What do you think about taking credit now for buying flats? (outside US)

[sandwind]

Actually even at this moment there are many places in the world that prices of homes are stable or are going slowly up.

I am thinking of buying 2-3 flats using bank leverage in Poland or Czech Republic.

The best time for it passed but you can still pay bank rates with money from renting and even some small money will left you.

My big worry is what will happen if real inflation hits the fan.

Then credit rates will sky up and I would be screw ?
Do you think this scenario can be around the corner ?

Any input gratefully welcomed

[Can somebody move thread this to rent and rave ? I shouldn't give it here ]

[c1ue]

Re: What do you think about taking credit now for buying flats? (outside US)

Keep in mind that all over the world, the mortgage home buying model is broken.

So while you do get a double down bet on the dollar declining/other currency increasing, the main mechanism for residential price increases is at least temporarily dead.

In return, you get the following problems:

1) long distance rental. This is a huge issue - I've seen friends who rented their homes out to people they already knew because of an ex-patriate job. They returned to find a dead dog had been left in the basement for at least 2 months such that a fetid outline could be seen (and smelled).

2) taxation - are you going to report your foreign income? Again non trivial

3) environment - in the US you pretty much know, or can find out, how an area is doing. Hopefully you can figure out where it is going. You don't have any of these advantages in a foreign country - doubly so if you don't even speak the language.

4) regulatory issues - rent control. foreign ownership. local taxes. etc etc.

Of course it isn't all bad.

If you can find places to buy/let in countries/areas where wage growth is strong for the foreseeable future, then you can at least be certain inflation is on your side.

[nero3]

Re: What do you think about taking credit now for buying flats? (outside US)

Actually even at this moment there are many places in the world that prices of homes are stable or are going slowly up.

I am thinking of buying 2-3 flats using bank leverage in Poland or Czech Republic.

The best time for it passed but you can still pay bank rates with money from renting and even some small money will left you.

My big worry is what will happen if real inflation hits the fan.

Then credit rates will sky up and I would be screw ?
Do you think this scenario can be around the corner ?

Any input gratefully welcomed

[Can somebody move thread this to rent and rave ? I shouldn't give it here ]

There are two kind of rushes. The one you get as when the Chinese now, or Japanese in the 90's think they are going to take over the world. Then there is the rush of Americans thinking their dollar will crash. There is some places in Germany real estate prices have remained depressed since the reunion, especially in their capital. They should see gains if they can bring down unemployment. A weak Euro is good for German unemployment and house prices. The attitudes in Germany is better than in Eastern Europe. It's a bigger risk for unethical business practices in Eastern Europe. If people want used cars where I live, cheaper than here, they go to Germany, and those cars are almost always better maintained as Germans are very rigid. It's also more likely you will find some company there to manage your investment. Germans are the most serious in Europe when it comes to ethics. Then there is the problems in Spain. If you look at the exchange rates of the Euro countries before adopting the euro, it's only Greece that have a history of banana republic monetary policies. That's why I think Greece will be the only country to collapse. Spain have a nice coastal line, appealing to all Europeans. That's my two ideas.

[sandwind]

Re: What do you think about taking credit now for buying flats? (outside US)

Thank you for sharing you view.
I added wage growth to my calculations as I wasn't thinking about this factor before.

I am Polish and I am living in Czech Republic at the moment so I am not too much worried about local issues like managing renting/law etc or being cheated (but this can be always an issue). At the moment Czech republic looks much better to invest. Prices declined 20-30% from peak stabilize and now looks like starting to going up as inflation kicked it. (An example before crisis basic bread costed 14 Kc latter price down to 12 Kc for a year+ now it is 16 Kc )

My biggest worry is what will happen if real inflation will come. Then it will be not only dollar but polish zloty or Korona as well. "Printing" dollars make only relativly stronger east Europa currences. I am affraid some wild inflation that will make to intrest rates to soar and the credit rates will soar too.

This is the problem with credits for 25 years. It is a really long time so it is a kind of
gambler bet.

[nero3]

Re: What do you think about taking credit now for buying flats? (outside US)

Thank you for sharing you view.
I added wage growth to my calculations as I wasn't thinking about this factor before.

I am Polish and I am living in Czech Republic at the moment so I am not too much worried about local issues like managing renting/law etc or being cheated (but this can be always an issue). At the moment Czech republic looks much better to invest. Prices declined 20-30% from peak stabilize and now looks like starting to going up as inflation kicked it. (An example before crisis basic bread costed 14 Kc latter price down to 12 Kc for a year+ now it is 16 Kc )

My biggest worry is what will happen if real inflation will come. Then it will be not only dollar but polish zloty or Korona as well. "Printing" dollars make only relativly stronger east Europa currences. I am affraid some wild inflation that will make to intrest rates to soar and the credit rates will soar too.

This is the problem with credits for 25 years. It is a really long time so it is a kind of
gambler bet.

I'm not very familiar with the Czech market, but I think property market's in Eastern Europe in general in some cases are even more expensive than in my country (Norway), where incomes are far greater (and I perceive the market to be in a bubble). That to me suggest the Eastern European market is in a bubble. Steer clear of borrowing in a foreign cheap currency, always finance in the domestic currency. Compare rents with prices, less expenses (exclude debt payments and interest rates), then you see how many years you need to rent it out to theoretically make back your investment. If you reach into very high numbers like 30-40, then the market is clearly a bubble. Even high income growth can't rationalize that kind of P/E ratios.

[karim0028]

Re: What do you think about taking credit now for buying flats? (outside US)

Can you give an example of purchase price and how much it would rent for? Also, would you be taking credit from Czech banks (ie. will the property be mortgaged or is it a signature loan?)