Real Estate Investment in Romania 2002

You can make a lot of money by investing in Romanian Real Estate: Up to 400 percent profit in four years or less. As much as this statement may sound like I want to sell you a get rich scheme, the thing is that I am not selling anything. More importantly, I don’t want you to intrude upon my life and work, asking me for help so that you figure out exactly how you can make a lot of money. What I want to do in this post is share the good news and give you some tips on how to do it yourself.

The Romanian Real Estate Market

The Romanian Real Estate market offers mind-blowing opportunities for capital growth. Aspirations of joining the European Union, the rising power of the Euro, and the shortage of housing, office space and hotel space make this the right time to invest in residential and commercial properties as well as land upon which to build. Finding trustworthy and knowledgeable people to make it happen for you, however, can be tricky.

Although U.S. State Department advisories have not always been so favorable about Romania in the last several years, I can tell you that Romania is stable enough for investment; business is happening here with no fear of political or social issues to interrupt business. In fact, the conditions are right for a fantastic return on investment. Property values in Bucharest and other major cities will increase 100 to 400 percent in the next four years- depending mostly on location.

I’ll even get specific: a two bedroom, two bathroom apartment that costs $40,000 (travel, property, consulting, commissions, lawyers, taxes, etc.) just outside of downtown Bucharest will sell at $160,000 or more in 2007. That’s five years from now. I am so confident about this assumption that I am buying such an apartment with my girlfriend this weekend.

Good News

As much as this post may sound like I want to sell you a get rich scheme, the thing is that I am not selling anything. More importantly, I don’t want you to intrude upon my life and work, asking me for help so you figure out exactly how you can make good money. What I want to do in this post is share the good news and give you some tips on how to do it yourself.

I am convinced that Romania will join the European Union (EU) by 2008 – maybe sooner. In my humble opinion, Western Europe needs Romania for its cheap natural and human resources (low cost labor). A complete exploitation of Romania will not be possible until it has been assimilated into the EU.

As such, the Euro is gaining foothold in Romania. Within a year or two, the Euro will replace the Dollar as the standard. Of course, there is a Romanian currency (Lei) and that will gain in strength once Romania’s entry into EU has a date. When the Euro becomes the standard, prices will flip from the Dollar to the Euro, overnight. And there will be measurable gains for property values when that happens.

Regarding the shortage of housing, it will be eight or more years before there is sufficient housing in and around Bucharest. Meanwhile, salaries will increase in several industries, bank loans will become more accessible, and young professionals and married couples will want to move out from mom and dad’s apartment.

In fact, it has been very difficult for Romanian’s to buy residential properties because sellers wanted all the cash up front and banks didn’t seem interested in the mortgage business. Of course, Romanian National Bank (BNR) policy may be a little paranoid now after some bad banking in the past. As a consequence, BNR has unusual restrictions on banks, but this will change very fast.

Challenges

There are several challenges in buying property in Romania because things are still settling. Truth, justice and the American way doesn’t happen in Romania. However, things can be worked out to a reasonable conclusion- if you are clever and have cash. Local banks don’t give loans to foreigners.

There is a law that prevents foreign individuals from directly buying Romanian property and land. Gee, they don’t want foreigners to buy up their country. Go figure! This challenge is overcome by creating a Romanian company with a foreign owner (unic asociat) that has every right to purchase Romanian land and property as if it were a citizen.

Many properties come with legal questions of ownership that may not be clear until 2006 or 2007. Courts are still considering claims made by pre-communist rule owners and former residents. The property papers must be studied by an experienced attorney and a further investigation at town hall must be made regarding whether or not any claims remain to be decided.

Trusting the people you work with is the hardest thing. Real Estate Agencies (even the international brands) and Attorneys usually lack experience and don’t really give proper attention to a deal. Sellers do not wait for buyers to think things over. Of course, everyone will be so helpful and as charming as possible- until you don’t have something for them to gain.

Two Cents

With $25,000, you can make $100,000 in four years. And most middle class Americans can’t turn that kind of profit around in double that time. With a larger investment, the turn around can be faster and larger. You can buy a house in downtown Bucharest for $400,000 or less, tear it down and build an office building that you can sell for 4 Million Dollars in the same four years or less. The sky is the limit.

Unfortunately, waiting and thinking about it will cost you serious profits.

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Stan Faryna
August 30, 2002
Bucharest, Romania

About Stan Faryna

Stan Faryna is the founder and co-founder of several technology, design and communication companies in the United States and Europe including Faryna & Associates, Inc., Halo Interactive, and others.

Mr. Faryna’s political, scholarly, social and technical opinions have appeared in The Chicago Defender, The Washington Times, Sagar, Social Justice Review, and other publications.

Stan Faryna is editor-in-chief of Black and Right (Praeger Press, 1996), a landmark collection of socio-political essays by important American thinkers including U.S. Supreme Court Justice Clarence Thomas.

Copyright

Copyright 1996 to 2008 by Stan Faryna.

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