What Exactly Happens on Closing Day?



The day you close on your home will be a big day. After weeks of searching, open houses, negotiating and securing financing you’re finally ready to accept the keys to your new home. But what actually happens on closing day? Most buyers know they’ll be signing a lot of documents on closing day, but the actual process can remain a mystery to them. Here we break down what happens on closing day and how you can best prepare for it. Get your notepad out because there are a few things to cover here.

What is a Real Estate Closing?

A real estate closing is the final settlement between buyers, sellers, and any third parties for the transfer of a property. This is when documents get signed, deeds are transferred, and all remaining payments are finalized. The whole process is usually managed by an ESCROW AGENT (usually, but not always, an attorney) that specializes in real estate closings and preparing all related documents.

In addition to paying the sellers the remaining balance for the sale, there’ll also be some CLOSING COSTS you’ll have to cover. These are the fees you’ll pay to third parties that helped facilitate the deal. On average, closing costs can be about 3-4% of the purchase price. You’ll know the exact amount to bring a few days before the closing when your lender sends you a Closing Disclosure. This details all the final terms of your loan as well as the exact cost of your closing fees. Make sure to compare this carefully to your original loan estimate. If anything has changed then be sure to ask your lender why.

While the exact steps might vary from one state to another, most closings will go something like this:

  1. The buyer pays all remaining closing costs as listed in the Closing Disclosure.
  2. The seller transfers ownership by signing over the property title to the buyer.
  3. The escrow agent registers the new deed with the appropriate government office. This makes the buyer the official owner of the property.
  4. The seller receives their proceeds from the sale after any remaining mortgage balance and closings costs are paid off.

Where and When Will the Closing Take Place?

During the contract negotiation phase, you and the seller will agree on an expected closing date. Once your offer has been accepted and your security deposit is transferred you can expect several weeks to pass before your closing day arrives. The expected closing day is only an approximation and is likely to change as the agents, your lender and the title agent try to find a date that works for everyone. There’s also the potential for delays if you encounter problems with financing, the home appraisal, title search, or the home inspection. On average, the time between an accepted offer and closing day is roughly 40-60 days. But this can vary widely depending on the state, county, and locality. You can ask your EXCLUSIVE BUYER AGENT for an estimate on how long they expect any closing to take.

If you’re taking out a loan, then the closing will take place at either the escrow agent or the lender’s office. To a large extent, the standard closing location depends on what the local traditions are where you’re buying. If you’re not happy with the arrangements then you can usually have them changed upon request. If you’re not taking out a loan, then there’s no lender involved so you and the seller can choose a location that is convenient for both of you. Using your attorney’s office or the seller’s attorney is an option but restrictions in client trust accounting may make it impossible for the attorney to disburse funds immediately.

What Documents Will You Sign?

As for documents, there’ll be a lot to go through. Expect to sign your name at least a dozen times before the day is done. Here’s a look at some of the more important documents to expect at closing.

  • The property deed
  • The bill of sale
  • Transfer tax declarations
  • Closing disclosure
  • The mortgage note
  • The loan application

What Happens After the Closing?

Once everything has been signed and the checks have been handed over it’s all done. As the buyer, you are now the official and legal owner of the property. You can now take immediate possession of the property. Or, you might take possession at a later date if that’s what you agreed to with the seller. There may also be some post-closing agreements. The most common agreements are reimbursements for real property taxes if the exact amount is unclear at closing, or repairs that could not be done in time before closing.

Written by: David Alvarez

Real Estate Agents With No Hidden Agenda. They Only Represent the Buyer Written by: David Alvarez


Real Estate Negotiations are Handled by a HOME BUYING EXPERT HOME BUYING ASSISTANCE from exclusive buyer’s agents focus on negotiations since they devote their work to the buying side and are considered home buying experts. They understand that home buyers value their negotiation skills and that ‘everything is negotiable’ in real estate. Not just price but terms, conditions, contract clauses, disclaimers, exclusions, and dates. Exclusive buyer’s agents will make sure the sellers know about other competitively priced homes on the market competing against theirs. They will attempt to learn the sellers’ motivation for selling, BOTTOM LINE PRICE and any deadlines they are trying to meet.

They will ask if there have been other offers or if they have any offers at the present time. They will use clauses and contingencies in the offer to protect your earnest money deposit as well as afford you the time for the appropriate inspections necessary to learn more about the home. They may suggest requiring a short window of time for the seller to respond to your offer depending on the type of market. The state of the market, whether it be a seller’s market or buyer’s market can affect your negotiations dramatically. When there are rising prices, fewer homes, and multiple offers competing against yours, you have must less of a chance of getting a bargain.

