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Investing in Ukrainian Real Estate

August 4, 2020

This post is sponsored by Exon Premier. All opinions are my own.

Peter Daly is a brand and marketing strategist who partners with companies to enhance their visibility and grow their professional and personal brands. After working for plenty of large brands and startups, Peter helped them to grow from under 100 customers in 2010 to 3,000 now across the UK. 

Peter knows how to attract visitors, convert leads, and interact with the customers. Peter graduated from the University of Westminster with a degree in communications and journalism. Now he resides in London with his wife and two children. 

Peter Daly
Peter Daly

Starting a career in investing

Investing in the financial market

One of Peter ’s life goals was to start his own business as a professional full-time investor. He decided to achieve the goal with the help of investing. Mr. Daly has tried various strategies that include investing in the foreign exchange market and cryptocurrencies. 

There are different methods for individuals and investment professionals to invest in financial technology. The investors can put money into financial market exchange-traded funds. There is the KBW Nasdaq Financial Technology Index which includes 49 financial technology companies which are niche research, publicly-traded firms, analytics and data providers, stock exchanges, and portfolio management companies. 

The investors who are looking for direct exposure may consider the companies included in the index. For instance, these may be Cardtronics ($CATM), ACI Worldwide ($ACIW), Green Dot ($GDOT), Envestnet ($ENV), Square ($SQ),  IHS Markit (INFO) and PayPal (PYPL).

The other way of investing in the financial market is investing in venture capital. The funds that are active in financial technology are also active in other fields. So, if you are investing in Sequoia Capital you will get exposure to the other portfolio companies like Nubank or Prosper and the other holding companies of the fund. Bessemer Venture Partners, Norwest Venture Partners, Spark Capital, and Kleiner Perkins are also active in the other spheres. 

You can be an angel investor in financial technology. The crowdfunding model provides angel investors the opportunity to invest money in startups from the comfort of their houses. However, investing in startups involves a high level of risk. More than half of the startups fail, while the other half survive to the fourth year.

Investing in real estate

When Peter achieved the first results as a beginner investor, he tried to start a real estate business. The reasons for this decision were the brilliant long-term perspectives for the future, including passive income, financial stability, and hedge against inflation. 

There are several ways of real estate investing that involve purchasing a property. House flipping is a popular method of buying the property, fixing it, and then selling the piece of real estate for the profit. This method needs a significant amount of initial investment capital and some patience. 

Picasso Project
Picasso

The other popular approach to real estate investing is called rent-to-own a home. This is a method that implies renting a house and then buying the investment property when the time expires. The rent-to-own strategy is not devoid of risks but it is suitable for people who can not afford to buy a house at once.

Also, the investor can purchase the rental property and then rent one room or the whole apartment to tenants. 

The investment property can be of different types, including commercial, residential and industrial properties. Purchasing commercial property is a high-risk investment but the revenue is worth it.

Real estate investing worked better than other approaches, so Peter Daly considered investing in the foreign housing market. He has chosen Ukraine due to several important reasons.

The prices in the UK housing market are quite high, especially in the residential sector. The increasing demand calls into question affordable housing. Investing in the real estate market in the United Kingdom requires a considerable sum of the initial capital, and also for a down payment. 

The prices in big cities as London are always on the rise, while the demand for housing exceeds the supply. This factor drives the prices even higher. Most people rely on mortgage loans when purchasing a piece of real estate. The average homeownership rate in London was 61.5% compared to the other European cities. 

The borrowing rate in the Bank of England equals 0.5% interest but if the investor is a foreigner, he or she may face difficulties in getting the mortgage pre-approval. Even the citizens of the UK sometimes can not receive mortgage approval.

One of the greatest challenges of the UK real estate market is related to mortgage lending. The competition is severe along with the demand for the rental properties. The impact of coronavirus will affect house prices resulting in the worst-case scenario. According to the predictions, by the end of 2020, the housing prices will fall by 13%. 

Furthermore, the taxes in the United Kingdom are heavy due to the current economic situation, especially in the real estate industry. For foreign investors, the taxation amount comprises the additional charge of 3% which is a stamp duty surcharge for the real property. If the investor is the resident of the UK, then the difficulties may arise with regard to the ongoing mortgage loans or if his or her other businesses are not performing well.

20 MIN FREE CONSULTATION WITH UKRAINIAN REAL ESTATE AGENCY USING "TBN24" PROMO CODE!

Investing in the Ukrainian real estate market

The real estate market in Ukraine offers great opportunities for investing. Due to the low prices for real estate which dropped by 20-50% since the times of political and economical crisis in 2013, the real estate sector now gives the chance to enter the market and receive significant revenue from the investment.

