Investment scenarios
We have prepared some scenarios (starting on the page opposite) which highlight some of the investment options available to you.
Each of the scenarios assumes that the Romanian market will follow previous trends in Central and Eastern Europe whereby capital growth of between 10 – 20% has been achieved after EU entry.
Short of gazing into a crystal ball, there is of course no guarantee of this, but it is prudent to forecast based on historical data. We therefore include different, yet realistic, rates of growth in order to present a full spectrum of possible returns.
Non-Status mortgages Available
The developer of Forest View is offering investors non-status financing via mortgages of up to 75% loan-to-value. This is only available on a 20–year repayment basis with a rate of 9.9%
Financing for locals in Romania is constantly improving which aids your onward sale. However, mortgages for foreign purchasers are not as easy to obtain. Therefore, though the 9.9% interest rate seems high by UK standards, we feel this offers a very good short-term solution for investors.
You’re not locked into mortgage at all and because there are no early repayment penalties, you are free to look for a better deal - you could ‘swap’ to a new one with no financial penalty.
What are the mortgage terms?
Non-status
9.9% interest
20-year term
Payable quarterly in Euros
No penalty for early payments
Buy to invest and flip
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Investor description
I am an investor looking for short-term returns and view this purchase as a pure investment. I want to sell the property at completion and I want to move to other ventures afterwards. I have a high risk tolerance but I also understand that should I fail to sell when planned, I will have to cover my mortgage payments myself.
Buy to invest and hold short-term
Investor description
I like to keep properties for a few years after completion and then sell them on after the area has settled. I view the possible benefits of high capital growth post accession and good rental income as an incentive to maximise returns.
Buy to invest and hold long-term
Investor description
I've seen the long-term sustainable growth that has occurred in other Eastern European capitals (Prague, Budapest) and I am keen to take full advantage of the long term benefits. I want to keep the property long-term and I aim to sell in around 10 years when the area should be a thriving community. I aim to look for alternative financing options in a few years’ time.
Buying through a company
Presently, the law in Romania allows foreign nationals to buy all types of property (i.e. buildings of any size and for any purpose).
However, foreign nationals cannot yet have title to land. As the villas are on private, 270m2 plots of land, you will need to set up a Romanian local company which is able to hold title to the plot of land. See page 24 for more information on the lawyers we recommend who can help you set up the company. Notarising and legalising any documents can be expected to cost between £200 and £500, depending on the number of shareholders.
We have structured this deal so that you may proceed with your purchase straight away and set up a company later.
Protecting your investment – Where does your money go?
Investors will receive title to the land upon sending in their deposit. The land is worth substantially more than the amount of the deposit paid. The developer will retain a first charge over land meaning the land can’t be sold without the mortgage being paid. This is the same situation as with a bank giving you a mortgage here in the UK.
In addition to the title, the developer offers a personal guarantee to cover every purchase. The developer is also the largest electrical retailer in Cyprus and listed on the Cypriot stock market, his financial assets are such that he is in a strong position to offer this guarantee.
Tax and currency
When buying property or land in Romania, there are no different tax rules or special taxes for foreigners. As with all tax systems, the rules are complex and you are strongly advised to seek professional advice from a tax specialist. However, here is a guide as to what you
can expect.
Property Transfer Tax
The sale and purchase of real estate located in Romania are subject to stamp duty and notary fees. Stamp duty is charged as a percentage of the value of the transaction (the marginal rate can be up to 2%). Notary fees of up to 2.5% are usually added¹.
Value Added Tax
As a rule, transfer of immovable property in Romania is subject to VAT charged at the standard 19%. However, special VAT simplification measures apply in the acquisition of land and buildings, provided both the seller and the buyer are registered in Romania for VAT purposes. In this case, the seller and the buyer account for both input and output VAT without any VAT cash flow². This particular tax will not affect those buying through a Romanian company.
