Acquisition of real estate property in resort areas. Advantages and disadvantages

When thinking about buying real estate property in resort areas, firstly, you need to clearly define the purpose of the acquisition. Housing for yourself, for the sake of obtaining a residence permit or citizenship, speculative profit on the difference in prices at different stages of construction, a rental source of regular passive income? For each of these goals, the selection criteria will be completely different, often even contradictory.

In this article, we will deal with the main aspects that are important to be aware of when planning an investment in resort real estate. Moreover, now, against the backdrop of a pandemic, in many regions you can find interesting offers at prices significantly lower than pre-Covid.

Let's start with the fact that not every real estate purchase is an investment. For yourself and for the sake of a passport, this is not considered.

There are several investment options:

• hotel     rooms, dorm rooms or nursing homes for rent;     
• micro-apartments     and apartments for rent;     
• renovation     of apartments for their rental or resale;     
• loan     for development or renovation projects;     
• club     deals (“sharing”) in development projects.

Your accommodation in the resort — an endless vacation?

Of course, this is not true. Resort life can be great, but it usually doesn't come cheap. Resorts usually attract people with money, and housing prices tend to reflect this.

Plus, the daily cost of living at a resort tends to be higher than the regional average for everything from groceries to entertainment.

Resort communities are less likely to have large chain stores (some resorts actually ban chains or franchises). Therefore, you may have to shop in smaller and more expensive stores, or burn gasoline and spend time on shopping trips to nearby cities.

Another disadvantage of resort life is seasonality. With the exception of a few regions with a year-round favorable climate, most areas in the off-season are not so attractive and comfortable in terms of everyday life.

Resort housing for income and citizenship — a profitable combo?

Another common stereotype. Many people want everything at once: having bought real estate, get a “golden visa”, earn money by renting it out to tourists, and sometimes even visit them themselves. But it is impossible to hit three targets with one shot.

The characteristics and qualities of an object that make it attractive for each purpose are different. And if finding a “two in one” option is extremely difficult, but possible, then combining all three desires is definitely unrealistic.

Higher return — more risk

The golden rule “the higher the yield, the greater the risks” is also relevant for the real estate market.

If you want, first of all, to preserve capital, receiving a small but stable income without the risk of loss, then developed cities and regions with good infrastructure and a stable economy are suitable for these purposes.

Investments in development, redevelopment allow you to earn much more. Building and renovation in European countries can bring from 7% to 18% per annum. And, for example, on the Mediterranean coast of Turkey, the difference in price at the stage of the project and the commissioning of the object can be up to 50%.

But it is worth remembering that participation in projects with high added value is more risky, there is no guarantee of income and insurance against capital loss.

Possession is a job too

Another important point, which is also not often thought about when dreaming of real estate in picturesque lands - who will be in charge of operational management?

If you do not plan to do it yourself, you will have to hire a manager, or entrust the affairs of a management company. Of course, this will slightly reduce your own income.

The most attractive

Based on the foregoing, it is impossible to appoint one “absolute champion” for all cases and in all respects. Different countries can be attractive, but each in its own way.

Traditionally popular among tourists and investors, Turkey has recently become even more attractive after the devaluation of the lira. Now prices here are at the level of Georgia and Bulgaria, where the season is half as long. And the longer the season, the higher the income.

Another popular destination is Spain. This is one of the countries most affected by COVID-19, and it is here that you can now buy residential properties, hotels, commercial real estate with a 30-40% discount. But it will be difficult to get quick results here. You need to wait until better times and sell in 3-5 years.

Approximately the same price decline is observed in post-COVID Italy. The country affected by the pandemic is becoming interesting as a promising market for buying distressed assets with subsequent sale in a growing market.

Buying property in Thailand makes sense for the sake of renting out. There are even guaranteed rental programs here: after the acquisition, the property is transferred to the management of the management company. The owner consistently receives income without thinking about finding customers, taxes, and so on. Rental Guarantee Programs should be considered as investments for 5-10-15 years.

Real estate on the Adriatic coast has shown good growth in recent years (primarily Montenegro, Albania, where prices are still relatively low, Croatia).

Passport programs have made Cyprus and Greece popular among those who are planning to obtain a second citizenship by investment. Investments for this require much more than, for example, in Turkey or Montenegro. But both Greece and Cyprus are members of the EU, and the government offers quite attractive conditions for investors.

Will the crisis end after the pandemic?

In general, the real estate market is constantly evolving. Now it is somewhat unstable due to the pandemic, but all experts hope for an improvement in the situation after it ends.

And there are reasons for that. Yes, now, due to the closure of borders and restrictions on the movement of people, the industry, all tourism-related industries are suffering losses. But the current crisis, unlike the one that happened in 2008, for example, is not based on economic causes. So, the recovery will go according to a different scenario.