Scanning the wisdom of buy to let

5 mins read

Buy to let is one of the favourite investments for Cypriot investors, who extend their interest outside Cyprus primarily in the U.K. (London) and Greece (Athens), as well as other towns with a high population of students.

With the prevailing situation of deposit rates (which now are negative), the near uncertainty of the local banks retaining their profitability even mid-term, the expected increase in value for some real estate investments are factors to consider.

As are the advantage that exists in real estate for “seeing and touching” the asset and the investor managing his own property (as opposed to funds).

In addition, by Cyprus standards and circumstances, investing in real estate for the children’s future (dowry/education) the sharing of assets amongst the family, mortgaging of real estate at some future time to secure funds for business is an added advantage for Cypriots.

At the same time, “solid” international companies are not doing so well, whereas Cyprus’ financial circumstances with the virus and the Russians double taxation treaty now in the air, are also considerations to be taken into account (as is the Cyprus Investment Scheme saga).

As circumstances stand and referring to the local RICS statistics, but concentrating in the towns and tourist areas, we have the following recorded returns:

Houses                 2.6%

Apartments        5.0%

Shops                    5.7%

Offices                  5.7%

Industrial             5.3%

We do not necessarily agree with this and we are of the opinion that in actual practice these returns are much less, whereas investors in the market with ready sizable cash are seeking a return of 5%-7% (very high and not attainable) but this is how it is.

What we mean by returns is the rental income of a property by comparison to the cost of purchase or market value as-is.

The Cyprus return levels have no direct relation to those in the international markets, since other than the income, repairs/ maintenance, non-let periods (voids) are not taken into account.

In order to demonstrate the difference, we have the following picture as an example to the let of an apartment (local market demand):


Cyprus                           International

Market value                                                                     €200,000                              €200,000

Income p.a.                                                                        €12,000                                 €12,000

Less administrative costs, taxes,

Voids, repairs, agent’s fees                                                                                              €3,000

Total income (net)                                                             €12,000                                 €9,000

Return                                                                                       ±6%                                      ±4.50%


So, there is a difference between the two on the returns (and this is before income tax dues).

Investors in such units must also bear in mind the following:

Quality of Tenant

Pay more attention to the tenant being capable to meet their total obligations under the lease, as opposed to the level of the rental payment.

The aim is to keep the tenant as long as possible since, in any change of tenant, the landlord must pay agent’s commission (1/12 of the annual rent + VAT), any repairs/improvement that the new tenant may require, whereas good paying tenants are hard to find.

Eviction of Tenant

Regarding statutory tenants, there is now an “express” type eviction procedure, which can be attained within 3-6 months (for non-payment of rent) as well as rental dues payment collection within 12 months.

Non-statutory tenants/landlords must follow the ordinary procedure which takes years.

Common Expenses

Better to add this on the rent as an addition since the non-payment of common expenses by a tenant is the responsibility of the landlord.

Avoid the hassle, be it that a landlord might take an added risk.


Pay particular attention to the availability of parking (1 spot per apartment) and 1-2 additional ones by those stipulated by the law (one spot/60 sqm) for commercial (shops) properties.

Aim for a minimum shop size of ±60 sqm plus, mezzanine and pay particular attention to the availability of a wide pavement – as such the shop can be used as a café/take away/bar.

Future expenses

Before buying, pay attention to the expected capital expenses that you may be called upon to pay in the immediate future, such as the replacement of lift, decoration of the building and common areas, any other items that need to be looked after.

Administrative Committee

For us, this is a major issue to have a good and efficient administrative committee, whereas the new law regarding common expenses creates confusion.

New type of lets

Airbnb lets although show returns of more than 10%, they require added management on the investor’s part, added commission to the specialized agents (±20%), whereas the nuisance in such lets created by the tenants may, in the end, cause the landlord to be liable in a lawsuit without being necessarily their fault.

Returns v Capital Appreciation

The returns are low bearing in mind the above, but you must take into consideration any capital appreciation to be expected.

For us, even if you expect a return as low as 2% this could be acceptable in cases there are expected future appreciation of value.

Insurance Cover & Scam

Watch for your insurance cover since our experience has taught us that insurance firms come up with all sorts of justifications for not paying.

Small print regarding the conditions “new for old”, third party insurance, let properties v owner-occupied, vacant periods not more than 30 days, bad workmanship are numerous points to be considered.

So, returns have no clear picture and due diligence is required since the investment involved refers to a large capital outlay, unlike shares.