Profit from real estate in Georgia: what you should know?
How to give real estate in rent in Georgia correctly and get profit?
It is possible to call Georgia as one of the most promising countries for investing in real estate in the post-Soviet space, and even in the whole world, without exaggeration. In recent years, the government had many reforms thanks to which Georgia has become attractive both for tourists and for people who want to move to live in this country.
Real estate rental business is very popular among foreigners. Its concept is quite simple - to buy one or several apartments and rent them out, making a good net profit.
Why do many foreigners choose Georgia to invest in real estate? There are several good reasons for this:
- Georgia is a country with a high level of security and a low level of corruption;
- It is one of top five countries with a simple registration of real estate. There are no bureaucratic delays. Moreover, you can buy an apartment and rent it out remotely through your representative in the country.
- Low tax rates and low cost of utility bills make the maintenance of real estate as cheap as possible.
- You can apply for a permanent residency when buying real estate worth over 100 thousand dollars (about 332,000 lari). This is a significant advantage for those who want to move to live in a sunny, hospitable and comfortable country with incredible flavor.
- The country has all possible options for recreation - sea resorts, mountains and forests for active recreation, health resorts and sanatoriums, ski resorts.
- Low real estate prices - $400-1000 per 1 m2 in Tbilisi and Batumi, as well as $150-400 in small towns.
- Actively developing tourism and well-developed infrastructure. According to statistics, the number of tourists coming to Georgia on vacation only increases every year (the exception is 2020 due to the coronavirus pandemic). This means that there will be no problems with finding tenants, especially if the property is in a good location.
- A large number of proposals for the sale of real estate. In large cities, several dozen new buildings are built every year, where you can choose and buy an apartment for every taste.
What city is it more profitable to give property in?
There are a large number of popular resort towns in Georgia. The number of tourists who visited the country in 2019 exceeded 9 million.
Tbilisi is a capital with great opportunities
Tbilisi is the capital and largest city of Georgia. Life is active here for 365 days a year. A significant part of restaurants, nightclubs and various entertainment establishments is located in Tbilisi. Many wealthy tourists from the USA, Western Europe, China and Arab countries choose exactly this city.
It is possible to earn money from renting out housing if you find apartments in areas popular with tourists. These are, first of all, the districts of Mtatsminda, Sololaki, Vera, Vake and Saburtalo. Real estate payback will take 8-10 years with the right approach, and in some cases even faster.
Resort by the sea
There is more than one seaside resort in Georgia. Let's look at a few of the most popular ones.
Batumi holds the first place in the competition for the title of the most popular tourist city in Georgia. This is, of course, a unique resort, attracting tens of thousands of tourists with various incomes every year. If you are looking for tours to Georgia in summer, then be sure to pay attention to this modern city with excellent infrastructure. Batumi has large and well-equipped beaches and very warm water, which allows you to spend a beach holiday at the highest level.
Additionally, Batumi is famous for many attractions and interesting excursions. Piazza, ancient temples and churches, the Argo cable car, singing fountains and a magnificent embankment will pleasantly surprise many tourists. It can take a few days just to explore the city. One can single out a visit to the Botanical Garden and a hike in the mountainous Adjara as inexpensive, but interesting excursions. There is no doubt, Batumi is a real pearl of Georgia and one of the best resorts in the country, but it is not the only one. Apartments in Batumi are of one of the most expensive in the country. A large number of luxury real estate is being built here, but there are also relatively budget alternatives. It is better to look for options on the first coastline to avoid problems with tenants.
This is a fairly small and quiet resort located in a small village on the border with Turkey. It is famous for its clean and warm water, as well as cozy beaches. There are not many attractions in this place, and it is more suitable for those people who want to relax in a calm and quiet environment on a perfectly arranged beach. Real estate here is inexpensive, but mostly private houses are for sale. Also, the disadvantages of the resort include not too developed infrastructure, which is why wealthy tourists rarely stay in the village.
The resort is located just a couple of tens of kilometers from Batumi, and it is considered as one of the best in the Caucasus. The main advantages of Kobuleti include the cleanest air, a pine forest located nearby, as well as a healing microclimate. This place is great not only for a beach holiday, but also for medical treatment. The local air, mineral springs and healing mud have a healing effect and can help people with various chronic diseases.
There is a magnificent amusement park near Kobuleti, and the beach with a length of more than 10 kilometers is considered one of the main features of the city. You can rent scooters, catamarans and even yachts on the beach. In addition, there are constant excursions to Batumi, Kutaisi, Tsikhisdziri and even to neighboring Turkey.
The cost of real estate in Kobuleti is lower than in Batumi. At the same time, prices for rental housing practically do not differ.
This resort stands out for its incredibly beautiful landscapes. It is possible to divide the village into two parts, one of them is located by the sea and the other on the mountain. By the way, the mountains are almost at the sea, which creates a kind of comfort and unity with nature for tourists.
The water in Kvariati is cleaner than in Batumi, and there are just as many tourists. Tourists pay attention to this resort not only because of the beautiful views and clean beaches, but also because of the various attractions. While resting here, you should definitely visit the waterfall of Andrew the Primordial and the Gonio fortress.
In the summer, this resort is overcrowded with tourists, so there will be no difficulties with renting out an apartment.
Cities near mountains
Georgia is known not only for its sea, but also for its ski resorts. They also sell a lot of relatively inexpensive housing, which can later be rented out profitably.
