Everyone wants to be a real estate developer. Every few days a new client comes to me with an idea to buy, build or renovate a property in a foreign country. Many of them have fantasies of getting rich quick (do you know the song “Illusions” by Nissim Saroussi?), and some of them lack the knowledge, experience and skills required for it. Real estate development abroad can be challenging, but also highly rewarding. With proper planning, hard work and persistence, you can become a successful real estate developer and build yourself a secure financial future. So if you too are looking to realize the dream and become a developer, here are a few points to consider:
1. Which market do I want to operate in?
It is important to choose a stable real estate market with growth potential. For example, markets such as Germany, the Netherlands and Portugal enjoy economic stability and supportive government policy, which creates a good business environment that encourages real estate investment. By contrast, emerging markets such as Greece and Cyprus or the countries of Central and Eastern Europe may offer higher yield opportunities, but involve higher risks, such as political and economic instability.
A study by the international consulting firm JLL found that many investors today are looking for opportunities in secondary markets, where competition is lower and properties can be found at more attractive prices. However, it is important to conduct thorough checks and make sure that the market is indeed stable and has growth potential.
2. Focus
Focus on a specific niche in the real estate market, such as residential, or commercial or industrial properties, or buying old apartments or old buildings and renovating them. Specializing in a particular niche will allow you to develop in-depth know-how and enjoy a competitive advantage.
3. Build Yourself a Professional Hive
The team that will work with you, that will build together with you the real estate empire you are going to establish, should include professionals who know the market and the niche (lawyer, architect, CPA/tax consultant). Beyond them, it is important to build a strong professional network with key local players in the real estate market where you operate, such as brokers, banks, lawyers and contractors. A strong network will help you find investment opportunities, raise financing and receive professional support.
4. Risk Management
Everyone knows the immortal saying “no gain without risk,” and real estate investments involve quite a few risks, from market fluctuations, through regulatory changes, to problems with the property itself. It is important to identify the risks and formulate a plan to manage them.
A study by the consulting firm McKinsey found that developers who carry out thorough due diligence before investing manage to reduce risks and improve their chances of success.
Everyone knows that legal due diligence must be done, but people tend to forget to carry out financial checks such as a professional valuation, income/expense forecasts, an analysis of expected costs (renovations, maintenance, taxes), a check of the ability to repay a loan, or engineering checks such as examining the physical condition of the building, plumbing, electrical and air-conditioning systems, an estimate of renovation/restoration costs, or planning checks such as the property's designated use, future construction plans, building restrictions, building rights and so on.
5. Financing
If you don't have the equity required to get the project going, then how will you be a real estate developer?
I meet quite a few would-be real estate developers who think they will be able to obtain bank financing without having checked the local bank's terms and requirements for it, or who hope to raise the required capital from investors or from the buyers of the property. This usually ends in disappointment.
And in the financial context it is also worth mentioning the subject of taxation in a foreign country, which is fundamentally different and requires special attention.
6. Patience and Persistence
Success as a real estate developer takes time, patience and persistence. Don't expect to see immediate results. It is important to keep pursuing your goal and not to give up even when you run into difficulties. It is important to remember that real estate investments are long-term and require patience.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית