Introduction
Since declaring independence from Serbia in June 2006 Montenegro’s government has been keen to pursue the twin goals of stimulating tourism growth and increasing its attractiveness as an EU candidate. With EU membership projected for 2014, and EU funds allocated to improve infrastructure, the country looks likely to continue the strong 6% GDP growth of recent years.
Montenegro has also been placed in the top three destinations in the world by the World Tourism & Travel Council in terms of forecast growth in this sector over the next decade – the highest figure in Europe and an excellent signal to the rental potential of suitable properties.
Coupled with the country’s great beauty and thriving economy, the country is also becoming increasingly popular with investors. Since 2005 land values have significantly increased, and popular tourist destination the UNESCO-protected Kotor fjord’s landscape of steep mountains rising from deep waters naturally restricts over-development, limiting supply and creating demand for highly sought-after frontline developments such as the Seagarden Resort.
Situated on the banks of the stunning Kotor fjord, Seagarden offers sympathetically stone-built frontline apartments with views over the water and surrounding mountains. A high-spec, boutique development, Seagarden will have its own small marina, underground parking, waterside restaurant/bar and private beach.
Prices for 1-bed apartments start from €155,000 (~£114k), that’s around 16% under current market value. You can secure one of these apartments with just a 20% commitment deposit. The remaining 80% of the purchase price is due at completion. One of Montenegro’s largest banks is offering mortgages on the completed value of the property which means you could potentially (depending on your financial status) cover the remainder with finance.
This is a rare instance where a sound, long-term investment destination with plenty of potential for growth is also somewhere you would like to holiday.
Call us on 01273 627 900 to get your questions answered and to reserve your property.
Regards
Please note that in-line with local standards individual units are given a set price per m2. The internal area is then costed at 100% of the unit price per m2, storage space at 50% and terraces at 60%. The average price of a unit at Seagarden is €2,885 per m2, with specific unit pricing depending on location and views.
Underground parking spaces are mandatory and irrespective of which unit you buy cost a set €15,000. Parking spaces in Montenegro can be sold as individual entities and hold their own value and as such can be to included within your mortgage.
Price comparables
UNESCO-protected Kotor bay, traditionally famous with British, German and French investors, is one of the most desirable locations for purchasing property in the whole of Montenegro. For this reason prices are high, with local comparables close to Seagarden ranging from between €3,000 per m2 to €3,900 per m2, and averaging €3,440 per m2. Prices at Seagarden however average just €2,885 per m2, which represents an approximate 16% discount to market value.
The below list represents a broad selection of like-for- like comparables - i.e. new build property on or close to the waterfront from around Kotor fjord. Older buildings in the area have a far larger range of pricing and cannot be considered comparable.
Please note that the price per m2 at Seagarden does not include the garage space or furniture pack, so it is necessary to adjust down the price of the comparable properties to show a fair reflection of the market value. The interior/exterior area of the comparables is also priced in the same way as Seagarden.
Rental pool
The specification for Seagarden resort is more luxurious than the majority of new build developments around the fjord – it is expected to be of a 4-star equivalent standard. Nearer to completion, the developer plans to put the rental management of the development to tender in order to secure a suitably upmarket operator.
It is envisaged that a rental pool system will be instigated whereby the operator will take a 30% cut of the gross income to market, manage and let the units and 70% will go to the investor. Your only expenditure from this 70% is a maintenance charge of approximately €36 per m2 per annum.
The optional rental pool reduces risk by giving an average profit from all of the units, so even if not all units rent, all investors share the income.
While the advantage of the pool model means that you will benefit from the upside of good yields from all units, in the event that the income does not materialise, you will only have to cover the mortgage and costs of your own unit.
Rental yield
The following projection has been based on figures provided by REDS, part of the Falkensteiner Michaeler Tourism Group. FMTG, a group of over 40 companies, are an international profile company specialising in tourism. They have a strong track record and an excellend understanding of premium property rental yields. You can view more information at www.fmtg.com.
REDS have projected and targeted a net yield in theregion of 6.5%, as demonstrated below. Our own research and rental comparables support this projection.
Please ask for our due diligence pack and proposed rental contracts for further information.
Profit forecast
Montenegro continues to be discovered by a growing number of international markets, such as Russia and the Middle East. Property values therefore have the potential for steady growth, particularly as the area becomes known for the increasing number of upscale developments planned in the area, such as the much-publicised conversion by Canadian businessman and philanthropist Peter Munk of a formal naval base into Porto Montenegro1, a high-end harbour development targeting the super-rich Russian oligarchs and their superyachts.
The following table serves as guide to the potential returns under three levels of market growth. With approximately 16% discount providing upfront equity and the potential for 100% finance at completion, Seagarden looks capable of providing a solid return even at the more conservative end of our projections.
Leverage
The real beauty of this deal is that only 20% is required to secure a property with the ability to obtain finance from a local bank at completion. Most deals in Montenegro normally require the full purchase price of the unit to be paid over the period of construction, which can mean a large outlay over a short time frame.
The mortgage finance is currently expensive at around 10.5% and the maximum term is just 10 years. As in other countries we’ve entered where the mortgage market is in its infancy, we would expect the interest rates to improve and terms to lengthen as the economy falls more into line with EU models.
We have negotiated with the bank on your behalf an increased loan to value of up to 80% on the purchase price of your unit.
The extra leverage this provides is significant, and your return on equity will be enhanced. However it may also mean that monthly payments will exceed rental income, needing you to supplement payments. If you would prefer your rental income and mortgage payments to break even then as a guide an LTV of approximately 50% would be required.
Exit strategy
The heady gains seen in the last two-three years in Montenegro are beginning to calm and a more secure, stable and mature market should continue to develop. As a result of this wider market base we would suggest a mid-to-long term exit strategy.
Add this to the fact that there is limited availability of developable waterfront land in Kotor bay, especially sites with the advantageous characteristics of the Seagarden development, suggest a strong supply/demand ratio. The higher than average predicted growth in the tourist sector should also create a solid base for your rental income. And with such a stunning location and investment potential you may find it hard to let go of your Seagarden units from your portfolio at all.
Buyer security
Your initial 20% deposit will go into Escrow until full building permission has been granted and construction starts (anticipated mid-2008.) When this milestone is achieved, the money will be released to the developer.
At this stage, the value within the development will exceed the combined value of deposits.
The track record of the German developers of Seagarden provides additional security and peace of mind. Having previously completed more than 40 developments in Berlin and been senior bankers in Germany, their professional experience is reassuring.
Mortgages
Hypo Alpe Adria bank is able to provide mortgage for Seagarden Resort. It is a large and reputable bank located in over 13 countries with a history stretching back more than 110 years. Hypo Alpe Adria entered the Montenegrin market successfully in 2005 opening its first branch in April 2006.
Current mortgage terms
Interest rate: 5.35% +3M Euribor
Potential loan to value: 80%
Loan amount: From €100,000
Type: Repayment
Max Term: 10 years
Fee for loan: 2%
Approximate conditions of status
• Permanent employment
• Annuity amounts to 50% or less of monthly income, this can be improved with incomes of joint mortgages
Required documentation
• Loan application form
• Copies of passports
• Proof of income
Please note that obtaining a mortgage will be subject to your individual financial status and that lending terms may differ at the time of completion. If you do not qualify for an 80% mortgage at completion then you will be required to cover the shortfall.
Lawyers
When buying property in any foreign country, it is imperative to have a good English-speaking lawyer that will guide you through the process step by step. Lawyers representing Ready2invest’s clients must be able to accomplish the following:
• Act with power-of-attorney for the investor.
• Guide through the conveyancing process until completion.
• Provide a good level of service especially around busy times, such as completion, keeping the investor up to date with what stage they are at.
• Provide an English-speaking key contact who can respond to enquiries in 48 hours by email or phone.
• Provide receipts for all disbursements or out-of-hand expenses.
• Include within fees the cost of all notarisation, apostils, postage, tax registration and other legal paperwork that will need to be done in Montenegro.
With these points in mind we have instructed a legal firm called ‘Live Overseas’ from the UK to liaise between a legal firm in Montenegro and you, our investors, to guide you through all the legal aspects of buying an apartment in Seagarden.
We anticipate the charge for the legal services to be around €2,500 for the purchase of a unit of any size. In order for the lawyer to work on your behalf and sign documents in your absence you will need to assign them power of attorney. The estimated cost of this is a one-off payment of £150.
Live Overseas
Academy House
403 London Road
Camberley
Surrey
GU15 3HL
Phone: 0870 191 3099
Fax: 0870 191 3002
email: info@live-overseas.co.uk
www.live-overseas.co.uk
Currency
Small differences in exchange rates make a big difference to the end amount you pay, and specialist companies compare extremely favourably to the high street banks.
Ready2invest currently works with Moneycorp and Currency Solutions, currency conversion companies in London that offer an extremely personal service and excellent rates.