This is the second largest city in Georgia. Despite the fact that there are no ski resorts in the city, the overwhelming majority of tourists who come to rest in Georgia arrive in Kutaisi. And from here you can go by bus to almost any city, including regular buses to ski resorts. Tourists often bypass this city, not realizing all its cultural value. Therefore, a good rental income cannot be guaranteed.
Gudauri is the most popular Georgian ski resort. There are only 16 kilometers of trails of various difficulty levels. It is absolutely safe here: the snow cover is dense, there are no stones on the mountain slopes, and avalanches occur in these parts very rarely.
A lot of wealthy tourists come to the city during the season, so if you find an apartment with a good location, you can earn very good money by renting it out for daily rent. However, it can be difficult to find a suitable real estate option, and prices are quite high.
The resort is located between Borjomi and Akhalkalaki in the Samtskhe–Javakheti region. It snows here for four to five months, and the number of sunny days a year is more than 200. During the season there is so many tourists that hotels are booked weeks in advance. That’s why vacationers are looking for options to rent apartments.
Legal considerations and taxes
Georgia has one of the most loyal real estate laws in the world. Foreigners can buy an apartment with the same rights as residents of the country. In this case, the transaction can be concluded remotely by writing a notarized power of attorney to your representative.
Real estate rental tax is only 5% of the received rent. There is also an additional tax that is levied if the commercial property generates an annual income of $ 40,000or more. In this case, the property owner is obliged to pay from 0.2 to 0.8% of the received amount.
Official property rentals
Georgia is a fairly developed country that has created favorable conditions for running honest business. A standard agreement is concluded between the landlord and the tenant, which spells out the rights and obligations of the parties, as well as the rental amount. The owner of the apartment is obliged to give 5% of this amount to the state every month.
Few of those who invest in real estate are independently engaged in renting out their homes. Basically, special management companies are hired for this purpose, which charge about 10% of the rental price for their services.
Is it possible to legally reduce the tax on renting an apartment in Georgia?
In Georgia, the tax can be reduced or completely canceled for preferential categories of persons. But the annual income must not exceed 3,000 lari (about $ 900) per year to use such benefits. The real estate owner must hit one of several categories:
- Single mother;
- Participants in the hostilities for the territorial integrity of Georgia and World War II;
- Persons who have adopted a child.
In practice, it is almost impossible to achieve a reduction or abolition of the tax, so it is unlikely that it will be possible to legally reduce the tax.
What happens if you give an apartment in a rent unofficially?
There are penalties for renting out real estate without paying the relevant taxes in Georgia. As a rule, few people manage to give an apartment in rent unofficially for a long time. The fact is that neighbors or even tenants themselves can complain to the police or directly to the tax office, and then a person will not be able to avoid the problems.
Penalty for unofficial real estate leasing
In Georgia, responsibility for tax violations is imposed in accordance with the Tax Code, and the tax authority is engaged in the proceedings on their case. Failure to pay taxes on giving an apartment in a rent or an incorrectly drawn up tax return can lead to unpleasant consequences.
Depending on the severity of the offense, the following changes may be introduced against the offender:
- Monetary penalty;
- Confiscation of property.
The amount of the fine varies from 200 to several thousand lari. If, after the introduction of sanctions, the violation is repeated, then the sanctions may be tightened. Therefore, it is not recommended to evade taxes and rent out unofficially. Moreover, the tax is not big.
Real estate repayment period
Income from renting out apartments largely depends on the season, the location of the housing, the availability of renovations, the city, the area and many other factors.
The landlord receives the greatest profit when giving an apartment in rent for 24 hours. During the high season, you can easily earn about $5,000-10000 from one apartment. When the season is over, you can find people who agree to rent an apartment for a period of 3-6 months. This will bring a few thousand dollars more.
In popular resort cities (Batumi, Tbilisi, Gudauri and others), the average rental yield is 10-12% in foreign currency. No bank in the world can offer a similar rate for investment. The payback period for investments of real estate in Georgia is 7-10 years.
With high profitability and minimal payback periods, there are practically no risks for losing money. Firstly, Georgia is a popular tourist destination, so problems with vacationers are not expected. And this means that there will always be people who need apartment. Secondly, even if the apartment for any reason will not bring the expected income, you can always sell it profitably. Real estate prices in Georgia are slowly but surely growing, so it will be possible to back all investments.
Tips for renting out an apartment
Experts give several tips to minimize the risks of renting out an apartment, and also help increase profits:
- Use the services of a management company. In Georgia, this service is very popular, and in any new building there is a management company that, for a certain percentage, takes on all the hassle of renting out real estate. Such a company conducts minor current repairs in the apartment, takes the readings of a meter and pays for utilities, looks for tenants, cleans the apartment and much more.
- If you are giving an apartment in rent for a long-term, then you should find out as much information about the tenant as possible. It would be nice if you find his/her credit history, type his/her phone number into a search engine. This will help you understand whether the person who will rent a living space from you, is honest and reliable. If he/she has a lot of debts, and previous tenants do not speak flatteringly about him/her on the Internet, then this is a serious reason to think about further cooperation.
- Make a list of all the property in the apartment. Each tenant (even if a person rents an apartment for a couple of days) must sign it. If any of the items are damaged or stolen, you will have proof that the tenant did it.
- Take out basic insurance for your apartment. In case of flooding of the apartment, fire or any other trouble, you will be able to compensate for the losses. Such insurance is not very expensive, but it will protect you from carelessness or inappropriate actions of the tenant.
If you do not live in the country or simply don’t want to spend your time and energy on renting out real estate, then the simplest and most obvious solution is a management company. This is especially true if you do not understand the nuances of Georgian legislation.