PROPOSALS FOR INVESTORS

Weather you are a small or a big investor, if you are interested in buying some property for investment purposes, we are able to help me make a wise decision.

The interest rates that most banks offer today are very low, and the average at around 3% per annum (p.a.). Given that inflation is around 4 to 5%, by keeping your money in the bank, the purchasing power of your money is reduced by around 2% each year. So instead of your wealth increasing, it is reducing.

We have a range of investment proposals for you, which can yield anything between 15% to 30%, depending on the size of your investment and the period you are willing to wait until you cash out your investment.

The larger your investment, the larger the yield will usually be.

Below we are describing two investment scenarios, very briefly. If you are interested for a full scenario, please email us your budget and we can send you a proposal to consider, free of charge.

Scenario A: Buying a single unit (flat or house) with the intention of renting it for a
                     Period of 5 years and then selling it.

If you are interested in buying a unit and generate income by renting it, we usually recommend buying smaller unit, i.e. 1 or 2 bedroom apartments.

A 10 year old 2-bed apartment (around 90m2), in a good location, will on average cost CYP65,000 and it will usually rent around CYP300 per month (p.m.) or CYP3,600 p.a. That’s a return of:

                                3.600  x 100 = 5.3 % p.a.
                              65.000

If can contribute 30% of the value of this flat, which is CYP19.500, and you borrow the remaining amount of CYP45.500 at a rate of 6.5% for 30 years, then your monthly installment will be CYP288.

Since this flat will rent for CYP300, you will need to make any of the bank payments. They will be paid by the rent you will receive every month.

Therefore for 30% of the value of a property, you can own a property which will increase in value by a minimum of 8% every year.  If say you sell it after 5 years its value will be:

                              65.000 x 8% x 5 years = CYP26.000 increase in value

 The selling price of the flat will be CYP91.000, which you will use to pay off your loan and you will have:

                              91000 – 19500 = CYP71.500

Your loan was CYP45.500, so after paying off your loan, you will have a profit of

                              71.500 – 45.500 = CYP26.000  Profit before Tax

Capital Gains taxes in Cyprus are fixed at 20% (if you have a company which trades properties its 10%). Therefore your net profit after tax will be:

                              26.000 x 80% = CYP20800 Profit after Tax

Since your investment was for 5 years, the average yearly return is

                              20800/5 = CYP4160 year return on your investment

Your investment was just the down payment for the property, so your return on investment (ROI) in this case will be:

                              4160/19500 x 100 = 21.3 %

What does that compare with the 3% that your bank gives you? And the 3% that your bank gives you is subject to income tax!

Scenario B: Buying a piece of land, developing it, and selling the developed units

There is a plot available for sale at a good location, in the sea front of Limassol, in the same road and area as some of the islands most prestigious hotels, like the “Four Seasons”   and   “Le Meridean”. It is 9632m2 with a building density of 40% and maximum height of 2 floors. Limassol is located on the South Coast of Cyprus, it has sandy beaches, and it is the largest city on the coast line of Cyprus. It is both a commercial center and a tourist resort. The market for properties in Limassol is large, consisting of locals as well as foreigners, mostly Europeans and Russians.

Size:
The plot is divided in two parts:

1. The commercial part (where shops, restaurants, hotels etc may be built) – 1652m2 which as you can see on the map it is on the main road, and
2. The residential part (where flats and houses may be built) – 7980m2 which is right behind the first part and it has reasonably good shape for development.

The m2 mentioned are “as is”. In order to be developed, roads, green areas and so on, will take approximately 30% of the land. Therefore, approximately 6742m2 will be left for development purposes. Since the building density is 40%, building can be constructed with a total living space of approximately 2697m2 plus 540m2 of covered balconies.  You are allowed to build unlimited uncovered balconies (without a roof), gardens, swimming pools and so on.

Every m2 of living space in this area can be sold at approximately 1600CYP. So the expected revenue is:

                              2697m2 x 1600CYP= 4.475.000 CYP

The cost of constriction is approximately 550CYP per m2, i.e.
                              2697m2 x 550CYP = 1.483.000 CYP

The cost of buying the land is:  1.700.000 CYP plus 120.000CYP for transfer fees.

Therefore, the expected profit will be approximately:

Expected Net Profit:  4.475.000 – 3.437.000 = CYP 1.038.000 (31.4% ROI on Development Cost)

In this case your profit will be realized over a period of 2 years. You can start selling the units you will built as soon as you get a building permit, before actually building them. Therefore the amount of money you will need to borrow, will be mostly that for the purchase of the land.