Investing money in real estate in Georgia

real estate investment

How to invest in real estate in country of Georgia?

You have probably all tasted McDonald’s cheeseburger, Big Mac, French fries and other foods at least once. They are everywhere in the world, no matter where you go, in most of them you will definitely find several McDonald’s restaurants. Now you may be wondering, what is the connection between investing in real estate in Georgia and McDonald’s burgers?

The fact is that the main wealth of McDonald’s is not the money earned from the sale of burgers and other food, but real estate. It can be said that McDonald’s is a real estate company rather than a fast food chain.

Its founder thought so. McDonald’s restaurants are either run by the company itself, or run by a franchisee, as in Georgia. The profits from the franchises, for McDonald’s, are much more than from the restaurants it manages.

That is why, since 2006, the number of restaurants run by the corporation has been growing, and the number of franchises has been growing more and more. The whole idea is that McDonald’s owns and rents most of the franchise restaurant buildings to companies that have the franchise to open a restaurant franchise and use the brand name. Isn’t it smart? So the company owns real estate in almost every country in the world and continuously makes a profit.

McDonald’s is not the only company that owns significant real estate, large real estate is owned by Amazon and Apple in the form of buildings or land. And in 2018, Google spent several billion on real estate acquisitions. Buying real estate for companies means better terms when it comes to taxes. But not only companies but also businessmen behave in this way.

 Investing money in real estate is considered to be the most reliable, and even the best investment by some. What is investing money in real estate, what can you invest money in and what should you consider when buying real estate, we will try to answer these and other common questions in a comprehensive way in this article.

What is it like to invest money in real estate?

Buying real estate is one of the most common forms of investing money. Some investors consider it the best and one of the most profitable ways to invest along with investing in gold and silver. When you buy real estate, you pay a one-time fee for the property and then, for the rest of your life, unless of course you decide to sell the property, you get a benefit from it.

 Also, the longer you own real estate, such as a house as an investment and not as your place of residence, the higher its value. The value of real estate is constantly rising, of course, at some point, prices may fall sharply, but if the country’s economy is developing, the price of real estate is constantly rising.

Consequently, if you are renting real estate, the rental price may increase dramatically over the next few years, as well as significantly increase the total value of the property. Depending on the type of real estate you own, you can use it for a variety of purposes.

You can buy commercial space and rent it accordingly for commercial activities. Of course, the more in the center of the space, the higher the value of it. An increase in its value is also highly expected. Commercial spaces are a good investment due to the fact that the number of constructions in Tbilisi is very high today. Their first and often second floors are also built for commercial purposes. You can buy the space for a lower price before the construction is completed and then rent it yourself.

If you invest in housing, you have even more opportunities. You can rent an apartment to tourists for a short period of time, register on tourist platforms, which will make it much easier for you to find a client and your apartment will become a source of income for you. You can also rent for a longer period of time and not worry about finding new customers.

Another opportunity to invest is to buy residential apartments in tourist cities. With travel platforms you can stay busy all day during the season and earn a much higher income.

Investing in real estate in Georgia

Buying real estate in Georgia is the most common form of investing money. People are well aware of the benefits of buying and renting real estate. You can buy several units of real estate over time and live on security. This is why most families who have the opportunity to buy real estate, or save a certain amount of money, buy one or more apartments to rent.

Aside from the fact that the pros of buying real estate are clear, this is one of the easiest forms of investing. It is much easier for people to perceive the benefits of owning a few flats than, for example, owning stocks or bonds.

Investing in real estate is also facilitated by the fact that new construction starts almost every day in Georgia. Today, the number of development companies has increased and consequently the number of constructions has increased a lot and people have more opportunities to buy real estate.

Why is it good to invest money in real estate?

Is it a good financial decision to buy an apartment or a house? You will often find this question on the internet, the answers are often mixed. The fact is that in some countries, buying an apartment to live in may be a financially unprofitable decision. That’s why this issue worries American millennials the most. However, buying an apartment and a house as an investment is still profitable and therefore popular. There are several reasons for this.

Real estate investing gives high returns

Anything that pays more than the cost over time is a good investment. Let’s calculate, you can buy a two-room apartment with one bedroom in one of the central districts of Tbilisi. You will spend about $ 45,000 to purchase, renovate and arrange the apartment.

