Are you considering investing in the Latvian real estate market? If so, you've come to the right place! Investing in real estate in Latvia can be a great way to diversify your portfolio and build long-term wealth.
With the right advice and a network of professionals, it can be relatively simple to start investing in Latvia.
If you want to get an overview of the Latvian economy and its investment opportunities, you've come to the right place.
This guide will give you an overview of the basics of investing in real estate in Latvia, through a LifeInvest® case study of a French investor in Latvia who will generate 10% on his rental property.
Bonne lecture !
1. Characteristics of the city
Latvia is one of the three Baltic states that emerged from the dissolution of the Soviet Union in 1991. Located on the eastern coast of the Baltic Sea in Northern Europe, Latvia has had a tumultuous history and has undergone radical economic changes in recent years.
Today, Latvia is an emerging economy with opportunities for investors who wish to invest in foreign markets.
In addition, Riga, Latvia's beautiful city and capital, has experienced steady growth over the past 10 years. Nearby major cities include Tallinn (Estonia), Vilnius (Lithuania), St. Petersburg (Russia).
In the long term, we believe that Latvia will provide a key economic link between Europe and Russia due to its geographical advantage and the Russian diaspora in Latvia.
2. Economic activity
Today, Latvia is gradually and steadily catching up with the per capita income levels of the most affluent OECD countries.
Thanks to its excellent solvency (43% debt to GDP), a very competitive tax regime (10% tax on property income), sustained inflation and wages that continue to rise, Latvia, like Estonia, meets all the criteria for a successful foreign investment.
Moreover, following the increase of the prices per m² in Estonia, Estonian investors are turning to Latvia to invest.
Indeed, they benefit from more competitive prices per m², as well as
double the rental yields they can find in Estonia.
Riga has all the attractions of a European city of the future, with an average increase in value of 7.5% per year between 2007 and 2020.
3. LifeInvest® Case Study
This week we celebrated the LifeInvest Elite™ of someone we've coached to successfully invest in real estate in Latvia. We'll call him Claude.
He invested in a furnished and already rented apartment in the first ring of Riga, 15 minutes by transport from the hyper-center, popular with both domestic and foreign investors.
When we invest in a new market, we prefer the first suburbs of the country's capital. This strategy allows us to take advantage of lower entry prices. This strategy allows us to take advantage of lower entry prices, to try out the market, and to move closer to the center with larger budgets once the return on investment is confirmed.
4. The numbers
Independent apartment with an area of 16.7 m² studio in an old building.
✔️ Selling price (negotiated, including agency commission): 31.283 €.
✔️ Stamp fee : 18 € 90
✔️Taxes: 375 €.
✔️Stamp fee: 18 €.
✔️ Non-recoverable expenses : 326 €/year
That is to say a global budget of 31.283 €.
✔️Gross annual rent (permanent lease) : 2.760 €.
✔️Non-recoverable expenses : 326 €/year
✔️ Capital gain : +3%/year : 35 €/year
✔️Home insurance: 35 €/year
✔️Cash-Flow : 216 €/month
✔️Capital gain: +3%/year
The gross rent yields 9.2%, giving you a net yield of 8.1%.
Or a projected annual return of 10% when taking into account a conservative price evolution of 3%/year.
5. Capital gains
What is the potential for appreciation in 5 years?
In the case study detailed above, 5 years of ownership, the cumulative net cash flow would amount to €12,980, or a personal enrichment of €216 per month.
If we add a moderate inflation of 3% per year over these five years, knowing that real estate prices in Riga have increased by an average of 7.5% since 2007, the potential return on investment could be higher!
This would represent 15.298 € of total gains and 255 € per month for each year of ownership - the opportunity to generate 10% / year of total annual return...
6. Leasing aspect
In Latvia's major cities, the limited supply of apartments for rent and the high demand for them result in higher long-term rents.
Due to the very high rental demand and the scarcity of quality real estate, the vacancy rate is low, so landlords can choose their tenants carefully.
In addition, white-collar workers are looking for apartments close to their jobs in Riga with a good price-quality ratio. With an increase in the number of people earning salaries above €1,500/month and a decrease in the number of those earning low salaries (up to €700/month), the market is booming for executives and skilled employees returning to the cities and looking for housing.
The Latvian real estate market offers a safe and profitable investment to add value to one's assets or secure a new source of income.
7. Property management
In Latvia, the law is in favor of the landlord, like most European countries. However, with the right rental agreement and good practices, supported by a competent lawyer, it is possible to obtain an eviction of the tenant, without going through a court decision. This shortens the eviction of a potential bad candidate by several months.
It is essential to focus on the rental contract rather than on the profitability, as it can be seriously tainted if not well drafted.
The tenants are students and employees and the management is done through a local agency with over 10 years of experience.
In this video, you will discover the testimonial of Romain Armato, founder of LifeInvest®, who owns and rents an apartment in the same building as the case study subject of this blog post.
8. Note on taxation
If you want to invest in the Latvian real estate market, you should know that financing is not an option (unless you mortgage a property in France or pledge shares as collateral).
However, it is possible to invest a sum of money that you have at your disposal and the possibility of getting a return on this value can be very profitable.
International investment also offers additional benefits such as security, tax optimization and complete portfolio management.
This investment option is ideal for those seeking to diversify their European assets or to strengthen their tax residences in Latvia.
9. LifeInvest® Analysis
Latvia represents all the criteria for a long-term rental investment, with an unbeatable annual return and a solid prospect of capital gains.
Given the local economic dynamics, Latvia is today, together with Estonia, one of the most sensible choices for a real estate investment abroad.
Not to be missed!
10. Next steps
To begin with, we propose an audit of your asset situation and clarify the complexities inherent in a cross-border real estate investment between France and Latvia.
Our advice is based on a clear vision of the legal and fiscal environment of Latvia, by proposing concrete actions to create, develop and secure your assets in the short, medium and long term in a way that is adapted to your investor profile.
If you decide to invest, Romain and his team will accompany you at each step of your investment.
As we did in the example of Régine, who also invested in two properties with Romain in the same building.
Click here, to discover in this real estate vlog, the backstage of Régine's investment as well as our different privileged partners in Riga.
To become a co-owner in the same building, visit this page to learn more about our turnkey investment service.