Capital Gains Tax
Non-resident legal entities are taxable in Romania at the standard profits tax rate of 16% for the capital gains realised from selling ownership right over a local company. Profits derived from the direct sale of real estate
in Romania are also subject to the standard 16% tax³.
Dividend Tax
Dividends paid abroad by a local company from its profits are subject to a 16% withholding tax in Romania. However, this tax may be reduced
(even to zero) under the provisions of some of the double tax treaties signed between Romania and other countries4.
Local Taxes
Owners of buildings are required to pay an annual building tax to the local authorities. For companies, such building tax would range between 1 and 2% and 1% of the book value of the building. Land owners are liable to pay the tax on land, which is established as a fixed amount per m2, depending on the location5.
Currency
Currency Exchange
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 Complete Currency, currency conversion companies in London that offer an extremely personal service and excellent rates.
Moneycorp
Moneycorp, the UK’s leading foreign exchange company, can help you achieve the best exchange rates, making your money go further. They have been trading foreign currencies since 1979 and are the only foreign exchange company in the UK to have been certified to ISO 9000 Quality Assurance.
In addition, you can take advantage of the following benefits:
No commission charges or receiving bank fees.
Fast, efficient worldwide transfers.
A dedicated dealer to guide you throughout your currency transaction(s).
Extended office opening hours
Monday - Friday 7:30am - 10:30pm and 10:00am - 4:00pm Saturday.
Moneycorp offers a very straightforward, efficient and cost-effective service. Exchanging and transferring money is an easy three-step process:
1. Open a trading facility - you can register online by visiting the Moneycorp website at http://www.moneycorp.com/ or calling their London office on +44 (0)20 7589 3000
2. Book a transaction - once a trading facility has been set up, a dealer will call you and discuss your individual requirements with you. Rates are booked with your dealer over the telephone
3. Transfer your funds - dependent on the date you require your currency
Our contact, Ben Nicholson, is always available to take your calls at their London office and can be reached on +44 (0)20 7823 7500
Complete Currency
This company offers a range of foreign exchange products to ensure its clients maximise their potential within the foreign exchange market, taking advantage of exchange rate fluctuations and safeguarding their investment. The company will provide fast money transfer with a full variety of foreign exchange products with no hidden charges.
The directors of Complete Currency have over 30 years of currency trading and money transfer experience at your disposal, and they will see to it that you get the best exchange rate.
Call our contact Steve Rowe on +44 (0) 207 709 2060 for a quick consultation, mentioning Ready2invest, between 8:30am and 8:00pm or take a look online at
http://www.completecurrency.co.uk/.
Lawyers
In a country like Romania, it is imperative to have a good English-speaking lawyer.
Now Romania has joined the EU, it is in the process of amending its laws to lift all restrictions on foreign nationals owning land in the country.
Presently, the law in Romania allows foreign nationals to buy all types of property (i.e. buildings of any size and for any purpose). However, foreign nationals cannot yet have title to land. Foreign nationals wishing to buy land in Romania have been able to do so by forming a Romanian company.
Romanian companies are able to behave like Romanian nationals, and therefore are allowed to buy any property in Romania, including the land. Therefore, to purchase the land the villa sits on, you need to set up a Romanian local company. By doing this, you immediately save paying an additional 19% in VAT (approx. €19,000), which is a cost even the locals have to bear when purchasing land and property.
We have found an excellent lawyer to help you with the entire transaction and have negotiated a good price of €1,800 + disbursements for you. This includes the set up of the company, as well as all of the acquisition work and account management fees.
Their company is Jinga, Burca & Asociatii (JBA), which is a law firm established in early 2005 by two former associates of a leading Romanian Law Firm. The firm’s activities are carried out by a team of 8 English-speaking lawyers with a good reputation and expertise in the fields of corporate and commercial law, fiscal law and taxation and real estate. They have a much experience in assisting foreign and domestic investors in all matters concerning the sale and purchase of real estate.
