, there is an increasing need for coworking areas. That means, if you purchase an office unit and renovate it according to the most popular office design in this city and region, you can make a significant profit.
Investments in land
Advantages
Land plots are the perfect option. If you keep empty land plots in your investment portfolio to generate passive income, then the only costs are annual taxes, unlike cultivated agricultural land, etc. There will be no need for repairs, communication depreciation, etc.
Once more, land in Turkey is an asset that continues to increase in value. That is why more and more investors are either switching from buying housing and commercial real estate to land plots or diversifying their portfolio.
Land prices are steadily increasing on their own. If the plot happens to be close to the construction of a transport highway or a future major infrastructure facility, its cost could rise greatly in the future. The most important aspect is to choose the plots in the right location.
Risks
- Profitability may not be so quick: the time it takes to convert assets into cash can be extended if the site is not situated in a rapidly growing location.
- The challenges arise when altering land zoning or environmental regulations in a specific area, especially in Turkey, where seismic activity is a consideration. Hence, it is crucial to seek advice from experts before purchasing.
Market analysis
2024 will be dedicated to investing in land suitable for renewable energy and sustainable houses in Turkey, which may include urbanization in cities. Furthermore, there remains a significant enthusiasm for agriculture and organic farming initiatives, with a continued need for land in this regard.
Investments in tourist facilities
Advantages
First, let us recall the benefits of purchasing apartments — hotel rooms, from one to several ones, including purchasing entire floors — in hotel complexes managed by professional hotel branches. We mentioned the advantages of buying apartments in such projects at the beginning of the article. In addition, the bonus is the opportunity for the owner to live in such apartments for free for some time. It is important to make sure that this condition is specified in the contract with the management company. This is extremely convenient for holidaymakers at resorts or business trips to Istanbul given the current hotel prices.
Second, the key advantage in the tourism infrastructure as a whole is high seasonal profitability: Turkey has been heavily reliant on tourism as a key source of income for a long time.
Moreover, this is the international appeal of investments: it can attract buyers from various countries when selling, and multinational tourists when renting.
Risks
- Seasonal fluctuations: income may decrease during some periods, for example, in winter, or force majeure situations such as a pandemic.
- Management challenges: there is a need for professionals to solve all the problems related to the accommodation of guests.
Market analysis
Emphasis is being placed on investing in specialized sectors such as wellness, nature and adventure tourism. Furthermore, similar sustainable development and environmentally-focused projects offer a competitive edge over other tourist attractions.
Summary
It is essential to vary your investment portfolio by investing in various types of real estate in to ensure that each property yields returns at different times. This strategy allows for steady profits even if a specific area experiences a slowdown, while all assets thrive during periods of economic growth.