Buying rental properties in Emerging Markets - Let's talk!
Hi everyone & Happy Holidays!
I wanted to get POVs of investors on this site.
As we know, buying assets has become much harder now, competition is high, people are bidding high, and cap rates are decreasing at all time highs!
Buying an apartment tower in Toronto or Paris will yield a 2.5% cap rate for Class AA towers....
So I wanted to understand the risks of going after properties in the Middle East, South Asia, Russia, and other Asian markets.
I currently own a portfolio of 12+ unit apartment towers, grocery anchored plazas, and single tenanted Industrial properties across Calgary Canada, Ontario Canada, New Jersey, USA & Wisconsin USA.
I am continuously getting frustrated in looking for deals in the US, Europe and Canada because of how hard competition is right now.
Therefore, I am learning about what it takes to buy real estate in the Middle East mainly.
Main Points ~~~
1) Right now, cap rates are about 9% - 18% in India, Pakistan, UAE, & Saudi Arabia.
2) Getting financing at attractive rates in those countries are much harder but through family relationships, I'm able to get rates at 4% - 6%
3) My idea is to go after Class B high-rise apartment towers and Industrial properties in Class A or Class B areas of their respective country.
4) If I can pull off a investment in those countries, my net ROI (after inflation, taxes, FX hedging, property maintenance, debt payments) will be about 27% - 31% per year which is insane... + the notion that I can raise rents to keep up with inflation or maybe add on 0.5% - 1% of additional rent (beyond inflation rate)
5) Biggest problem is in South Asia.... In this region you really need to get your hands in the mud to make a deal work. This is because regulations are not strong, access to property data metrics are low, and thus a lot more hustling is involved. Luckily I have a wealthy well connected family member who can help me with that (he would also be investing in these properties as an LP).
What am I missing?
Thank you and have a great New Years!