Their services include the following processes:
Set up a Romanian company to buy property
Draft a Client Agreement for each Client;
Assist a Romanian public notary in calculation of transaction costs;
Draft of power of attorney for incorporation of the company and for the execution of the preliminary sale purchase agreement;
Draft statements and fiscal statements for investors;
Execute, on the Client’s behalf, the preliminary sale purchase agreement;
Arrange for a licensed translator to translate the Client’s executed power of attorney from English into Romanian language;
Provide an English-speaking key contact who can respond to enquiries within 48 hours by email or phone
Receipt of notification from developer about the date and time appointed for the transfer of possession of the Client’s Property;
Represent the Client at the handover of the Property or granting a power of attorney to the third party appointed by the Client to represent him at the handover of the Property;
Pay notary fees due for the execution of the final purchase agreement from the Client’s funds held in JBA client account;
Provision of a non-certified English translation of the final purchase agreement;
Disbursement of transaction costs paid into JBA client account;
Prepare a file for the Client’s transaction which shall include the power of attorney, preliminary sale purchase agreement, final sale purchase agreement;
Use JBA office as correspondence address;
Send the file to the Client by registered post. The Client’s file shall comprise the signed Romanian version of preliminary sale purchase agreement and original transcripts of your final purchase contract in Romanian.
JBA will send you an engagement letter soon after you send in your reservation form.
Our contact at JBA is Mircea Jinga
Their full address is:
Jinga, Burca & Asociatii
Attorneys at Law
77 Popa Savu St
1st District
Bucharest,
Romania.
http://www.jba.ro/
mircea.jinga@jba.ro
Tel: (40-368)414638
Fax: (40-368)414639
Risk
A Forest View villa investment should be viewed as a medium- to long-term investment. But even in the long term, there are a variety of risks that should be taken into account. Worldwide economic imbalances and local problems can significantly impact the property market and price can move down as well as up.
What if there is no capital growth?
There are no guarantees in any market in terms of future growth. Everything in this deal points towards there being substantial growth available, but nothing can ever be guaranteed. From our experience as a developer in various countries, looking historically at how property values appreciate in emerging markets and by carefully researching the current market, we anticipate these villas to increase considerably in price too, but there is always a risk of the future not reflecting the past.
What if the market value of my property is eroded?
The risk of market value plummeting is always present, especially in the emerging markets where there can be problems with oversupply. The market can become oversaturated if there is more supply than demand. Even though specialists consider there to be a shortfall in demand of 1,000,000 units and supply of just over 35,000, it is possible these estimates are incorrect and negative price growth is experienced.
What if I can’t cover my costs with the rental income?
If there is no rental income, you will need to cover the costs of a mortgage or risk repossession. Currently the deal structuring at Forest View suggests that you may not need to subsidise your monthly payments
What if I can’t sell?
As stated in the price comparables section on page 7, we believe our villas to be priced on average 34% below market value. However, other, cheaper developments may arise which might attract the local market’s interest, or there might be negative changes in the purchasing power of the local population due to unforeseen economic conditions.
The Ready2invest fee
The Ready2invest fee for a Forest View villa is £2,975 (£2,500 + 19% VAT) payable for each reservation made.
There is also a £1,000 advance on purchase price payable to the developer, hence a total fee payable for one villa of £3,975.
What our fee covers:
FINDING THE DEAL
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
• 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 finished property
We don’t advise on tax
About Ready2invest
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.”
Over the past two years, the company has built up a customer base of over 20,000 investors, and has achieved over €300 million of off-plan sales in many countries across Europe, 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.”
Next step
To reserve a Forest View villa in Bucharest without delay, please complete and sign the Reservation Form and return it to us with a non-refundable reservation cheque for £3,975.
Reservation cheques should be made payable to Ready2invest (Forest View Villas).
If you are as excited as we are about investing in Romania, then call us now on +44 (0)1273 627 900 and speak to one of our property consultants.
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.