Europe Trip

How To Think (Eastern) European..and make a Fortune in Real Estate

November 16, 2014 | Comments Off on How To Think (Eastern) European..and make a Fortune in Real Estate

I have been investing and advising real estate investors in Eastern Europe for the better part of a decade. A growing number of investors with a pioneering spirit have been lured to this part of the world, in search of hot investment opportunities that can yield profits that are uncommon in North America and Western Europe.

I have seen many smart, successful investors come here from America and try to apply American investment techniques with varying levels of success. Anyone looking to invest in Eastern Europe would be well advised to understand the unique factors that motivate the market in this region. Many of the distinguishing factors of Eastern European real estate are actually distinguishing factors of European real estate while others are purely regional in nature.

Here is the long and short of what you need to know to think Eastern European and invest wisely in Eastern Europe :

The European Union drives the market .or it does at least partially. Most Eastern European countries are being considered for EU membership or soon will be. The prices of the European Union set the benchmark for prices in emerging European markets and drive speculation. Eastern Europe is not similar to Central South America which has no similar benchmark to follow. Europe tends to be more expensive then America in almost all facets but in particular in regards to real estate. Prices may seem high by American standards in some Eastern European locales (particularly Capitol cities) but may be quite low by European standards.

Time and time again, Central and Eastern European markets have proved that the EU has a tremendous impact in increasing property values. Just look at Hungary, Poland, and the Czech Republic . Each market saw a steady growth in value in the time leading up to EU ascension and continued/s to see remarkable growth for a period after. Note also, that many of the prices in the above countries for everything from apartments to land are more then they are in most American locations.

In some ways Bulgaria or Croatia joining the European Union is akin to Alaska or Hawaii joining the United States of America. It is a radical transition with radical implications.

Prices have gone way up and, though they may not reach London or Paris prices, still have long ways to go.

Cheaper is not always better. I am told of the story of an American woman from Washington state that was looking at a raw land opportunity in the north of Romania in 2002. When she discovered that per square meter was actually higher then in her hometown she promptly advised her agent that there was no way she was going to pay more money for land in Romania then she would in suburban America. Her thought process is quite understandable. However, it also proved to be quite incorrect. Land in her hometown has shown reasonable growth over the past 4 odd years but the land that she could have acquired in Eastern Europe would have earned her about a 400% profit has she sold in the summer of 2006. Similarly, many investors come to me and ask me “how much land can I get for x amount of dollars.” The answer I inevitably give them is “a lot, but unless you are starting a park or a farm, I’d rather help you buy the most profitable land, not simply the most land.”