You may end up in a bidding war when the market is ‘hot’ and it may even be necessary for you to be likable to the sellers when they must choose from among several offers on the table. On the other hand, when it is a buyer’s market, sellers are forced to be more accommodating and you will strike your best deal. The exclusive buyer’s agent will advise you how long the property has been on the market as well as conduct a property value study or prepare a CMA (comparative market analysis) to help you decide the amount of the initial offer.

They will encourage you to try to find at least two homes, preferably three homes that satisfy you to improve your bargaining position for your first choice home . A thorough home inspection will also help you determine if the home is in the condition represented by the seller and the home buying expert will be ready to renegotiate should there be repairs needed or a request for a credit to cover repairs. Be prepared to walk away if you cannot strike a deal. It is a good way to test your resolve about the value of the house.

What are the Most Common Real Estate Title Problems?




Real estate transactions are rarely a done deal once the purchase contract has been signed. There are still a few steps to get through before you reach your closing day, one of which is the title search. This is when documents on the history of a property are reviewed to determine if there are any problems concerning the transfer of that property. In the case of a prospective purchase, a title search is primarily done to answer three questions relating to the property:

  • Does the seller have any saleable or marketable interest in the property?
  • What kind of restrictions and allowances pertain to the use of the land?
  • Are there any liens on the property that need to be paid at closing?

No real estate transaction can proceed properly until the title is cleared. This can slow down a transaction and even lead to a deal falling through if the issues can’t be resolved. There’s also the chance that the title search may have missed something which only comes to light after the closing. This is why title insurance is so important for buyers. It protects you against having to pay for these issues. Here’s a look at the most common title issues that could affect your purchase.

1.) Errors in Public Records

Mistakes happen but when they relate to your homeownership the results can be devastating. Any clerical or filing errors can affect the deed or survey of your property and lead to heavy financial strain in order to resolve them.

2.) Unknown Liens

The previous owners of your property may not have been the most meticulous bookkeepers or bill payers. Liens are any unpaid bills that are tied to the property. It’s usually just the mortgage but it can also include unpaid credit card bills, taxes, and child support judgments. Essentially, Liens are anything that can be filed in public records against your property. Even though the bills aren’t your own they become your responsibility after the closing. The initial title search is meant to find these and make sure they’re paid off before the sale is closed. However, they can still crop up even after the property is transferred.

3.) Illegal Deeds

The chain of title on your property may look sound but it may be discovered that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or someone who reported being single but was actually married. An issue like this can affect the enforceability of a deed and possibly your ownership of the property.

4.) Missing Heirs

Estate problems can crop up long after a property has been purchased and affect your rights to it. When a homeowner dies, their will may be left to their heirs. However, these heirs can sometimes be missing or unknown at the time of death. They can then turn up later and contest your ownership of the property. It can also happen that the owner dies without leaving a will or that the will wasn’t probated. Either of which could lead to the ownership being contested.

5.) Forgeries

Sadly, not everyone is honest. It sometimes happens that forged documents relating to the ownership of a property are filed in public records. These can obscure the rightful ownership of a property and put your rights to it at risk.

6.) Undiscovered Encumbrances

Encumbrances relate to when a third-party holds a claim on all or part of your property. This can be due to a lien or non-financial claims like restrictions on the use of a property.

7.) Unknown Easements

An easement is when a government agency, business, or other third parties are allowed to access all or part of your property. While this doesn’t affect your ownership of the property it can impact your right to do what you want with it.

8.) Boundary/Survey Disputes

During the purchasing process, you may have noticed several surveys being done evaluating your property’s legal boundaries. If there are any other surveys that show different boundaries there could be some complications determining your property line. This could allow a third party to claim ownership of a portion of your property.

The Importance of Title Insurance

All of the above title issues can have serious repercussions for a homeowner. The worst thing about title issues is that even if the initial search was very thorough, unknown issues can still arise long after the sale was closed. Fortunately, homebuyers can protect themselves against this by taking out title insurance. It protects you against loss or damage from undiscovered liens, encumbrances, or defects in the title or ownership of the property. Best of all, it’s unique in that it protects you against past claims as well as future ones. At its most basic, title insurance will cover the following:

  • Ownership by another party
  • Incorrect signatures and forged documents
  • Errors in public records
  • Unrecorded easements
  • Encumbrances or judgments against the property such as unpaid liens

All of this might sound scary or overwhelming. But there’s no need to worry. Consider hiring an EXCLUSIVE BUYER’S AGENT to be an advocate for you while you’re purchasing a home. They’re uniquely skilled and qualified to help look at for your best interests as a buyer.

NC Realtors & Global Network

NC Realtors & Global Network

Recap: The MIPIM 2019 International Conference

Hello NC REALTORS®! We’re thrilled to share with you a video describing the NC REALTORS® experience at MIPIM 2019, the world’s largest real estate conference held in Cannes, France.