Currency Solutions
The UK’s premier foreign exchange company for clients purchasing property overseas. Their up-to-the-second trading facilities allow you to trade or fix the exchange rate on your purchase at the most opportune time, saving you money.
Nigel Hodges, our dedicated R2i dealer, will be happy to answer any questions you have. The London office number is (0)207 740 0000 or visit www.currencysolutions.com.
Moneycorp
Moneycorp, the UK’s leading foreign exchange company, can help you achieve the best exchange rates, making your money go further. It offers a number of benefits including no commission charges or receiving of bank fees and fast, efficient worldwide transfers.
Our contact, Ben Nicholson, is always available to take your calls at Moneycorp’s London office. Their number is 020 7823 7500 or visit www.moneycorp.com.
The R2i fee
The Ready2invest fee for a unit in Seagarden Resort is £2,500 payable for every individual reservation made.
What our fee covers:
• Finding the deals through our network of international finders.
• Personally visiting all developments for face-to-face meetings with key personnel and viewing the sites.
• Negotiating the discount using R2i reputation and buying power.
• Financially structuring the deal for maximum returns.
• Completing extensive research and due diligence on:
-title, planning, legals, country and town, the development, and the developer.
• Securing protection for your investment.
• Sourcing reputable local English-speaking lawyers in every country wherever possible.
• Negotiating favourable fee structure with lawyers.
Service:
Our investor relations staff help you through your entire
investing process.
Their roles incorporate:
• Answering any questions you may have during your investment process.
• Guiding you through the contract and payment process.
• Helping arrange a power of attorney if necessary.
• Help organise and liaise with mortgage companies where necessary.
• Arranging site visits (1 week’s notice needed).
• Help source and organise furniture packs where appropriate.
• Help source local letting agents where appropriate.
• Update you on the progress of your investment.
• Provide a friendly ear for any worries or queries you may have regarding your investment.
What we don’t do:
• We don’t arrange mortgages.
• We don’t convert currency.
• We don’t manage or sell finished property.
• We don’t advise on tax.
About us
When Jonty and Alise Crossick sold their retail business and moved into property in August 2003, they invested just £300,000.
Twelve months later they were sitting on a property portfolio worth over £7 million with equity of over £3.5 million.
In October 2003, Jonty and Alise set up Ready2invest Limited to share their property strategy with others and deliver a professional investment brokering solution in a fragmented market. The company has become well known for its thorough research and due diligence, and for negotiating and engineering exceptional deals in
the marketplace.
“We think like investors, we behave like investors and we personally invest in the developments we launch. Ready2invest grew out of a need to group together with other like-minded investors in order to create the buying power to get great deals.”
Alise Crossick
Over the past two years, the Brighton-based company has built up a customer base of over 20,000 investors, and has achieved over €400 million of off-plan sales in 16 countries across Europe and worldwide, each with its own administrative and legal procedures.
“Our job is to build trust with the developer and trust with you. If you know that the properties we offer are well researched, superbly priced, judiciously selected and located in prime spots, then we believe you will buy through us. If the developer is confident that we can sell a lot of properties quickly and efficiently, thereby taking some of the pain out of his transaction process, we can negotiate unbeatable deals with him. The result? You, the investor, wins. The developer wins. And we win.”
Jonty Crossick
Next step
To reserve a unit at Seagarden Resort, please complete and sign the reservation form on the next page and return it to us, along with a reservation payment of £4,000.
The reservation payments consists of a £1,500 advance on deposit and £2,500 R2i reservation fee.
The simplest way to pay this is by electronic bank transfer –
it’s quick, easy and it’s free. The Ready2invest bank details are:
Bank transfer details
Barclays Bank PLC
United Kingdom House
7th Floor
180 Oxford Street
London
W1D 1EA
Ready2invest Ltd Deposit Account (Sterling)
Bank Account Name: Ready 2 Invest Ltd
Bank Account Number: 40559725
Bank Sort Code: 20.03.53
IBAN Number: GB35 BARC 2003 5340 5597 25
SWIFT Code: BARCGB22
Alternatively, if you prefer, you can send a cheque which should be made payable to Ready2invest (Seagarden). Please send a separate cheque for £4,000 for every unit you wish to reserve.
Ready2invest (Seagarden) Limited
Olivier House
18 Marine Parade
Brighton
BN2 1TL
For full registration details including the Registration Form and a list of Reservation Terms and Conditions, please download the full brochure as a PDF below.