Can a broken market like Athens really beat established markets like UK/USA/Australia? Let’s find out.
In the UK rents may appear to be high historically but when compared to the prices of buying real estate the numbers rarely stack up.
Investors have for years been buying in London and the south east of England for equity growth. It seemed it would never end.
In Sydney where the Australians missed out on GFC 1 (don’t worry guys you are the new sub prime bomb to set off GFC 2 this year) investors were even more hung ho and bought properties with so called negative gearing – where the monthly interest only payments are up to 2x the actual rental income.
But even in the UK where lenders insist on rental coverage of at least 125% of the interest payments Southern property investment was only about equity rise. Get some rent to help and wait for the market to rise then sell.
Investors are still buying into London for yields as low as 2% with zero equity growth in sight due to the global situation and Brexit in particular.
In Athens it’s like the 1990s all over again. We’re buying small one bed properties for €50,000 with good tenants already in paying €350 per annum. If you’re paying cash that’s a yield of 8.4% without relying on the promise of equity?growth. And if the equity growth comes along. We’re laughing.
If you then look at creative contracts for buying in Athens then the true yield (return of your actual cash invested) can be astronomical.
Here’s an example :
Flat bought on terms.
1 Bed First Floor apartment with ‘Green’ view
- Situated next to a little park which is unusual in Athens
- Used to be seller’s parents home but now empty
- Dad wants rid of the tax issue of an extra property
- Needs a new kitchen and bathroom – they’re both marble but not for modern use
- Small balcony overlooking rare green space that can’t be built on – adds feeling of space and makes it easier to let
- Close to Metro for commuting
- Workers area but very safe and well kept
- Ideal for rental to an older person or young couple starting out
- We agreed to pay the €35,000 the seller was asking for in return for
- 12 months exclusive access to ‘fix up’ the place before we complete
- Payment of €300 per month to come off the price
- Balance at the end of 12 months
- This may seem like a short deal but this was agreed 6 months before the final contract giving at least 18 months in total in a rising market
- Goal for this one is fix and rent and pay the low balloon or sell on to an investor for cashflow – market rent alone (with zero capital growth) would be 10.29% p.a.gross depending on low cost refurb
- Refurb would add value to property at approximately 1.5x cost