NC REALTORS®’ mission at MIPIM is to bring exposure to North Carolina as a growing market for investment. Our state boasts an educated workforce, statewide transportation infrastructure, a strong economy, and consistent growth throughout the state. NC REALTORS® is proud to serve as North Carolina’s sole representative to MIPIM’s enormous concentration of real estate investors from all over the world.

Global in the News

Where Are the Investment Dollars Going?

Interested in finding out where international investors are sending their money when it isn’t going to North Carolina? Here are a few stories from the news to keep you updated:

Please visit our Global Network website to learn more about the REALTORS®’ efforts at connecting our members to the international marketplace.

Pleases see the video above in the VIDEO section

PropTech: the digital real estate revolution By Trenio February 20, 2019

PropTech: the digital real estate revolution By Trenio February 20, 2019

The rapidly developing digital technologies, steadily penetrating into all spheres of our life, have not bypassed the real estate market, where the term PropTech is increasingly mentioned.

PropTech (from the English.  Property Technologies  technologies in real estate) is a multifaceted phenomenon. It combines all modern innovative technologies and applied solutions in the field of real estate creation and management (real estate transactions, investment analysis, construction and design, development, real estate maintenance, etc.).

Startups in the field of PropTech are developing in two main directions: they offer tools that can help real estate professionals improve their services or increase productivity, or they are trying to replace professionals.

So what does PropTech carry with it and what effect can it have on one of the most seemingly stable markets?

PropTech – a new trend in the real estate market SergeyNivens /

How do PropTech meet on the real estate market?

Let us turn to numbers. The results of a KPMG survey conducted in the summer of 2018 among the leading real estate players showed the following: 97% of respondents believe that digital and technological innovations will affect their business in any case, while 60% are convinced that this will have a significant impact. 78% of respondents noted that such influence has already increased in the past 12 months.

The majority of survey participants (73%) evaluate PropTech positively, considering this trend as a new opportunity for the development of their business, but 25% see it as a kind of threat. Recognizing the inevitability of innovation and their overall positive direction, 56% of respondents admit that they cannot yet speak of the “digital maturity” of their companies. Only 7% of respondents are convinced that in this area are at the forefront.

30% of survey participants indicated that they are already investing or planning to invest in PropTech start-ups, while 66% indicated that they still have no clear idea about the prospects for using digital and technological innovations or the corresponding strategies.

It is interesting how the perception of the survey participants about what exactly PropTech’s achievements will influence the activities of their companies and the real estate market as a whole has changed over the year. So, the majority of survey participants of KPMG 2017 (53%) suggested that in the next three years their companies would most likely use PropTech innovations in the field of “big data” (from English  Big Data  – structured and unstructured data, which differ in outstanding volumes and processed by certain software tools) and analytics.

Talking about what trends PropTech in the next five years will have the greatest impact on the property market as a whole, 44% respondentova also highlighted big data, 16% said things Internet capabilities (from Eng.   Of Internet of Things, the IoT  – unified network-related facilities among themselves through the Internet, capable of collecting data and sharing them. Such objects may include household appliances, cars, etc.), and 15% – the development of artificial intelligence.

Many participants in the real estate market do not yet have a clear idea about the prospects for the use of digital and technological innovations, nor the corresponding strategies of ra2studio / Depositphotos

The 2018 survey showed that in the short term, respondents expect automation to have a greater impact on the real estate market as a whole and on their own companies (30 and 31%, respectively). In second place (in 27% in both cases) were “big data”. Third place was shared by artificial intelligence and the Internet of things. In the long term, the greatest impact is expected from artificial intelligence technologies (32 and 28%).

We note that real estate market players do not yet see the really serious potential of such innovations as blockchain, autonomous vehicles (including drones or self-driving machines), 3D printing technology, virtual or augmented reality, 5G.

Are investors ready to support PropTech?

Statistics show that in solving the problem of investing PropTech projects, 2017 was a turning point. Starting in 2016, start-ups in this area began to receive tangible support from venture capital funds. For example, in the United Statesalone  , the volume of relevant investments increased from 44.7 million dollars in 2012 to 6.5 billion dollars in 2017.

Market research conducted by RE: Tech showed that in 2017 funds invested about $ 12.6 billion in PropTech, thus supporting 347 transactions. The global investment in this area of ​​the market increased by 92%. In 2018, this trend continued.

Thanks to innovative technologies, large investors also appreciated the new opportunities offered to the real estate market: it was SoftBank that repeatedly invested in PropTech; Amazon has invested in a modular housing company; Sequoia Capital supported AirWnb and WeWork’s.

