New Real Estate era, new challenges for all of us. 5 tips for investors in order to reach a successful deal

Part 2

• to read part 1, click here

Romanian Real Estate world has entered in a new era since several months now. During this period, not only investors choose the rules of the deal, but the only expected transactions will be the ones dealing with top properties in "decent" prices or foreclosures. Everything else will remain "idle", depending on its owner's ability to wait for better days.
(read more about this new era here)

This is not a moment for someone to be arrogant, either he is an owner of a property or a potential buyer. It is time for clever moves and careful actions, in order the result to be satisfactory. But what should be the steps of an owner or an investor during the following 12 – 24 months? Let us try to identify them together, referring always to people with common sense and self respect.

5 tips for an investor in order to reach a successful deal
Mainly we see five types of investors during this period:

• Romanians who are interested in investing, but they are cautious and careful.
• Romanian "smechers" who are searching for "cheap deals, even not 100% clean" in order to buy fast (I have no tips for them, they know everything by themselves).
• Foreigners who search for opportunities.
• Foreigners who say that they don't search for opportunities, but in fact they do.
• Foreigners who search for really top properties and they are willing to buy them at a fair price "which is a bit higher than the "opportunistic" one".

Whatever your status is, there are 5 things that you should take into consideration before you proceed in any transaction, investing in a new property:

1. Decide what you really want and create your investment strategy. I see so many people who claim that they want to invest, but they don't really know where to invest in and what should be their priority. In the end, they just reject everything because they are still confused and undecided. If you really want to invest nowadays, try to create your investment strategy:
   • What is your budget?
   • Do you want to use a credit facility as well?
   • Do you know how much this credit costs? Do you have connections with a bank or you will start searching "after you find the opportunity"?
   • What type of property do you search for? A land, an apartment, something that produces income?
   • Do you need the property to live in or it is a pure investment?
   • What is your expectation for annual returns?
   • In how many years you wish to resell it?
   • Your investment profile could be described as defensive or risky?

Replying to all these questions will allow you to focus on the real targets you should have. If it is difficult for you to identify a strategy, ask an expert's help, there are some serious guys out there, able to consult you. But without this, you will simply lose your time, get confused and maybe frustrated too…

2. Don't be in a hurry. I know that my profession, Real Estate consultant and broker, should make me try to initiate you to move fast. But why to lie to each other? Today we have "two markets": The real one and the one of "asked prices". As time goes by, more people will need to change from the "asked prices" category to the "real one". And more "opportunities" will be available for you. So if you don't find what you are looking for, just wait. The following months will definitely provide you with more options to choose from.

3. Too many "opportunities", but very few real opportunities. 90% of the Real Estate brokers nowadays present to you everything as an opportunity. Ofcourse the argument sounds logical: "Comparing to 2008 price, now we have a deduction of … %". But who says that 2007 – 2008 price is the right basis to calculate with? We are living in a new world and just a price which is lower than the past is not enough in order to justify the potential of a property. We compare prices to the current market levels plus we try to predict how sustainable they can be in the near future. And ofcourse we always start by verifying:

Location

Location

Location

And all the other parameters of the property

Only after having known all these details, we are able to realize if this property is an opportunity or not.

4. Be VERY careful with the property's papers. During 2010 I usually lose an one important deal per month. I refer to cases where the owner and the buyer have agreed on the sale price. But when the buyer asks for the full set of documents, in order to verify everything and to be sure for what he invests in, then sometimes the story goes like this…

• "They will come soon" (first week or two)
• "I didn't understand that you need so many papers, I will do my best to collect as many as possible" (following two weeks)
• "What is this? Why do you try to trick me and ask all these papers? If you want to do business here in Romania, you have to buy without asking too much" (after one month will pass).
• "This is it. This is what I have. Either you buy like this, or you are not serious and you just spend my time" (after 6 – 8 weeks).
• (During all these "phases" there is always the possibility that the owner will simply stop replying to phone calls, having realized that he will not be able to trick you).

Don't accept to play their game. Protect yourself, securing your future success as well. Choose good lawyers, architects and Real Estate consultants and either buy something with 0 problems, or buy it with small problems, for which you will be aware of and it will be your decision to proceed. Avoid surprises…

5. When you find a top property at a fair price, don't miss it! I receive about 10 – 20 properties daily and I consider that I know more than half of the existing available ones in my field of expertise. Most of them are not good, this is why we don't propose them to any investor. Top properties are very few and usually expensive (still). This is why if you find a top property in a fair price, not "by someone distressed" but also not at a "very expensive" price too, I strongly suggest to you to think about investing in it. I don't expect the really good assets to end up being sold "for nothing". And this is for a very simple reason: If a top property will enter the market at low price…

Very few people will hear about it.

Many local rich people will move for it immediately.

Many other foreigners will compete with them.

The deal will finish in less than a week.

• "And how many top properties were sold at very low price so far?" I think… none!
• "Is there any exception on this rule?" you may ask. Yes, while top lands, commercial spaces and buildings are very few, the stock of apartments is many times more than the actual demand.
• If there is one market segment where one may find top properties at even better prices, I guess this will be it.
• "When?" I don't know and I am not 100% sure that this will happen. But I think that by the end of this year and during 2011 there will be more "reasonable" offers in this domain, as too many developers are stressed by banks and this is always the first segment of the market which is influenced by the crisis (and Romanian economy will probably worsen furthermore over the following months).

Don't forget: It is an excellent period for investments, but with your eyes open and the right consultants by your side