One of the most trusted real estate companies in the Ukrainian market is Ukraine Realty LLC.

The investment opportunities include not only residential real estate investing but also commercial real estate where the yields comprise 12% which is twice higher than in the other countries of the European Union.

The prices for the residential real estate in Ukraine are now twice lower than those in the capitals of the European countries. Moreover, the prices are expected to grow due to the strengthening of the national currency. 

In the year 2019, the prices of the residential real estate in Ukraine were quite stable. The price per square meter was equal to UAH 23,000-24,000 but later this amount increased from US$850 to US$1,000. The real estate experts state that this trend will continue and the prices will grow in the near future.

If you compare the prices of real estate in Kyiv and in neighboring capitals like Warsaw and Budapest, the prices in the other countries are 2-2.5 times higher, so there is good growth potential. In addition, the increase in the prices will have a positive effect on the real estate industry in general, because the quality of housing will improve.

Due to the mentioned above reasons, now is the high time to invest in the Ukrainian real estate market when the prices are low and the potential for growth is expected. These factors provide the opportunity to earn significant revenue on the appreciation and also the perfect conditions to enter the market and save some money on the down payments.

Returns on investment

Real estate investing in Ukraine has a wide range of benefits. The advantages of real estate investing include:

Financial security for a long time. The investment property appreciates over time, so the long-term financial security is one more huge benefit of real estate investing;

Appreciation. Real estate investing often requires a long-term strategy, so the property that you own today will be worth much more in 30 years;

Hedge against inflation. This is one of the major benefits of real estate investing. If the inflation rate is high, the rental income and the value of the property will also rise significantly.

Foreign investors are able to buy any kind of apartment in Ukraine due to the lack of restrictions. The only exception is agricultural land. The size and number of properties that can be acquired by the foreign investor in Ukraine are not limited by the law. The property can be purchased for the majority of purposes – this can be either personal use, an investment, or rent. 

Great way to invest
Great way to invest

The rights of buying real estate in Ukraine are equal for the residents of the country and also for the foreigners. There are two main legal ways of buying the property in the country:

  • Primary real estate. When the buyer purchases the property from the developer company.
  • Secondary real estate. When the investor buys the registered real estate from the owner.

It is more profitable to buy the unfinished or primary apartment with regard to the Ukrainian law. When the investor purchases the unfinished property the buyer needs to pay a fixed tax of 0.5-2%. In the case of the secondary property, the payment is about 3.5% to 8.5% in notary fees and taxes. So, the purchase of the unfinished apartment in Ukraine is more beneficial than buying the secondary property from the owner.

If you are a foreign citizen and you do not have special permission for residence, you need to transfer money to Ukraine. The next step will be to buy the property from a private investment account. The foreign investor is not able to purchase the property through the non-Ukrainian account in the bank. The transfer of funds usually takes more than a one-week period. The minimum down payment is usually about 30-50%.

The other important thing is the currency used for the real estate transfer. Even when the price of the real estate is mentioned in euro or dollars, the payment should be done in national Ukrainian currency which is the hryvnia (UAH).

The foreign investors who are willing to purchase the property in Ukraine should have a certified translation of passport and Ukrainian tax id number. It is important to conduct the procedure of acquiring the property with the assistance of a professional legal adviser.

How to buy the apartment from a development company

If the buyer is going to acquire the property under construction he is called the investor. This kind of deal implies that the buyer is not acquiring the flat itself because from the legal point of view, at the stage of construction there is no official apartment. In this case, the buyer is investing in construction financial fund. After the governmental approval or commissioning, the investor will get the rights for a property. The major advantage of buying the apartment from the development company is the absence of any taxes, except the registration fee which is about $200. 

The best project to invest in Ukrainian Real Estate
The best project to invest in Ukrainian Real Estate

Conclusion

Real estate investing in the Ukrainian market offers attractive returns. The purchase of the apartment in Ukraine implies the high potential of appreciation, especially for the properties in the old historic buildings. The homeownership rate in Ukraine is over 90% that is higher than the average rate in Europe which is about 69%. 

In addition, the cost of entry in the Ukrainian real estate market is relatively low compared to the other frequently growing markets. The process of acquiring the investment property in Ukraine is very simple and the foreigners have the same rights as the citizens of Ukraine. Try it for yourself with Picasso project!

20 MIN FREE CONSULTATION WITH UKRAINIAN REAL ESTATE AGENCY USING "TBN24" PROMO CODE!

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