The new era in property investment

The property market has always been a volatile well, very impacted by external factors such as recessions, pandemics etc. It is time to take a more innovate approach towards property investments.

A new way to look at property investments is through real estate funds being established in Cyprus. Cyprus has large range of property types in different areas both residential and commercial which would be great to invest in.

The funds can be created by financiers for different levels of equity investments. Larger funds for higher investments such as hotels, beach villas, villas to let and other large-scale projects and smaller funds for housing projects, residential apartments and the smaller projects in need of a lower investment amount.

If these funds are initially created with the backing of the financier wherein this individual will be the major shareholder, other shareholders feel safer as opposed to a private company or individual controlling the fund. Until today, most people would count on the banks for their loans and financial support when it came to investing in property whether commercial or residential. These real estate funds are a new and innovative way for Cyprus, as they have been around a while in other countries for financing to be more accessible.

The official term used abroad is calling bridging finance which is basically ‘bridging the gap’ between the buying of a new property and the selling of a previous one. Some call them short-term loans too. They are referred to as short-term loans because unlike the loans you may take from the banks, these are usually paid back in up to 18 months, more likely even less. The lenders and the borrowers will come to an agreement on the repayment structure as well as how the payments will be made and the lender will clarify all other information such as loan to value, interest etc.

Many may question where the money is coming from that is invested in the funds and this comes from private investors and wealth managers looking to diversify a portfolio. The investors make a profit off the interest assigned to the property per annum. This makes it attractive for investors to allocate money to such funds. The larger the fund or project, the higher the risk which inevitable means, the higher the returns. This will all depend on the capacity of the investor.

The property market in Cyprus is quite strong in the sense that there are a lot of properties old as well as new and many being auctioned by the banks too that have been repossessed which are also trying to be sold. Bridging finance can be used to help banks dispose of these properties and in exchange, receive a good amount of cash flow. Moreover, the more attractive these funds appear to the market, the higher the demand will be which will only help the banking sector in Cyprus. Individuals will be more likely to resort to the real estate funds due to the perks rather than taking loans from the banks.

Given the passport scheme that is now closed after the scandal, this is also another way to attractive foreign investment. If the real estate funds in Cyprus are of a substantial amount with a high return on investment, this may attract more foreign investors to invest in property in Cyprus to both diversify their portfolio and also make a profit out of it.

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