There are 5 very good reasons to invest in Latvian property:
Reason One – Economy
Latvia has some pretty good tailwinds: fastest growing economy in the EU for 3 years; 2014 conversion to euro (Estonia converted in 2011 and real estate prices are up 30%); prices only starting uptrend since crisis; excess inventory--buyer's market that can lead to continual economic growth.
With Latvia adopting the euro in 2014, we will certainly see property price increases, just like in Estonia since 2011. There has also been an increase in foreign investment here which will only accelerate once the euro is adopted in just a few months.
Economically speaking, Latvia is on an upswing.
Reason Two – Return on Investment
The returns are quite respectable. Admittedly, they are not astronomical, but returns of 8% are still quite good when secured with real estate.
Clearly you won't always get a 8% return, but 5% is quite common here.
There are many opportunities to buy whole buildings for €1000/m2, invest €500/m2 for remodeling and sell apartments for €2500/m2 and more.
Reason three - there is a large buyer base for Russians interested in luxury apartments willing to pay €2500/m2 and much, much more.
As for rental real estate, the rates are still at 2009 levels, but with the economy improving every year, we should easily see 15-30% increases in rental rates over the next three years.
In the example above, if the rent/m2 goes from €8/m2 to €10/m2 (25% increase), the cash return jumps to nearly 13% and the leveraged return jumps to 22%.
An opportunity also exists for significant capital appreciation. This particular project cost is approximately €800/m2. It should easily revalue to €1200/m2 within three years. This doesn't even bring prices back up to 2007 levels.
Regardless, you can still buy properties here with a reasonable current cash flow and potentially higher cash flow and/or capital appreciation short-term.
Reason Four – Permanent Residency in the EU that Can Lead to Citizenship
In Latvia, there is a residency through investment program. If you purchase real estate in Latvia of any type in your own name for €250,000 or more, you are eligible for permanent residency.
According to the amendments, the minimum threshold of the real estate value is EUR 250 000, with the minimum cadastral value of such property being EUR 80 000. If the cadastral value is below this amount, an evaluation of a certified appraiser is required stating that the market value of the facility is not less than EUR 250 000. Such conditions are applied to real estate acquisition in all regions of Latvia.
The permanent residency is valid for five years and renewable as long as you still own the property (or any property meeting the minimum requirements). You do not need to live in Latvia or even spend a minimum amount of time in the country to maintain your residency status. (Although if you come here, you will fall in love.)
Once you establish residency in Latvia, you become a permanent EU resident giving you full rights within all 28 EU member states. You can live, work, bank, do business, etc. as any other EU resident. You will get a permanent residency card which also functions as a travel document within the EU.
This lifts any travel visa restrictions for any EU country. For example, Americans can only be inside the EU for a maximum of 90 days. But if you become a Latvian permanent resident, you can stay inside any of the 28 EU member states indefinitely.
This is a very common tactic for Russians. They are buying the apartments in the city center in order to obtain permanent residency inside the EU so they are not limited by visa restrictions. This has created a market for Russian clientele for purchase of luxury apartments in the city center.
Herein lies the opportunity as mentioned before. Purchase whole buildings for €1000/m2, invest €500/m2 for renovations and resell for €2500/m2 and more. The opportunity in this business is huge.
Additionally, as of Oct. 1, the citizenship law changes to allow dual nationality for citizens of most other countries (Russia and some CES countries excluded). Up until now, Latvia has not allowed dual nationality, but in an effort to attract immigrants and thus investment, they are opening the door and allowing dual citizenship.
For those of you seeking that elusive second passport, residency leading to citizenship through investment could be an excellent option.
Reason Five - Latvia is beautiful EU country
The quality of life in Latvia is high and cost of living is relatively low.
There are many opportunities here and it truly is a beautiful country. If you are looking for investments in foreign real estate in an “off-the-radar” place, Latvia could well be your Shangri-la.
Information was partially sourced from the article written by Bobby Casey.