PROPERTY MARKET

REAL ESTATE INVESTMENT: Step by step guide to buying Ukrainian property remotely

Property investors do not need to be resident in Ukraine in order to enter the market – but finding the right local partners is vital

REAL ESTATE INVESTMENT: Step by step guide to buying Ukrainian property remotely
The Kyiv residential real estate market offers interesting opportunities for international investors but local knowledge remains crucial to long-term success
Tim Louzonis
Saturday, 18 August 2018 12:39

People invest in overseas properties for all kinds of reasons, ranging from diversification to rental income and capital returns to lifestyle considerations such as obtaining foreign residency in another country. More and more investors are choosing to do this without traveling overseas to make their purchase. Some countries require your physical presence in order to buy property. What about Ukraine? Can you buy property in Ukraine remotely? The answer is yes.

Before you attempt to purchase Ukrainian real estate remotely, there are a number of steps you should consider taking. First, educate yourself about Ukraine’s real estate market. Next, select a capable broker whom you can trust and sign a power of attorney (“POA”) for your broker’s legal partner to obtain a Ukrainian tax ID on your behalf and get it notarized and apostilled in your home country (or get it notarized at a Ukrainian embassy or consulate). You must send the original authenticated POA to your broker by courier such as FedEx or DHL. After obtaining a Ukrainian tax ID, repeat the notarization, apostille/authentication and shipping process for a second POA for your broker to purchase property on your behalf, and if necessary, to open a bank account for your purchase. Once these steps are complete, you can proceed with the purchase of your investment property.

 

Doing Your Homework

Ukraine’s residential real estate market is still a long way from being a place for do-it-yourself investors. Finding quality price and market information is not a straightforward process or something you can easily do online. Ukraine’s real estate agents are not legally required to obtain licenses, nor does the industry follow a formal code of ethics, so their knowledge and level of professionalism can sometimes leave a lot to be desired. This means that potential remote purchasers are not just looking for a broker to effect a mechanical transaction. Instead, you will need to find someone whom you can trust to be your real estate investment advisor in Ukraine, who will help to educate you about Ukraine’s economy and the outlook for its real estate market.

A good broker will take the time to understand your requirements and investment goals and will help you find opportunities and avoid the potential minefields of buying an investment property in Ukraine. Your broker should also have broad and deep knowledge of the local rental market. For example, Kyiv is Ukraine’s No.1 real estate market and Lviv has emerged as the country’s No.2 real estate market, but these markets offer different opportunities. In Kyiv, long-term rental apartments in the premium downtown segment rented to diplomats and corporate clients provide the best investment returns. However, if you are thinking of buying an investment property in Lviv, then short-term rental apartments in the Old Town usually offer the best returns. Smart investors will seek out local partners who can provide this kind of insight.

 

Legal Matters

In Ukraine, it is not possible to use an electronic notary and digital signatures when buying property. You will need to send original documents to your broker in Ukraine via courier such as DHL and FedEx. Once you have selected your broker, their legal partner can send you a draft power of attorney to authorize them to obtain a Ukrainian tax ID on your behalf (registration of ownership title in Ukraine requires an owner to have a tax code). You will need to get this POA notarized and apostilled in your home country. An apostille is used to authenticate your notarized document so that it may be accepted in other countries that are parties to the Hague Convention. Different countries have different procedures for obtaining apostille, so you will need to investigate the procedures in your home country.

Alternatively, if you live near a Ukrainian consulate or embassy, you can take the POA there and have it authenticated by a Ukrainian notary and skip the apostille step. If your country is not a party to The Hague Convention and you do not live near a Ukrainian consulate or embassy, then you will first have to submit the document to your country’s department of foreign affairs. After that, you can submit this document to the consulate of your country, and only then to the ministry of foreign affairs of Ukraine. After obtaining your Ukrainian tax ID, you will need to repeat the notarization, apostille/authentication and shipping process for a second POA to authorize your broker to purchase property on your behalf, and if necessary, to open a bank account to complete your purchase.

When agreeing upon a power of attorney, you will want to avoid granting wide and ambiguous lists of powers to your broker. The more specifically the document is written, the more secure you will be. You will also need to consider whether you want to grant your representative the ability to transfer any of the rights under the power of attorney to any other person (this must be indicated directly in the POA). The validity term is another key provision of the power of attorney.

 

Collecting Income

Since you will be investing remotely, you will need to find a real estate agent who can offer you a complete, turnkey solution that includes legal and tax support, due diligence, buying a property, renovating your property in a manner that will maximize its investment yield, finding tenants, and managing the property. Here it should be noted that investment-grade properties in Ukraine with attractive yields almost always require some form of renovation (partial or complete), so investors should bear this expense in mind when budgeting their property investments in Ukraine.

You should also keep in mind that Ukraine currently has currency controls and strict banking regulations in place, so you will want to find a broker who has experience working within these rules to help foreign clients buy property by overseas bank wire transfer. You will need a partner who can advise you on the best way to structure your purchase to allow you to repatriate rental income, pay your Ukrainian taxes, and sell your property in the future. Very few brokers in Ukraine have this experience, since most apartments in Ukraine change hands in exchange for physical cash.    

 

Challenging Environment

Buying property in Ukraine remotely is possible. It is not necessarily easy, but it is not too difficult either, once you get beyond the paper chase. As with many things, the biggest steps are the initial ones, including getting comfortable with the investment case for real estate in Ukraine and finding a broker who can act as your trusted advisor, someone who you feel will be capable of delivering you an investment asset and income stream on a turnkey basis, no matter where you are.

 

Special thanks to attorneys Vasyl Cherednichenko and Tetiana Yashchenko at the law firm ExpatPro for their contributions to this article. Please note that this is article not intended to replace qualified legal advice. You should also bear in mind that your specific circumstances may differ from the assumptions used here.

 

About the author: Tim Louzonis (This email address is being protected from spambots. You need JavaScript enabled to view it.) is a co-founder of AIM Realty Kiev and AIM Realty Lviv, real estate agencies that specialize in real estate for foreign investors and expats. Tim is a long-time expat with Ukrainian roots. He first came to Ukraine as an exchange student in 1993 and returned in 2008.

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