Experts point out that investors already interested in the real estate market, using technologies rather than technology companies, are ready to offer new solutions and products for this area to attract more interest from investors.

What changes bring new technologies to the real estate market?

Despite the fact that the real estate market is traditionally quite conservative, many experts agree: in the coming years, due to the growing demand for innovation, it will inevitably change beyond recognition. Many projects are aimed at helping the buyer to find his dream home without the participation of intermediaries or to organize a happy meeting of the landlord and tenant.

As shown by a survey conducted by HSBC analysts, 37% of respondents – real estate buyers felt uncomfortable (under stress) during forced communication with many people involved in a deal (real estate agents, lawyers, salespeople, etc.). 29% of respondents considered the negotiations on the price too exhausting, 28% considered the resolution of tax issues, and 24% considered drawing up the necessary legal documents.

The number of transactions concluded without prior visits to the property is increasing alexroz / Depositphotos

Modern technologies and online platforms will provide users with the opportunity to make transactions independently. Acquisition and sale of real estate will be greatly simplified. Today, among the most famous PropTech startups that have taken on the functions of realtors, one can single out American Redfin, Zillow, OpenDoor, Trulia. In the UK, Tepilo service is gaining popularity, in China – Homelink. In their work, companies use big data analysis, which allows them to form proposals that match the client’s requests.

The development of such projects will affect the work of real estate agents, who are likely to become only consultants and / or providers of technology platforms.

According to HSBC research, most consumers are not yet ready to trust chat botsor robot consultants in matters of mortgage lending (only 11% of respondents would decide to do this). Experts believe that this, in turn, leaves room for technological solutions that allow receiving remote consultations through online chat rooms or video chat. In addition, the quality of service provided by chat bots is rapidly increasing, and their flaws are becoming less and less obvious.

Using data analytics and artificial intelligence, property owners will be able to get comprehensive information about the demand for certain objects, as well as forecasts and recommendations. This is exactly how the startup Skyline AI, which offers investment advisor services, operates. The program independently determines the most profitable assets for investments, tells you when it is better to carry out a major overhaul or increase the rent.

The development of virtual reality technologies (VR), through which preliminary inspection of real estate assets can be carried out remotely, will be able to seriously affect the processes of acquiring real estate (especially foreign). Virtual reality makes it possible to thoroughly examine the preliminary planning and design of the premises before the repair works are carried out, and if necessary, make adjustments.

The use of VR-technology allows you to conduct virtual tours of buildings, and you can inspect the object both from a computer monitor in 2D-format, and using special VR-glasses in 3D mode. In addition, the client is usually provided with detailed panoramic photos and the ability to monitor the object (including those under construction) in real time via webcams with a 360 ° view. One of the recognized leaders in the creation of VR are EyeSpy360 (UK) and Matterport (USA).

In a survey conducted by the online broker Redfin (USA) in 2017, 33% of respondents said they made a decision to buy a house without actually visiting the facility, taking advantage of the opportunities provided by digital technology (in 2016 only 19% of respondents acted that way) .

The influence of PropTech is not limited to interfering in the process of making sales and rental transactions. Modern technology allows you to automate the management of real estate. Such programs help, for example, track the terms of lease agreements, manage bills, keep track of property, pay taxes, place objects for rent on ad sites, and monitor income and expenses. Today, the field of property management confidently conquers SMS Assist.

PropTech services offering solutions based on the Internet of things and artificial intelligence help minimize the costs associated with servicing real estate – help control energy consumption, timely detect faults and equipment defects, etc.

For example, an enertiv startup from New York promises its customers up to 5% savings in operating costs due to solutions based on machine learning, big data and IoT. The company provides buildings with various sensors that continuously transmit information about its condition. In this case, the system itself determines the malfunction, or detects equipment that is on the verge of failure and informs about it. In addition, the system allows landlords to track the occupancy of objects in real time.

Many PropTech companies work by combining several technology solutions. For example, Opendoor acquires real estate through the Internet, directly from homeowners, at a price set by an algorithm based on Big Data. Having improved housing, they bring it back to the market. Using big data, the Internet of things, digitalization, the company greatly simplifies the purchase process – electronic locks installed in buildings and premises allow real estate viewing at any time convenient for the buyer, without an appointment. It is not necessary in the presence of an agent. The lock code can be obtained through a special application.

The impact of PropTech on the real estate market will inevitably grow under the influence of the demand for innovation. Buying a residential or commercial facility anywhere in the world will be as easy as buying securities, and virtual assistants will manage the facilities.

The success of traditional market players will soon depend on how quickly they can adapt to the changes taking place.

Material prepared for PropTechRussia.com



Note: January 2019 data below are the most recent released by the National Association of Realtors.

Existing-home sales experienced a minor drop for the third consecutive month in January, according to the National Association of Realtors®. Of the four major U.S. regions, only the Northeast saw an uptick in sales activity in January.

Total existing-home sales (transactions including single-family homes, townhomes, condominiums and co-ops) decreased 1.2 percent from December to a seasonally adjusted annual rate of 4.94 million in January. Sales were down 8.5 percent from a year ago (5.40 million in January 2018).

NAR’s chief economist, Lawrence Yun says January’s home sales of 4.94 million were the lowest since November 2015, but that he does not expect the numbers to decline further going forward. “Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”

The median existing-home price for all housing types in January was $247,500, up 2.8 percent from January 2018 ($240,800). January’s price increase marks the 83rd straight month of year-over-year gains.

Total housing inventory at the end of January increased to 1.59 million, up from 1.53 million existing homes available for sale in December, and represents an increase from 1.52 million a year ago. Unsold inventory is at a 3.9-month supply at the current sales pace, up from 3.7 months in December and from 3.4 months in January 2018.

Properties remained on the market for an average of 49 days in January, up from 46 days in December and 42 days a year ago. Thirty-eight percent of homes sold in January were on the market for less than a month.

Per Freddie Mac data, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 4.46 percent in January from 4.64 percent in December. The average commitment rate for all of 2018 was 4.54 percent.

First-time buyers were responsible for 29 percent of sales in January, down from last month (32 percent), but the same as a year ago.


Sellers, you have an excellent opportunity to sell your home this season — if you have the right pricing strategy in place from the start! Studies show that the longer a property stays on the market, the less the seller will net upon the sale.

It is very important to price your property at a competitive market value at the signing of your listing contract. In some places, the market is so competitive that even over-pricing by a few thousand dollars could mean that your house will not sell. And in some of today’s particularly hot markets where we’re seeing bidding wars, you still want to work with your agent to set the right starting price from the outset to give yourself every advantage.

An Overpriced Home:

  • Minimizes offers
    · Decreases agents response
    · Limits qualified buyers
    · Decreases showings
    · Decreases prospects
    · Limits financing
    · Wastes advertising dollars
    · Nets less for the seller

When you are ready, contact us today for a personal market value analysis of your home. No hassles or obligation – just honest advice on how to get top dollar for your home!


Today’s low interest rates and stabilized home prices have created some great investment opportunities! Investing in real estate has unique advantages over other types of investments:

  • Interest in mortgage loans are tax-deductible.  Investors can lower their tax liability while increasing their equity.
  • Renters pay down your mortgage loan.  Investors reap the benefits of rental income, which offsets your mortgage cost and build equity.
  • Real Estate values increase over the long term.  Real Estate is limited and will always be in demand.
  • 1031 exchanges are available to defer taxable income when you are ready to sell.

Many investors are taking advantage of these great market conditions.

USA remains the world’s largest real estate market /Material prepared by Tranio/

USA remains the world’s largest real estate market /Material prepared by Tranio/

US continues to be the world’s largest commercial property market by transaction volume, despite dynamic fluctuations observed in recent years. That way, the total transaction amount in 2017 has come to $376b, around 8% less than in 2016. However, over the first three quarters of 2018, the investment volume in US property increased by 14% to $341b. The total transaction volume has risen by 10% year-on-year in 2018, according to estimates from JLL. The dramatic decline in investment coming from China most notably affected the commercial property markets of New York (where the total transaction amount decreased by 54%) and San Francisco (where it dropped by 52%), the two cities accounting for two-thirds of the total Chinese investment in US properties.

How to choose a strategy for investing in overseas property /Material prepared for RBC Real Estate. Georgiy Kachmazov, Managing Partner, Tranio/

How to choose a strategy for investing in overseas property /Material prepared for RBC Real Estate. Georgiy Kachmazov, Managing Partner, Tranio/

Many investors who invest in overseas property, tend to high returns. However, not everyone understands that a higher initial yield implies greater risks, that is, the likelihood of a decrease in income in the long run.

We recommend clients to assess risks in advance and think through an investment strategy with an optimal balance of profitability, reliability, labor costs and other factors of investment efficiency. Most Tranio customers have a simple rental business in a stable location, with a long-term rental contract and management through a management company. In this article we will look at how to ensure the best profitability with such a strategy.

Why simple rental business

Typical investors who use the services of Tranio are successful entrepreneurs from Russia, Brazil, Iran or China. As a rule, in their homeland they have an active business that makes the main profit. From overseas property, they prefer to receive passive income with minimal involvement in management. This investment is not so much for profit, but with the aim of preserving capital and protecting it from the political and economic risks of its country.

Most customers do not plan to sell their profitable real estate in the short term. This property provides investors with a personal pension fund and serves as a guarantee of the financial well-being of their children. Another important motive – a residence permit in the United States or European countries, which provide such an opportunity to real estate buyers.

Value added projects, construction or redevelopment, are usually not suitable for our investors. Investments in them are associated with high risks, among which are cost overruns, difficulties in obtaining permits, an overpriced purchase price, and a long search for a buyer. The investor is required to actively participate in the project and certain qualifications in the construction business. Development projects are effective as the main type of activity, and not as a tool to preserve capital.

Thus, we recommend non-core investors a simple rental business: to buy real estate and lease it. This is a low-risk and easy-to-implement strategy.

Budget and object types

We recommend considering investments in overseas property with a budget of 200 thousand euros. Cheaper, with rare exceptions, it is difficult to buy a liquid object. In this segment, we recommend buying residential apartments. Among their advantages is high liquidity and stable demand.

With a budget of over 2.5 million euros, it is worth targeting commercial properties, primarily commercial real estate and nursing homes.

Regardless of the budget, 50–60% of the value of the property can usually be taken on credit, so you can start investing in profitable real estate from 100 thousand euros of your own funds.

Types of commercial real estate and their parametersTranio data (average recommended indicators) *

Types of
% per annum
The term of
the contract
Benefits disadvantages
From 300 thousand euros
Apartments (short term rental) 5–7 From 1 day High liquidity; in comparison with long-term lease – the yield is higher and there are no problems with the eviction of tenants; more potential rental growth Risks of management and downtime;compared to long-term lease – faster wear
Apartments (long term rental) 2–3 From 1 year High liquidity; high demand from tenants, stable even during a crisis Risks of management and downtime; problems with the eviction of tenants
Student housing 4–6 From 6 months High demand from tenants Compared with apartments – lower liquidity, difficult to repurpose
From 2.5 million euros
Apartment buildings 3-5 From 1 year High liquidity, growth potential of capitalization Low yield, many tenants, problems with eviction, we need a management company
Street shops 3-4 3–10 years old High liquidity, growth potential of capitalization Low yield
Supermarkets 5–6,5 12–15 years old High yield, long contracts The closer the contract expiration date, the lower the liquidity
From 10 million euros
Nursing home 5–6,5 20–25 years old Growth in the number of pensioners, long-term contracts Difficult to repurpose
Shopping centers 4–6 5–15 years old High yield Risks of management with a large number of tenants
Hotels 4–6 10–20 years old High yield Difficult to repurpose

* Average indicators for objects:

  • in prosperous areas of major European cities;
  • new facilities or after major repairs;
  • rental contracts at the beginning of the term.


From the location of the object is directly dependent on the risks and profitability of investments. We recommend investing in countries with a developed economy and a stable political system. Austria, Great Britain, Germany, USA, France and Switzerland are the least risky: in these countries the probability of hyperinflation, the fall in national currencies and the decline in GDP are the least.

Most Russian clients prefer Germany because of geographical proximity, and also because, compared with the other countries listed, profitability in Germany is slightly higher, credit conditions are better, and taxes are slightly lower. But other countries from this list are also of interest: for example, some investors choose the United States because they expect more capitalization there, others fear a weakening of the German economy due to political events, and still others are buying income property in countries where their business or personal interests .

We also advise you to take into account the currency in which the investor’s family spending in 5–10 years will be nominated . For example, if you have residential property in the UK and your children study there, then it is worth looking at the objects whose rental income is generated in pounds sterling.

Among settlements, it is better to choose either megalopolises and their prosperous suburbs, or cities of medium size with a growing population, a developed labor market and a potential for economic growth. We advise you to focus on proven locations, which already have a successful investment experience compatriots. For example, successful options are the Western European capitals and major cities of West Germany.

The choice of the area depends on the type of property. For example, it is better to buy street shops on the main streets with heavy traffic, and retail and warehouse premises – on the outskirts of a large city near the highway.

Tenants and Leases

If you rent residential property, then middle-class people with a good credit history and stable income are preferable as tenants. And in the segment of commercial real estate the least risky objects that have already been leased to large corporate tenants working in the market for tens or hundreds of years are least risky. The probability of bankruptcy of such tenants is less than that of small private companies. Information about the financial status of tenants can be requested from lawyers in the process of examination of the object (Due Diligence).

Objects with a large number of tenants (for example, apartment buildings or shopping centers) are not suitable for foreign non-core investors. In our experience, if there are more than five tenants, this significantly increases the risk of management and increases the requirements for the professionalism of the management company. It is best to buy property with a single tenant.

An important condition of the lease is the separation of costs for the maintenance of the object between the owner and the tenant: who pays tax on real estate, utilities, insurance and other expenditure items. We advise to reduce risks by buying objects in which the maximum operating costs assigned to the tenant. Agreements of this type are called NN Lease (Double Net Lease) or NNN Lease (Triple Net Lease), their differences from other options are shown in the table:

Type of lease Owner’s expenses
Repair of the facade
and building
and service
Insurance Real estate tax
Gross rent lease
N Lease
(Single Net Lease)
NN Lease
(Double Net Lease)
· ·
NNN Lease
(Triple Net Lease,
equivalent in Germany —Dach & Fach)
· · ·
Absolute NNN Lease · · · ·

It is recommended to acquire objects with long-term (10–20 years) rental contracts without the right of termination, and with a fixed rental rate without reference to the operating indicators of the tenant’s business. Keep in mind that such an agreement imposes obligations on both sides: it is not only that the tenant guarantees stable rent for the entire term, but also that the owner does not have the right to evict the tenant before the expiration of the contract.

Long-term contracts provide the investor with additional insurance against price corrections, from which even the most reliable real estate markets are not protected. If you have invested in an object with a 15–20-year contract, then with a high degree of probability the period of price reduction will fall on the first 10 years of ownership, since real estate market cycles replace each other every 7–10 years . In case of hard contracts for 15–20 years, price fluctuations will not affect your income, since it is impossible to terminate the contract or reduce the rent. Thus, you can wait until the market recovers, and exit the project with a successful market situation.

Even with long-term contracts, it is usually possible to index rental rates in accordance with inflation, that is, annually raise them by about 1–2% . With the positive development of the market this has its drawbacks. For example, if the real estate market grows by 4% every year, and after 10 years you would like to donate an object that is significantly more expensive than inflation, you will not be able to do this, because the contract limits you. Therefore, investors who believe in the rise of the market in the long term, it is better to buy objects with five-year contracts (for example, commercial property on pedestrian streets) and index the rental price at the end of the contract.

Cost growth potential

Low risk assets in Western markets are sold with an initial rental yield of 3 to 7%. We consider buying objects with an initial yield of more than 7% unjustified and disadvantageous for a foreign investor: in such projects it is highly likely that any risk is realized on the horizon of 5–10 years , the cost of eliminating which will be higher than the risk premium at the entrance.

In addition, markets with a low level of risk and profitability (as a rule, these are centers and prestigious districts of large cities) are becoming more expensive than those that are characterized by high initial profitability and associated high risks.

For example, as a retrospective analysis of real estate prices in the USA showed by Tranio , from 2001 to 2015 objects with an initial yield of 3% grew in price by an average of 5% per year, with a yield of 5% – by 4.7%, with a yield of 7 % – only by 3.5% per year, and objects with a yield of 9% could fall in price. At the same time, among the objects that became cheaper, the ones that had a lower yield lost the least in value. The probability of price falling is higher for objects with a higher initial yield, so taking into account the likelihood of the realization of this risk, objects with an initial yield of 3–7% result in a higher total yield.

For the forecast of price increases, the development prospects of the district are also important. The real estate where the gentrification occurs is the fastest growing – the process by which industrial areas are transformed into prestigious residential areas, the territory is improved, the infrastructure is developed, and low-income people are replaced by more affluent. At the same time, the most advantageous areas are located close to the city center or have convenient transport links to the center.

Optimum profitability depends not only on risks, but also on the duration of the investment. The shorter the term, the greater the initial yield makes sense within the range of 3–7% . For example, without taking into account a loan with a 20-year investment period, the highest total return (taking into account the growth of capitalization) is achieved with an initial yield of 3.8–5.8% ; and if the investment period is 10 years, then the optimal initial yield is 4.5–6.5% . This conclusion Tranio analysts received as a result of a study of 100 pairs of “profitability – capitalization increase” for residential and non-residential real estate in Germany. 


You can increase profitability with a mortgage.

The money raised by the mortgage is cheaper than the tenant pays the rent. For example, when buying investment property in Germany, you can count on a loan of up to 60% of the value of the object at 2-3% per annum. With a rental yield of 6.5%, the return on invested capital, taking into account the loan, can reach 8-10% .

In general, the cheapest loans are at a floating rate without the possibility of early repayment, and the most expensive ones are at a fixed rate, allowing early repayment.

It is better to take a loan for a long period (10-15 years) : the longer the term, the more expensive the money, but the less risk that the negative market conditions affect the refinancing conditions. In the case of commercial real estate, it is recommended to draw up a mortgage under a scheme whereby interest is paid first and the loan body closer to the end of the loan term. It is desirable that by the end of the term not less than 40–50% of the body be extinguished .