 You will then be able to rent the apartment for $ 350 a month, which is the average rent for a newly built, furnished, two-room apartment. So you will deduct the cost of the apartment in 10 years. For the rest of the year, whatever money you get from renting an apartment will be your net profit.

The value of real estate is rising

Real estate prices are constantly rising. The apartment you bought, renovated and arranged was totally worth $ 45,000, its value will increase in 10 years. You can withdraw the amount invested in the apartment in full within 10 years, then sell the apartment and get double the amount as profit.

Real estate is a reliable investment

Real estate is one of the most reliable investments. A reliable investment certainly does not mean a risk-free investment. You may not be able to determine the time or place correctly. For example, buy real estate when its value is highest.

In such a case, when the economy returns to normal, the price will inevitably be adjusted and you will find yourself in a losing situation; Or for example buy an apartment in a promising location, however, the price of real estate has fallen due to events such as the construction of new buildings nearby and more.

Real estate management has been simplified

Managing real estate is now as easy as ever. Everything you may need is in your laptop. You can place your apartment or house on relevant websites to easily find interested people who want to rent or buy it. You can also post pictures of your real estate on travel websites if it is intended for tourists. You can hire a company or an individual online to maintain an apartment and so on. If you yourself do not want to micro-manage your real estate, you can easily find such a person or company for a small fee.

What to consider if you are planning to buy real estate?

We all agree that real estate is a good investment, but it is only good if it is done wisely. There are many things to consider when thinking about real estate.

Start at an early age

If you have the financial means and willingness to do this, do not think too much and start investing in real estate. If you buy your first investment real estate at the age of 30, by the age of 40 you will have a return on your investment and will receive a net return on your investment. Also, if you are interested in investing in general, investing in real estate will be a good start for you.

Do not buy real estate on credit

At this point we can argue, however, that investors are not advising others to buy real estate on credit. Their formula is to buy real estate that you can pay for with cash. If you still decide to buy an apartment with a mortgage, make sure that the monthly payment on the loan is less than the rent of the apartment.

Here, you should be well aware of the risks associated with borrowing. If you buy and rent an apartment, you may have a period when your apartment is not rented. Two or three such months can seriously hurt you. In that case, the apartment will not be your source of income, but a financial problem. In addition, your credit score and history will deteriorate which will make it difficult to manage your finances in the long run.

Do not rely solely on the selling price of an apartment or house

When buying an apartment or house for investment, do not rely solely on their selling price. This is definitely not your only expense. Calculate all possible expenses such as repairs, arrangement, repairs, customer acquisition and so on. You will be prepared to meet all the costs and better determine the value of your property in the future and the return on investment.

Explore everything about real estate

Be sure to research everything around real estate to make the right decision. Try to find out if any construction is planned around your property. Also look at the neighbors, the general situation and the environment and decide accordingly whether it is worth buying this particular real estate. Investing in real estate is a risk carrier. It may happen that the price of real estate that you predicted to grow will not increase and you will go into a loss.

Where to buy real estate?

Another important question is where to buy real estate. Many new buildings are being built in the center of Tbilisi, at the same time construction is underway in the suburbs and other cities of Georgia.

Every person who wants to invest money wants to get the highest possible return on investment. If we look at it from this angle, the best solution is to invest money in resort areas. The number of tourists in our country is increasing every year, as we can host tourists from all over the world in all seasons due to the diverse environment and good climate.

If you look closely, tourists, especially young people, often choose apartments rather than hotels. There are simple reasons for this. Renting an apartment is much cheaper and more comfortable for many. In addition, modern travel platforms allow them to search, select and book the apartments they want in a few seconds.

Investing money in real estate in Batumi

Batumi is especially useful in this regard, where, like Tbilisi, new constructions start every day and apartments are sold very soon. The demand for Batumi is growing more and more, its international recognition is also growing.

With the development of infrastructure and the coastline, Batumi is becoming even more attractive to both Georgian and foreign tourists. In the list of tourists, which city or place to visit in Georgia – Batumi is always at the top.

As your apartment will be designed for vacationers, you can buy a particularly small apartment in Batumi. Let’s calculate. You can buy a small (28-30 sq. M) studio-type apartment on the waterfront for about $ 37,000. You can rent this apartment for $ 60 a day. The sea season in Batumi lasts from Invis to mid-September, therefore you have about 110 days at your disposal.

