Investing in Romanian Real Estate


When we entered the Romanian real estate market for investment purposes we found many agents wanting sell us land

We found no one wanting to sell us an investment

So we decided to set up our own capacity to support our investment objectives

Capacity
To understand the macro and micro economics drivers, the infrastructural developments, the demographics, the potential ROI
To have governance over the ‘’paperwork’’ abd have local negotiations solely on our behalf

iSpace is our investment space made available to you

Join the club

info@investmentspace.eu



E  n  t  r  e  p  r  e  n  e  u  r  i  a  l    i  n  v  e  s  t  m  e  n  t    a  t     y  o  u  r     f  i  n  g  e  r  t  i  p  s

iSpace is a Dutch Romanian initiative. As a result our investment community is Dutch and Romanian. We hope to expand to a truly international group. This provides broader perspectives for all of us.

Who will add the next flag on our website?



Romana
This is our website ''version 1.0''. With 18 years of experience in Romania and with 4 years in real estate we are now ready for the next step, broadcasting our activities to a larger audience.

We will be creating more content soon. We will talk about our history, we will discuss ''the Way We Work'', we will outline our strategy. For now, for those who are contemplating to invest in Romanian real estate, send us an email and we will happily explain our differentiating approach.

iSpace,
14 March 2009
iSpace history
Contemplations which you will recognise

Most people will have some form of personal capital management to enable their future ambitions. Individuals will all have different views on what their future will look like, but the basis for creating options for the future is through forming some personal wealth.
The first principle most people will adhere to in investing is to create a diversity of ''defensive'' and ''offensive'' investments.  The second principle to look at is the potential of the investment. The first principle can be translated into the ''risk'' of the investment, the second principle can be translated into ''ROI'' or return on investment over time.  Investing really is creating a portfolio of sets of risk vs returns.

Some of the investments can be in ''cash'' on interest accounts, some of it can be in shares on the stock exchange. One can be active on the ''futures'' market, invest in hedge funds and so forth. We also had a ''dynamic'' life in analysing these options, we had our successes and disasters on the stock exchange, investing in ''blue chips'' listings and ''pink sheet'' listings.  The stock exchange looks to be one of the options to gain a high ROI, however when looking over a longer period really stocks have a low ROI (6% since the inception of modern stock exchanges) and really have a very high risk.

Analysing where really good returns are made at relatively low risks one invariably come to real estate. So did we. However, it is not as simple as that, real estate in very mature areas and countries might still be a good investment, but returns are again in the order of single digit percentage points for the passive investor, i.e. someone who buys real estate to leave it for ''appreciation''. The big returns are made in developing nations in areas where development starts to conglomerate around centres of high activity. 

Many have made the above analysis, so did we. The following question is where to invest. Offers in ''investing in real estate'' are plentiful. One can decide to buy this ''great offer'' in Kenya or Costa Rica any time. Real estate requires a stable environment in which business can thrive, so the first question is whether these are stable nations.

When we were reviewing our options 4 years ago we decided that a fairly unique situation was arising in ''Eastern Europe'' where 10 developing nations were projected to join the EU. Placing a relatively poor nation within the EU framework creates the stability element on top of  potential, making an attractive balance between ROI potential and risk.

All of the 10 new entrant countries provide very good opportunities. Out of the 10, probably Romania and Bulgaria come on top in terms of potential ROI as they have a longer way to go. Not to go into too much detail, we decided for Romania. This decision was supported by the dramatic transformation we had seen since we first came there in 1991. Through the long history we had in Romania we also felt very comfortable in this country. Romania has a lot going for it, things we will try to highlight elsewhere on this website.

The decision for a country is only the beginning. Within a nation one now has to decide where and in what to invest, really similar analysis but now on a smaller scale. Also in Romania there is no problem to find ''land for sale'', in fact half the nation is populated with ''teren de vanzare'' or ''land for sale'' signs, market prices are difficult to establish, professional realtors are difficult to find.

Investing in real estate one does for the long haul, say with a minimum window of 5 years, but really as a strategy for 10 and more years. Given our investment objectives we decided to invest in a local company, our own real  estate company, we found a young, keen intelligent guy who had just finished university with a degree in economics with a very sharp eye for where the ''next thing'' will happen in Romania. We employed him, gave him a thorough training and he was within the first 5% to certify as real estate agent in Romania. A certification which has become mandatory since the entry of Romania into the EU.

So now we were independent and we made thorough investigations throughout the country, we decided for areas and regions to invest in. For the moment these are the northern black sea coast, Brasov and its region, Bucharest ''outskirts'' and agricultural land in general. We searched and found good legal and accountant advisors to complete the cycle for good governance over the actual purchase.

Since we had build this local capacity we started to get interest from a small group of co-investors using our local capacity to identify and govern good investments. iSpace is the ''second generation'' of the original company and we are looking to expand the group of investors.

We have developed a long term strategy which we will explain elsewhere on this website.


Horia Halmagi
Operations Manager


Old city of Brasov
Base of iSpace


Above is an abstraction of our strategy supporting organisation which we continue to build. iSpace is the organisation governing the process and is the funnel to the investment opportunity. We work through a concept of ''memberships'' of IIC  ''iSpace Investment Community''. iSpace provides 2 fundamental values:

1) governing the process of finding and buying the ''best land'' or the ''best house'' for the investor. This is ''iSpace Real Estate'' as depicted in the black box in the above scheme
2) Developing project development offers. This is ''iSpace Projects'' as depicted in the black box in the above scheme

iSpace Real Estate and iSpace Projects is only a conceptual differentiation to clarify the value proposition of iSpace.

The above depicted  organisation is not completed yet. We are still looking for partners particularly in ''Building the Future'' which will become an associated but independent company. We do have construction capacity and we are building a first house as a test to expand to a larger project for which we will be seeking participants.

Further, we partner with architects of YYY (www.StudioYYY.com). A number of very inspiring initiatives are already underway in ''study phase''. Soon we will elaborate a bit more on this.

iSpace Strategy and Concept


When analysing investment offers their are 2 critical parameters to consider:

1) In what part of the value chain does the offer sit?

Investments early in the value chain have a higher ultimate potential than mature opportunities. Intuitively one probably adds that early opportunities also have a higher risk. This is only partly true. Investing in real estate in mature and over mature regions and countries actually have a substantial risk. If there is little to gain, there is a lot to loose as we have recently seen. This goes for real estate, but it goes for any mature investment, finance for instance! Limiting ourselves to real estate, let's consider the following value chain: large agricultural areals -> areals converted to construction land -> individual housing lots -> constructed houses. It is clear that an investment at the onset of the chain (large agricultural areals) will yield far more return than an investment in ''constructed houses'' if one considers that the large areal is bought at a fraction of the value of the land with a house on it. Market investment offers are often in latter stages of development, e.g. appartments in a vacation resort. Most people realise this, however they lack the substantial time required to invest in earlier stages of the value chain. If one wants to buy agricultural land to convert this into a lotting project for house construction a lot of research needs to be done. Agricultural land is plentiful, but only a fraction of this land is a suitabe for further development, because of it's location or because of legislation.

2) what percentage of the gain potential is shared with the investor?

Buying a ''packaged investment'' offer leaves one always wondering what the real value of the investment is and what share of the potential is really shared with you, the investor.

based on these considerations our investment strategy emerged:
1) to control the full process rather than buying investment offers from the market.
2) to buy land in areas in early and very development in the development cycle to achieve the highest possible return in locations where development is inevitable (through projected large scale infrastructural plans)
3) to make our capacity available as a (partnering) service to the investment community to generate supporting income for our operation and to create a group of associated investors (iIC, iSpace Investment Community)
4) to consquently create project development capacity to drive value of property rather than just waiting for apprecitation.
5) to formulate investment projects and to seek participants, thereby increasing our ability to create scale.
6) to develop projects and derive income through a share in net profit of completed projects

Fundamental in our approach is that the main income of iSpace is based on a share of net profit of a successful project. Our ultimate business success is directly associated to the success of projects.


Web Page Maker, create your own web pages.