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Investment strategies in North Cyprus

For illustrative purposes the two most common strategies are described below.

  • Short term - (18 – 24 months (this is also known as a Flip strategy)
  • Medium term - (3-5 years (also known as a buy to let strategy or buy and hold strategy)

It is important to be clear what the investment is trying to achieve and by when it must be achieved. In this way it helps focus the investment decision. More experienced investors may start to look at portfolio investments across different areas in North Cyprus in order to spread the investment risk and achieve a more balanced return. We highly recommend to read additional costs that you will need to pay when buying a property in North Cyprus.

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Short Term Investment Strategy

This strategy involves purchasing a property that has either not commenced construction or is currently under construction and then selling the property prior to completion. In reality this is not a property purchase as the property has not been completed but is a purchase and sale of an option to purchase the property. A key factor is the time taken to identify the investment opportunity as this is critical to the strategy's success.

In North Cyprus all property taxes payable come due only after the completion of the construction when the title deed are transfered to the owner's name. Therefore, it's better to sell the property before you need to pay taxes. In this case you will not need to pay transfer fee and VAT as a buyer and capital gain tax as a seller. You will only need to pay for solicitor's fee.

Key Opportunity: The opportunity to purchase a property at a low initial price before market forces lead to significant capital appreciation. Then sell the option whilst demand is increasing and before you transfered the title to you name. No need to pay taxes.

Level of Complexity: This strategy is attractive to the investor because of its simplicity, the low initial investment typically 10% of the purchase price and some basic legal fees. The short payback period allows the investor to recover their cash relatively quickly for reinvestment in other developments.

Key Risks: The critical element and therefore the highest risk element to the success of this strategy is the sale of the property prior to completion otherwise the investor will be forced to complete on the purchase with all its associated legal and financial consequences.

The investor must be clear on the mechanisms available to resell the option, whether that be privately through an existing database of buyers, a private advertisement, a website or through more commercial means such as estate agents, website portals etc. For our customers we offer our assistance and we place their property for resale on our website.

Medium Term Investment Strategy

This strategy involves the purchase of either an off-plan unit or resale property, completing on the purchase and holding onto the property for a period of typically 2 to 5 years although it could be longer, before ultimately selling. During this period the property is rented either on a holiday rental or long term rental basis in order to generate income. When considering this strategy it is important to be clear as to whether income generation or capital appreciation is the key objective and tailor your investment accordingly.

Avoid emotional purchases as this type of strategy is a medium to long term investment which requires careful analysis of the returns and critically the investor needs to be able to afford the cost of maintaining and financing the investment.

Key Opportunity: The strategy is to either maximise the possible capital appreciation by holding the investment until market conditions change, i.e. sell at the highest possible price. Alternatively, maximise the income generated by the investment via rental means at perhaps the expense of capital appreciation. Additionally the property may be available for the investors own holidays!

Level of Complexity: Fundamentally this is a normal property purchase therefore a very simple concept; however please bear in mind the need to maintain a second property in another country involves more management than a property close to home. There will be physical, economic and legal requirements to adhere to, ranging from basic maintenance of gardens, pools etc, rental administration, perhaps financing mortgage payments, community charges, annual legal returns and taxes.

Key Risks: Depending on whether income generation or capital appreciation is chosen one of the two key factors is the identification of a property which will be attractive for that particular strategy. Only for our customers we offer to place their property as a rental property on our website free of charge in order to help to generate more income. The average price per week for a villa in North Cyprus in high season is £500.

The location of the property is always important as it will determine the amount of rent achievable and the level of capital appreciation achievable, however please remember that the initial price of the property will also reflect this. For example, a property near the golf course will of great interest among holiday makers, which can help you let you property on a weekly basis and therefore collect more.

Secondly is to continually monitor the market to ensure that when the property is sold it does not happen during a market downturn such as a change from a sellers market to a buyers market, which would of course reduce the sale price.

Taxation: Taxes will be payable upon the completion of construction and transfering title on your name and is usually the most significant expense that needs to be recouped. As the investor is the legally registered owner expect to have to pay capital gains on the profit upon sale.

See our offers of best properties for investment in North Cyprus.