Let’s assume that out of these 110 days the apartment is rented for 90 days. In this case, you will get your investment back in 7 years. You would rent an apartment with the same options in Tbilisi for $ 300 a month and, consequently, you would withdraw the amount in about 10 years and a few months.

These numbers are of course approximate, you may withdraw the investment amount sooner or later. It depends on what type of apartment you are buying and at what price. Also what will be its rental price and how successfully you will be able to rent it. These are just some of the goal setting shareware that you can use to make a successful investment in Batumi.

Investing money in real estate in Gudauri

Another potential place where you can buy real estate as an investment is Gudauri. Like seaside resorts, mountain-skiing resorts are developing in Georgia and, most importantly, attracting the attention of tourists. More and more people are coming to Georgia for skiing because it is cheaper than other possible mountain-skiing resorts.

Ski infrastructure that was disorganized for years is now being repaired and gradually aligning with European standards. Even in foreign articles, which tell foreigners about Georgia and inform about the places of rest, the ski resorts always have a big place. Why Gudauri anyway? Gudauri has several advantages over other resorts.

First of all, Gudauri is the closest to Tbilisi compared to other ski resorts. It is 120 kilometers from Tbilisi to Gudauri and you can reach Gudauri by your own car in about 2 hours. There are also minibuses from Tbilisi to Gudauri every day.

That’s why it’s convenient not only for those who want to spend some open vacation there, but also for those who want to spend the winter weekend skiing. Therefore, the apartments in Gudauri are constantly occupied during the season. Demand for them is high not only from tourists, but also from Georgians who go to Gudauri to spend the weekend.

The season in Gudauri lasts from December to March, therefore, you have the opportunity to rent your apartment or house for foreign and Georgian visitors for 3-4 months. As the demand for Gudauri is high, your apartment may be busy throughout the season.

Ski roads and general ski infrastructure in Gudauri are the most organized and developed compared to other mountain ski resorts. There are 16 ropeways and 20 skating rinks, covering a total of 70 kilometers. There is a skating rink for all types of skiers in Gudauri.

Skating can be done by both beginner skiers, those who know intermediate level skating, as well as experienced skiers and professionals. That is why Gudauri is the most populous resort.

Due to these and other advantages, the demand for apartments in Gudauri is always high and they are rented throughout the season. Prices for apartments are around $ 50 per night, though of course depending on the apartment, its condition and location.

 Prices are especially high in the mid-season and during the New Year. Consequently, you can withdraw your investment in Gudauri in about 6-10 years. It depends on the value of the apartment and then the investment real estate management.

As in the case of Batumi, it is better to buy a one-bedroom apartment in Gudauri, as foreign tourists mainly travel in pairs and look for such apartments. If the financial situation helps you in this, you can buy several apartments in one residential complex and further increase your income.

When should you buy real estate?

As I mentioned above, it is best to start buying real estate at an early age and then make a net profit from it. However, due to the economic situation in Georgia, many do not have investment money at an early age. Abroad there are special investment funds where investing in real estate is 5000 US. It is even possible with dollars. Unfortunately, there is no such opportunity in Georgia, however, as the real estate sector is very profitable, it may be necessary in the future.

If you already have the investment money, do not rush to buy real estate. You need to determine the best time to invest. You need to observe the real estate market and choose the right time to invest. Like everything else, the real estate market has a certain cycle that repeats itself, though you can not determine the speed and variability of that cycle. For this you need to carefully observe the general economic trends.

The cycle of real estate is as follows: recovery, expansion, oversupply, recession. Let’s briefly consider each of them.

The first phase – recovery

Of course, the real estate market has no beginning, it is constantly evolving. However, we have chosen recovery as the first phase for this article. Recovery is the state of the real estate market when the market experienced a recession and is now beginning to recover. This period is marked by general hopelessness. The general picture is this: unemployment is higher than it was before the recession, the purchasing confidence of the population is low, and the price of real estate is also low, which in itself has a negative impact on those who have invested in real estate. So this is a time when people say, “Real estate is a bad investment.”

During this period, large investment funds soon begin to purchase large amounts of real estate. This is a sign that the market has officially started to recover and soon prices will return to the usual pre-recession mark.