It is not worth refinancing an object and borrowing too much. But one should not borrow too little, since it would be strange not to use the opportunity to get a loan at a lower price than the tenant pays.

Tax optimization

As for the optimization of the tax on income, individuals in Europe and the United States pay it in proportion to the amount of income, and real estate worth up to 1 million euros is easier to issue to an individual. A more expensive property is more profitable to register for a company, because legal entities usually have a flat and lower income tax rate. It is also easier for companies to reduce the taxable base due to depreciation and deductions on loans from the bank and the founder.

Best of all, if the transaction can be organized so as to pay taxes only in the country where the property is located. Such a possibility depends on the tax residency of the investor, interstate agreements on the avoidance of double taxation, form of ownership and other factors. Tranio consultants, with the help of tax advisors, help each client individually structure the transaction and arrange a loan on optimal terms.

Exit from the project

The usual tenure of ownership of a real estate before the sale is 5–20 years . As a rule, you need at least 13-14 years for the object to pay off and start making a profit. In some countries, investors are guided by the term for the sale after which the capital gains tax is not paid (for example, in Germany it is 10 years).

Whether it will be possible to profitably sell real estate in many years is one of the key risks of an investment, which is often not taken into account by clients who are interested in high returns. They are attracted by offers with an initial yield of 8% and higher; typical examples are parking or housing for students on the periphery. The key disadvantage of such facilities is low liquidity, that is, small demand for purchases. If you are going to sell them, you will have to significantly reduce the price, which ultimately eliminates the high initial yield.

With a planning horizon of 10–20 years, we recommend considering commercial real estate with an initial yield of 5% (while observing the remaining recommendations from this article). Most often, their value grows by 2-3% per year with the market or even faster. These are reliable objects that can be profitably sold ahead of schedule if your plans change. And under a stressful scenario, such real estate loses less in value than more risky objects with a high initial yield.

However, if you are going to sell the property in 1-3 years , then it is best to buy the most profitable property in the region with growth potential. Today, Spain is considered one of these locations in Europe with its central markets in Madrid and Barcelona. However, it is impossible to say whether the growth of these markets will continue in the next 10–20 years , so for long-term investments aimed at preserving capital, it is better to choose more predictable locations.

If you plan not to sell real estate, but leave it to your heirs, then it is important to choose the correct format of ownership in order to optimize inheritance taxes. For example, in France there are no inheritance and gift taxes if the object is registered for a civil real estate company (SCI). And in the UK, inheritance tax is not subject to real estate issued to an offshore company.

Here is a summary of Tranio’s key recommendations for overseas property investors:

  Residential Properties Non-residential property
Min budget 300 thousand euros 2.5 million euros
Types of objects Apartments, accommodation for students Commercial real estate on crowded streets, supermarkets, nursing homes
Country Austria, Great Britain, Germany, USA, France, Switzerland
Cities Large settlements with good demographics and potential for economic growth
Areas Places with good ecology and infrastructure, popular with the middle class; surroundings of universities, medical centers and business districts Near transport arteries and public transport stops, in places where other objects of a similar profile gather
Capitalizationgrowth potential Tall Average
Investment Term From 10 years
Optimum initial
(can be increased by a loan)
LTV (share of borrowed funds
from the value of the object)
Credit The cheapest loans – with a floating rate without the possibility of early repayment; should choose a scheme in which interest is paid off first, and the body closer to the end of the term
Loan terms 10–15 years old
Tenants Representatives of the middle class, families with children, students, office workers, pensioners Large trading networks and management companies that have been operating in the market for several decades and are in good financial shape
Type of lease NN or NNN (maximum operating costs for the tenant); non-negotiable long-term contract
Lease term 1 day (short term),
1 year (long term)
5–20 years old
Shedding Light On The Region’s Affordable Housing Gap

Shedding Light On The Region’s Affordable Housing Gap

Jessica Lautz, vice president of demographics and behavioral research for the National Association of Realtors speaks during the Cape Fear Realtors Affordable Housing Summit on Wednesday, February 13, 2019 in Wilmington:

“Average home prices have risen 22 to 30 percent in the tri-county area in the past six years” – according to a report produced for Cape Fear Realtors and distributed Wednesday morning during the organization’s Housing Affordability Summit at The Terraces on Sir Tyler in Wilmington.

“In New Hanover County, the figures showed a rise of 25 percent from 2012 to 2018 in the average price of a new home (about $285,000 in 2012 to $355,000 last year) and 28 percent for an existing home (about $234,000 to $301,000)

Pender County, showed the greatest average price gains: 27 percent for new homes (an increase of $64,000 to a little over $300,000) and 30 percent for existing homes (a jump from $210,000 to $273,000).”