Transylvania Investment

What is rental demand like for residential properties?
Currently the demand for residential properties is high. Annual rental returns are between 6 and 10%. We advise clients to accept a 6% return if opportunity arises, rather than lose money looking for a tenant who just might spend more.

Not if you hold it for more than 3 years, but if you sell it in the mean while you will be taxed at 16% on capital gains.

What additional costs are there upon purchase excluding commission?
Notary fees and the equivalent of stamp duty come about 1 ½ % of purchase cost and legal fees are 1% of purchase cost.

It is better to buy something that generates more revenue, than purchase something very cheap, but of little value as an investment. Associate with someone and this way your chances of making a good buy increase. The minimum project investment is 5000 euro in a limited company controlled by shares for simple purchase and resale. This way, smaller investors can join larger projects, and larger projects are where the higher percentage returns exist. However buying land to resell at a later date you have to consider your profit has to wait until you resell. Development and agriculture retrieve a big return as well.

Can I get mortgage in Romania?

Yes, there are two situations when you consider obtaining a loan from the bank for renovating/purchasing your property in Romania. The first refers to the situation in which you are a resident citizen. Most of the banks provide these financial means to Romanians and to residents. You will have the same rights and obligations as a Romanian and each bank has its own eligibility criteria. Becoming a resident is not a very complicated procedure and can be done in a day or two.

However becoming a resident implies paying some taxes to the Romanian state, so you need to be fully aware of what you are doing before you make this step.

The second situation is when you are not a resident citizen. If you want a mortgage for example, you must prove your income in your country, providing documents to sustain that you work and how much you earn monthly, provide bank statements and documents that show what other loans you have made, plus show documents of the property on which you want to place the mortgage (property title and land book proof).

Can you help me obtain a bank credit?

Yes, we shall consult you about the terms and conditions in the different banks and shall advice you how to choose the most favorable alternative for you dependent on your income and the future expected repayment for the property. If you think you meet the requirements and are willing to use a kind of bank credit you should take into consideration the time limits for granting the credit with the time limits for its final repayment. The time for the final conclusion of the deal is described in the precontract you sign with the seller and a copy is also given to the bank.

The using of a mortgage-secured or consumer credit gives you the opportunity to obtain higher value properties than what you can get with the money you already have.

Do I have to come to

Romania

to purchase my property?

It is not necessary as we can take a power of attorney, however is good to know for yourself in what you put your money and for larger investments we recommend travel and a short break so that you can get a feeling of the country.

What are the dangers involved in taking title in

Romania

?
The taking of title is safe and you will take freehold. Land Registry searches are done in a similar fashion as in any other EU state to disclose any charges registered upon the property. However, due to the fact that many properties have been confiscated by the communists and now their initial owners want them back, there are some other documents you need to check before you are sure that you can purchase.

The market is very active and everything is going up in value so if you have to get out quickly you do not have to worry about losing. Besides, everything we advise you to buy is in areas that are either desirable or necessitated to the domestic market.

Will my property be hard to rent?
Not at all. We provide a full managed service solution and only put investors into properties for which there is a real demand.

What is the position in relation to tax in

Romania

?
The tax on rental income is 16%. From this, 25% of the value of the rent is considered expense with maintenance and other related issues and you don’t pay tax on this, you only pay tax on the remaining 75%. Capital gains tax is 16% if the property is held less than 3 years. If held over 3 years there is no capital gains tax applicable.

What is the position in relation to tax when I bring my money back home?
As an EU member,

Romania

has double taxation agreements with most of the European countries, so any tax deducted in

Romania

will be deducted from that due in your domestic jurisdiction.

What are the tax liabilities in relation to setting up a company?
The income tax in

Romania

is16%. When you sell a property that has been purchased by your company formed in

Romania

, the company must pay 16% income tax and 19% VAT. Whatever profit your company creates (and you can create this if your company sells a valuable property) is reallocated on dividends on which you pay tax. So add a dividend tax of 10%, if the company cashes the dividends or 16% if you are the one who cashes the dividends, but if you have a good accountant there are ways to skip this last tax. Again, economic knowledge is essential.

What is the position on buying on the Black Sea or Ski resorts?
We can locate properties in these areas, however we strongly advise against purchasing in the ski or in the Black Sea coast resorts. Skiing in

Romania

is not that good, even many Romanians prefer

Austria

Switzerland

, plus the last years were very scarce in snow. It is preferable to purchase an apartment in Brasov and have it rented out all year long, not just during the winter. As for the Black Sea, you have a 4 month maximum rental period, which means that for the rest of the time, you only spend money on maintenance. However, mountain resorts are visited both in summer for the scenery and in winter for sports, so from this point of view they are more attractive than the seaside. Yet, tourists are generally weekend tourists, so throughout the week you don’t have much movement going on there either. Therefore we don’t think these purchases are very interesting from the investment perspective.

What else do I need to know about my purchase?
The annual tax on the property can be anything from ½ to 1 ½ % per year. Find out if there is an association of tenants/inhabitants of the building, as this could be very important if you intend to rent your apartment as an office, as they might decline to give you their approval for this, therefore you will not be able to rent your property as an office. If you purchase a flat that can be transformed in a commercial space, be aware that the law changed and there is no longer allowed to convert a residential flat in a block of flats into a commercial space (as a shop, bar, etc). If the approval is already issued, you can feel at ease for the time being.