Straight Talk: Perfecting your exit strategy when investing in Istanbul

When you're investing in property you need a crystal ball to maximise your profits - and find a buyer. Property Turkey director Cameron Deggin offers up a few tips for would-be investors before they make a move in the Istanbul property market.

Think like a Turk

"As a foreign investor you need to think and act like a Turk," Deggin says. With 95% of the Istanbul property market made up of Turkish buyers, you are highly likely to sell to a local. What's more, they're likely to be a home buyer.

"So what do Turkish home buyers want? What's the attributes of a home?" One piece of advice Deggin has is to avoid busy highways. "For some overseas investors, particularly those accustomed to investing in the Middle East in places like Dubai, they might think if the property is located on a property on a major artery that's a plus sign."

However, in Turkey this is a drawback: Turks target developments on smaller roads, Deggin says.

Read more: Straight Talk with Cameron Deggin

Avoid home offices

In latter years, developments that offered dual-use units were touted as the next big thing by developers, Deggin says. However, it hasn't panned out. 

"The home office concept hasn't really taken off in Istanbul," Deggin says. 

He mentions the Astoria, where Property Turkey had an office some years back. "This suffers from this point, and home buyers keep away from this."

Turkish buyers are looking for a community, he says. This simply isn't there in a large complex where your neighbours are businesses. 

"This takes away from the homely nature. Turkish buyers want to know that if they are buying a home all their neighbours will be there for the long haul. They want to be able to say hello and have a coffee."

Watch your entry level

That beautiful five-bedroom villa might seem like a decent investment option, but the pool of buyers who will consider it will be a small one, Deggin says.

"Buy at a point where after five years you are still targeting a large buyer profile," Deggin says. That means pitching it at the level of young Turkish buyers.

"Make sure you are within the reach of the young Turkish population," he says. "Turkey is not a poor country, yet it's not a wealthy country. Which means out of Turkey's 85 million population, the majority is young people starting their lives. They have a good future earnings potential, but they're not now earning megabucks."

To avoid pricing yourself out of the market, invest in affordable luxury, Deggin advises. That is central, reasonably priced apartments with excellent facilities and good access to the city centre.

Don't buy a good project in a bad location

"Rather than buying into a good project in a bad location, buy a bad project in a good location." 

As even novice investors know, location is everything when you're buying real estate, Deggin says.

On the outskirts of Istanbul in neighbourhoods like Esenyurt and Beylikduzu, there are some really good projects with comprehensive facilities, he says. "In isolation, you might review these projects and think, they have everything. However, these areas generally tend to have a glass ceiling, which isn't high."

The moment a Turkish home buyer can afford it, they will move to the centre of the city, or to an area perceived to be more desirable, he says.

 "Go for an average project in the right location and the right entry level, a lean price. You will make better returns when you come to sell."

Beware of joint ventures

Not all developments are created equal, Deggin warns. In a joint venture, the landowner and the developer each have a share in the project, generally a larger complex. Sometimes, the landowner will have been paid for the land with units in the development.

Under the terms of the contract, the landowner is generally unable to market their units until the developer has sold out, Deggin says. This means any investor who is hoping to cash in in the mid term could find themselves undercut.

"Say you pay $100,000 for a one-bed," Deggin says. "Three years pass, you want to sell for $135. You put your property on the market only to find that a comparable property is being offered for $95,000, right next door."

You might wonder if you'd overpaid for your property, he says. You haven't. What has happened is the landowner has also decided to cash up, and they can sell at any price they like. 

Investors who find themselves in this situation will have to wait a few years longer till the prices start stabilising, Deggin says.