I remember an incident which happened a few years back and I want to share it with friends and clients.

Around 2008 I was discussing with a client ( a reputable professional man from Cyprus) the possibility of him investing in Romania. I recommended to him to buy a building in the northern area of Bucharest which was let with an income of around 10% on the investment of E1 million euros.

We made preliminary investigation at the local authority about the title of the land which proved to be without any problem.

I explained to the client and we arranged a meeting in Bucharest with the owners to discuss the details of the purchase. I explained to the client, if we agreed on the points of sale we would make a thorough investigation of the ownership titles and all aspects to make sure that there was not problem with the building.

At the discussion we got all related information, and when we came at the point of the price the prospective buyer to the surprise of all of us he offered a price which was about 60% of the asking price. Of course the deal could not proceed and we left. I understood from the owners that they could discuss a discount of 5-10% but not 40%.

After that the client decided and bought some lands to make plots and sell hoping to make a quick profit. Of course the crisis came and now he is tight up in the investments and has to wait for a few years until the situation improves. So he has to pay the taxes and other expenses for his companies which own the lands and wait.

From the above is evident that the income fetching investments are more reliable than the investments done on a speculative basis to get profit from capital appreciation only.

This is more evident today where an investor who buys a rented property in Romania will expect a return on his investment of 12% or even more plus a substantial capital appreciation.

Another incident different from the above is the following: A business man asked me if I can help him to buy something in Romania to invest around E500.000, which he had available at the bank. I checked our database and recommended to him a shop in a central area of Bucharest, rented with a return of 12%. He said ok when I shall go to Bucharest he wanted to go with me, see the property, and if agreed, I was supposed to make with our lawyer a due diligence and check everything before concluding. I understood that he postponed because he hoped to get a better bargain if he delays. In the end the catastrophe came, his money at the bank was haircut, and he was left only with the guaranteed amount of E100.000. What we can learn from this? Once decide to make an investment do not postpone, make all necessary investigations and proceed.

%d bloggers like this: