Understand return on investment (ROI) in Istanbul real estate

In real estate investment, the term "return on investment" (ROI) is an important metric for evaluating the profitability and efficiency of an investment over a specified period. As one of the world's most dynamic and developing real estate markets, Istanbul provides a great case study for understanding return on investment in the context of real estate projects, accompanied by illustrative examples.

Determine the return on investment in Istanbul real estate

Return on investment is a financial metric that measures the profit or loss generated by an investment relative to its initial cost. It is usually expressed as a percentage and serves as an indicator of investment profitability. In the context of real estate in Istanbul, return on investment measures the potential returns that an investor can expect to receive based on the purchase price of the property, rental income, and potential increase in the value of the property.

Example 1: Return on investment on rental income

Suppose an investor buys an apartment in the Besiktas neighborhood of Istanbul for $250.000. The investor then leases the property for $1500 per month, which results in an annual rental income of $18.000.

Calculation:

Return on investment = (annual rental income / cost of ownership) x 100

ROI = ($18.000 / $250.000) x 100 = 7.2%

In this scenario, the return on investment from rental income is around 7.2%. This indicates that the investor earns a 7.2% return on his initial investment through rental income alone.

Example 2: Estimating return on investment

Think of an investor who buys a commercial property in Sisli, Istanbul, for $500.000. Over the course of three years, due to the development of the surrounding infrastructure and increased demand in the area, the value of the property has been estimated at $700.000.

Calculation:

Estimated ROI = ((Final value of the property - Initial cost of the property) / Initial cost of the property) x 100

Estimated ROI = (($700.000-$500.000) / $500.000) x 100 = 40%

In this case, the discretionary return on investment is around 40%. This indicates that the investor has earned a 40% return on his initial investment by appreciating the value of the property.

Combined ROI: Rental income and appreciation

To get a comprehensive view of return on investment, investors often consider both rental income and property appreciation. Let's combine the above examples to illustrate the combined ROI.

Suppose an investor buys a residential property in Kadikoy for $300.000. The investor rents the property for $1800 per month, which results in an annual rental income of $21.600. Over five years, the value of the property is valued at $450.000.

Calculation:

Total return on investment = (total profit/initial investment) x 100

Total Earnings = Rental Income + Estimate

Total earnings = $21.600 x 5 + ($450.000 - $300.000)

Total earnings = $108.000 + $150.000 = $258.000

Total ROI = ($258.000 / $300.000) x 100 = 86%

In this combined scenario, the investor achieves an impressive ROI of around 86%, which shows a great return on both rental income and property appreciation.

As shown through the examples, the real estate market in Istanbul provides various opportunities for a suitable return on investment, which makes it an attractive destination for investors. However, it is crucial for investors to conduct thorough research, deal with trusted real estate experts, and analyze market trends carefully to make informed decisions in line with their investment objectives. By making use of the concept of return on investment, investors can reap significant gains.

The best neighbourhoods in Istanbul for high ROI

Investing in real estate is a strategic endeavor that requires careful consideration of many factors. One of the most important aspects for any real estate investor is achieving a high return on investment (ROI). Istanbul, a vibrant and culturally rich city that spans two continents, presents a plenty of opportunities for those looking for lucrative real estate investments.

What are the most important areas in Istanbul that promise a high return on investment?

Besiktas district:

Located on the European side of Istanbul, Besiktas district represents a unique blend of history and modern lifestyle. Due to its proximity to major commercial areas and its rich cultural heritage, Besiktas has become an important center for real estate investments. The neighborhood's charm lies in its cobbled streets, bustling markets, and historical landmarks, all of which contribute to its appeal.

The development of modern residential complexes, commercial spaces and luxury hotels has given Besiktas a contemporary edge. In addition, the planned expansion of the Kabatas-Mahmutbey metro line promises to enhance the accessibility of the area, thus enhancing its potential for high return on investment.

Kadikoy district:

Crossing over to the Asian side of Istanbul comes Kadikoy, an area full of artistic energy and a relaxed atmosphere. Kadikoy is a hub for the creative industries, hosting art galleries, theaters and a range of cultural events. The neighborhood's eclectic atmosphere and thriving craft scene make it a magnet for both locals and tourists.

The real estate market in Kadikoy is poised for growth, driven by its proximity to transportation hubs and the Bosphorus shore. As the Asian side of the city is undergoing urban renewal, investors can expect the value of their properties to increase exponentially.

Sisli district:

For investors looking for a more commercial approach, Sisli stands out as a business and shopping district par excellence. Its central location, and proximity to the famous Taksim Square, makes it a prime destination for retail and office space. The presence of high-end fashion stores, corporate headquarters, and luxury residential complexes confirms the potential of Sisli to achieve a high return on investment.

Ongoing infrastructure projects, including the Istanbul metro expansion, are establishing Sisli as a lucrative investment hub. With the continued influx of companies into this area, the demand for prime properties is expected to rise, resulting in positive returns.

Beylikduzu district:

Located on the European side of Istanbul, Beylikduzu offers a unique opportunity for investors looking for a suburban haven that maintains a connection to the city center. This thriving neighborhood is characterized by modern housing, green spaces, and a peaceful atmosphere.

Bahcesehir, Basaksehir and Kucukcekmece districts:

The Istanbul Canal project, which aims to create a new waterway parallel to the Bosphorus, has sparked interest in Bahcesehir, Basaksehir and Kucukcekmece districts. This project is expected to enhance the attractiveness and accessibility of these districts and could lead to significant appreciation in real estate value, making it an attractive option for those looking for a long-term investment return.