Turkish leaseback

T

tskhealy

Guest
There's some crowd doing a leaseback in Turkey (Bodrum) at the moment. Typical price for a 2-bed appt in a fancy complex is about 75000 (+12000 furnishing). The furnishing sounds outrageously expensive but they guarantee 10% of the purchase price (7500) per annum for 10 years rental income. ABN-AMRO provide the guarantee according to this company's web site. Getting an interest only mortgage (using equity in my own gaff) at 3.15% would cost me about 2900 a year. An annuity mortgage (25yrs) would come in at about 6 grand a year. According to the site there are no ongoing expenses. So, as usual, this looks a too good to be true situation. Does anyone know anything about this?
What's the situation regarding tax on rental income in Turkey?
Can money be taken out of the country?
What's the tax situation when selling?
Can foreigners hold property without conditions ?
What affect does the wildly fluctuating Turkish lira have on property prices?

I don't hold out much hope on this, but I suppose if Turkey wants it's membership of the EU to actually happen they'll need to make sure things are regulated properly
 
Hi TS,

For what it's worth, I've noticed since the French leaseback scheme started attracting non-French investors in recent years, more "leaseback" developments are popping up outside France. They throw around the same terms--guaranteed rental, etc.--but they are an entirely different animal. I'm not saying this is the case here...and obviously I've no idea what the specs of the apartment you mention are...but I've heard of (what sound like) similar apartments for half the price you quote, and it's not an unusual practice for these new "leasebacks" (and, indeed, some of the ones in France, too) to inflate the price so you're funding your own guaranteed rental.

Developers in Turkey are pinning a lot hope on EU accession, to the point that they're quite eager builders, with not a lot of time for the little details like planning permission or proper title, so do your homework thoroughly on any purchase, and hire your own English-speaking guy to go over legal documents, no matter what the developer (or the developer's attorney) says.

To own in Turkey, you need a permit which you can't apply for until after you agree to buy. It's just a formality, but I wouldn't like handing over some money for something I was then told I couldn't buy.

Purchase costs are about 6% and CGT is 30%; your rental income may be taxed at 25%.

Good luck,

J.
 
Thanks Scotty. I don't have any faith in this myself. I'm thinking the the devaluing Turkish lira might mean that your property could be worth less in a couple of years? Either way, it's all a bit too far away and hard to keep a handle on for my liking.
 
Re: Turkish Leaseback - Orient Palace Bodrum

My wife and I are/were considering purchasing one of these properties and have engaged a law firm based in Istanbul to check it out. The contract was drawn up by one of the partners in the building firm - Euro Holding AS (Euro) - not a solicitor. Unifin Groep (Unifin), a Dutch company holds itself as authorized by Euro to sell, as well as to sign purchase and sales agreements with respect to the apartment complex. The contract itself is not in official form and does not comply with the requirements in the Turkish Civil Code and/or Notary Code. Therefore in case of the selling party's default it would be impossible to obtain a court order to transfer the ownership to our name. There is no documentary evidence that Unifin is duly authorised to sell and execute documents on behalf of Euro. The contract is not a sufficient legal document to secure the interests of the buyer, due to the peculiarities of Turkish Law. As it currently stands the agreement could easily result in a situation where the buyer makes a significant unsecured payment and in case of non-performance its only recourse is to Unifin for damages. These properties are being sold through a Re-max agent in Kerry and also by www.turkeyrealestatedirect.co.uk Funnily enough the agent in the Uk also has another website www.worldwiderealestatedirect.co.uk which will allow foreign developers the use of a virtual office. Apparently this encourages Irish & UK investors by virtue of the UK address and also "It is a proven fact that the British and Irish feel happiest when their call is answered by a member of staff with the same ‘mother tongue’ as themselves eg someone without a ‘foreign’ accent". I'll post further info when it is to hand. Happy investing...
 
Any further updates on your research cochese? I am trying to decide whether to go ahead with this scheme myself at the moment.
minimax
 
For what it is worth , a work colleague got the speel on these apartments about 4 months ago. He ended up buying a two bed in the same complex. Another colleague went for a more expensive lavish 3 bed job which cost about 120,00. I gave it consideration, and spoke to the re max guy in kerry, He was a good salesman, and made me believe that I was missing the boat if I didnt buy one there and then.

My colleagues have signed their contracts and a big part of it for them was that it was backed by the Bank AM AMBRO. There apartments are due to be finished in aabout 4. months time.