 Those who have determined the market situation and acted quickly and confidently are making a profit, while others are missing out on an opportunity. As one of the most famous investors Warren Buffett used to say, it is better to buy unusual real estate at a good price than good real estate at an unusual price.

The second phase – expansion

By this time, the market recovery has been cursed and is starting to expand. General self-confidence in real estate is gradually increasing. As well as in business and companies are still starting to hire workers. In addition, real estate owners who have invested in and rented an apartment or house are gradually emerging from a state of recession.

This cycle is also evolving: the recovery is more or less complete, although real estate prices have not yet risen. Consequently, real estate owners are reluctant to sell their apartments or houses at a low price as this will lead to their loss. Consequently, the supply of real estate in the market is still low, but the population, which has regained its purchasing self-confidence, is interested in buying a lot of real estate, which, according to the demand-supply rule, leads to an increase in real estate prices.

In this period, while prices are still rising slowly, people who have come out of the recession are optimistic about the future and are thinking about buying a home. They want to move in separately, or think buying their own home is better than paying rent and so on. As demand grows, developers begin to build real estate to meet increased demand.

This is a good time to participate in the economic growth processes of the market, it is still a good time to invest, however it is necessary to observe how this whole cycle moves into a new reality. As the expansion of the real estate market nears its end, speculators and investors are entering the market, expecting profits from these processes.

At this time, people are starting to look for better apartments to live in to improve their living conditions. For example they moved to a bigger apartment or their own house. During this period the price of real estate starts to rise and people pay more than they have to pay.

This period is especially beneficial for those who are buying real estate for the first time and have qualified for a mortgage, as well as those who have been trying to sell real estate for a long time and have not been able to do so before.

Third phase – excess supply

The next phase is usually excess supply. An example of this is the United States in the 2000s when there was a lot of construction, real estate prices were high and many people were buying apartments or houses.

During this period prices have risen for everything, developers are paying much more for land and construction, and they are building a lot of real estate in the hope and expectation that the price of selling and renting real estate will increase even more. Investors also behave, they pay extra in real estate because you expect buyers to pay them much more for a finished and completely renovated apartment or house.

At first glance at this point everyone is happy and the situation in the real estate market needs to be balanced. However, supply and demand are not balanced, as it usually takes years to build and commission real estate. Accordingly an excess supply is generated.

During this period, the people who made the investment during the previous two phases are significantly embarrassed. However, due to the economic situation in the period of recession and expansion (unemployment, declining purchasing confidence and pessimism) there are not many such.

A large proportion of people see the success of those who bought real estate during the previous phases, though they do not pay attention to which phase the market is in now. Consequently, they are blinded by someone else’s success stories and buy apartments more expensively than they should.

Real estate sellers are especially embarrassed during this period because prices are consistently high. As well as buyers who are buying homes for housing with a long-term perspective.

The fourth phase – recession

In the third phase, the general economic situation improves, people have better incomes, their purchasing self-confidence is higher, and they want to improve their living conditions. At this time developers are actively building real estate and at the same time as the competition is high they try to offer better conditions and bigger real estate to the consumer.

Because of this, real estate prices are rising faster than the wages of the population. At this time the real estate market is moving into a situation in which the majority of the population can no longer afford to buy apartments due to their financial situation.

In this phase real estate prices fall, development companies slow down or cease operations, real estate tenants tighten their requirements, part of the businesses close. This of course affects the general economic situation and the unemployment rate. A similar recession was for example in 2008 in the United States.

Projects that have so far promised success to buyers and developers are becoming unsuccessful. People can no longer repay a mortgage or sell real estate because demand is either low or very low and real estate prices are low.

This is a good period for those who are experienced in real estate investing, however in times of recession you need to be careful. Real investors at this time are waiting for when the real estate market will reach its lowest point. At this time they start buying real estate at a cheap price. Once this process is actively started, a new cycle of recovery begins.

Buyers and investors who have not been able to find good deals during the second and third phases are embarrassed.

As you can see, the cycle is constantly moving and the phases are alternating. However, it is very difficult to determine exactly, at the right time, what phase the real estate market is in at one point or another.

 It is because of this difficulty that few buyers or investors are able to make ends meet in the first and fourth phases, and many people buy real estate at the end of the second or third phase. In order to make the right decision and invest at the best time, you need to look at the economy and determine what stage the real estate market is in at the moment when you want to invest.

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