I didnt buy myself in the end, it all just seemed to be to easy, but hey, maybe I should have,

Jack
 
Dear Cochese or anyone else with knowledge,

I am considering buying a couple of these apartments in Orient Palace. Has anyone found that the legalities of these contracts have been improved/amended since the original trouble experienced by "Cochese".

I have visited the site, and the apartment complex seems to be progressing well. I am concerned that the swimming pools, etc don't seem to have been even started yet, or the 5-star hotel, or the marina & beach, etc...... yet the complex is being sold on the premise that it is to be completed in June 2006!!

Please post contact details of the Law firm in Istanbul, if you have it.

Thanks, Jack.
 
I am also looking at this development. The legal issues concern me somewhat. Could anyone who has purchased confirm that they have managed to get the contracts changed so that they do comply with Turkish Law?
 
Look at the bank backing the guaranteed return in this project. As far as I am aware they have no knowledge of their connection to the development.

The hotel is also situated in the middle of nowhere just around the corner from a fish farm. I'd think long and hard before investing here.
 
Hi Dunhill, what makes you think that the aforementioned bank is not actually backing this project?
 
The relationship is currently being investigated by a solicitor, when he contacted the bank they knew nothing of their backing of the project.
 
On the topic of leasebacks in general bear in mind that the purchase price of properties with leaseback/rental guarantees often build in the cost of such guarantees and inflate the price above what one might normally expect to pay for a similar property with no such guarantees on the open market.
 
[broken link removed]

I had a brief look through the website. It is out of date and not particularly professional looking (I saw a lot of grammatical errors) - is this actually convincing enough to persuade people to invest overseas?
 
peagle said:
they have found an underground spring which is suposed to mean that the hotel will now be a spa hotel
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Is somebody attempting to make a virtue out of a necessity here? Who are you getting your information from? The developers/agents or somebody who will actually give you independent, objective information?
 
ClubMan said:
Is somebody attempting to make a virtue out of a necessity here? Who are you getting your information from? The developers/agents or somebody who will actually give you independent, objective information?
Click to expand...

Well if you find hot water bubbling up where you wanted to put a building, there's all sorts of possibilities. A spa hopefully will be the most innocuous, unless the water is accompanied by the delightful aroma of hydrogen sulphide. Sulphur baths are great fun in the right place.
 
ClubMan said:
On the topic of leasebacks in general bear in mind that the purchase price of properties with leaseback/rental guarantees often build in the cost of such guarantees and inflate the price above what one might normally expect to pay for a similar property with no such guarantees on the open market.
Click to expand...

Good Point. 2 Bed apartments furnished around the 90K mark. This does seem expensive. I would worry that, in ten years, the apartments wouldn't be worth much more than this, if at all.

Anyone seen contracts on OP yet?
 
Purchase costs are about 6% and CGT is 30%; your rental income may be taxed at 25%.
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Also note that you have a liability to Revenue in Ireland. See [broken link removed] for foreign tax in particular and [broken link removed] for rental income in general

As there is no double taxation agreement with Ireland. You owe tax in turkey and ireland and no credit is allowed against your irish tax liability

From Revenue website as at 1/1/06
New treaties with Argentina, Egypt, Kuwait, Malta, Morocco, Singapore, Tunisia, Turkey and Ukraine are being negotiated
 
I have set up a blog which may be of use to people interested in this thread and Turkish property in general. I agree with the sentiments on caution wth regard to buying in Turkey and yes, you do come across cowboys - especially in the silly summer season but genuine referrals from buyers are the key here.

I've posted some info on buying & taxation in Turkey so far with more coming and all the articles are carefully researched and will be updated regularly. Some information is from experience (in Bodrum), some is from Turkish sources in the business. There's also a lot that has been trawled, cross-checked and verified. It's non-commercial at present so I really have no piper to pay - let me know what you think!

Matt

http://propertyinturkey.blogspot.com
 
Hi,

Do you know if your colleagues have got confirmation or proof that the bond with AM AMBRO exists? I am about to invest shortly but I am concerend about this point. Any assistence would be very much appreciated.


Shelley

Jack Frost said:
For what it is worth , a work colleague got the speel on these apartments about 4 months ago. He ended up buying a two bed in the same complex. Another colleague went for a more expensive lavish 3 bed job which cost about 120,00. I gave it consideration, and spoke to the re max guy in kerry, He was a good salesman, and made me believe that I was missing the boat if I didnt buy one there and then.

My colleagues have signed their contracts and a big part of it for them was that it was backed by the Bank AM AMBRO. There apartments are due to be finished in aabout 4. months time.

I didnt buy myself in the end, it all just seemed to be to easy, but hey, maybe I should have,

Jack
Click to expand...
 
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