Costs of Purchasing Property in Turkey
Investment in real estate requires a decision making process. The most important part of this process is understanding the costs of purchasing a property in Turkey, working on the budget and choosing a property that is suitable for one’s taste and budget.
Every property available for sale has a settled price. However, the actual costs for purchasing a property is not limited to the sale price. To save time and make a sound decision, let us inform you about the most prominent expenses of purchasing a property in Turkey. To get the best property deals please click here.
A. ARISING FROM THE PURCHASE
1. Sales Price of the Property
The most known part of the purchase is the cost of the property to be paid to the property owner. This owner can be a developer in case of buying a new house or a real person in case of buying a resale property. To start the TAPU (title deed) transaction process, the owner will be asking for the complete payment done in advance, and in some cases when the installment is over then the TAPU is transferred to the buyer’s name. The points to be noted before paying the sales price, you must consider the following.
2. Closing Costs
2.1. Real Estate Valuation Report
For foreign investors, the lawmaker made a valuation report obligated. The price of the reports varies between 1.500 TL and 4.000 TL.
2.2. Taxes and Legal Fees
a. Value-Added Tax (KDV)
In Turkey, the VAT rates are set at 1%, 8%, and 18% by law. For the purchasing real estate, it generally is 18%. However, if the investor meets with the conditions stated by law, it is possible to take advantage of the VAT exemption. For more information about the VAT exemption please check our blog about taxation.
b. Title Deed Fee (TAPU Harcı)
According to the Law, the rate of title deed fee is 4% of the sales price. The title deed fee is paid by the buyer and seller over the sales price. Depending on the deal, title deed fee payment terms are changing. While some owners require the buyer to pay the whole fee, some of them ask to share it in half. On some occasions, the owner pays the fee and the buyer doesn’t need to pay it at all.
c. Circulating Asset Payment
Locally determined circulating asset payment should be done. For 2020, the decided circulating asset payment varies between 90 TL to 450 TL according to provenience.
d. Service Fee
For the services TAPU (title deed) Office is providing, a fee needs to be paid. This fee is determined by the Ministry on a yearly basis. For 2020, the decided service fee is 750 TL.
2.3. Notary Public and Translator Fees
a. Making transaction personally
People who cannot read or write Turkish, a sworn translator is a requirement fort he transaction. The translator will be explaining the terms and details about the title deed records. The translator’s fee for oral translation varies from 400 to 600 TL.
b. Making the transaction with a representative
It is possible to handle the TAPU transaction with an authorized person. To be represented in the TAPU Office, with a Power of Attorney (POA), the person should be authorized specifically. In Turkey, only the Notary Public is empowered to prepare the POA. For the POA, between 700-1000 TL will be paid to the Notary Public. In addition, between 350 TL to 500 TL will be paid to the translator for oral translation and passport translation.
3. Agent’s Service Fee
As it is well known, real estate agents work on commissions. This another important factor in the calculation of the costs of purchasing the property in Turkey. They are only paid when they complete a property sale. Therefore, they don’t receive any payment until after settlement. The standard commission rate in Turkey is 4% of the sales price. Depending on the deal, the agent’s service fee payment terms are changing. While some owners require the buyer to pay the whole commission, some of them ask to share it in half. On some occasions, the owner pays the commission and the buyer doesn’t need to pay it at all.
4. Attorney’s Fee
According to Turkish Law, unlike other sales contracts, real estate sale is a type of contract with special legal regulations. Therefore, we recommend investors to work with Brokerage Firms which are working with in-house lawyers. If the company you work with does not provide such a service to you, you should definitely get support from a lawyer. In this case, the service fee you will pay the lawyer will be starting at 1,500 dollars.
B. AFTER PURCHASE
After the costs of purchasing a property in Turkey comes another important factor in place which is the costs after purchase. These are the continuous cots for maintainability of property in Turkey, whether you decide to live in your property or rent it out, you must have these costs into consideration.
1. Live In: Ongoing Homeowner Expenses
1.1. Property Tax*
By law, the property tax rate of the houses is as follows. It is 0.2% of the market value within the metropolitan boundaries. In non-metropolitan municipalities, it is 0.1% of the market value.
For commercial places, the rates are changing. It is 0.4% of the market value within the metropolitan boundaries. In non-metropolitan municipalities, it is 0.2% of the market value.
The taxation for the property is made annually and the tax is paid in two installments during the year. Click here for taxation periods and the property tax payment deadlines.
1.2. Compulsory Insurance (DASK)*
DASK is a type of insurance which is obligatory by law. This insurance covers natural disasters such as earthquake, fire, etc. This insurance should be renewed on a yearly basis. Insurance costs vary according to the size and quality of the property. The fee changes between 100 TL to 300 TL.
Proverbially, as much as the gas, water, and electricity are used, bills will be heavier. In Turkey, the main services paid by the bill are gas, electricity, water, and the internet. These bills come on a monthly basis and paid by the resident.
While subscribing for the gas, water, and electricity, there is a security deposit should be paid. You may find the deposit amounts for an average house which is 2 rooms and 130 sqm explained below.
The deposit for the water subscription has been determined as 196.50 TL for the year 2020.
Electricity Subscription Security Deposit is taken as 198 TL.
Gas subscription security deposit is 700 TL for houses up to 200 sqm.
1.4. Maintenance Fee
Every residential site has its own kind of social facilities and services which are provided to homeowners and residents. Rates depend on the place property located and the size of the house. The maintenance fees start from 100 TL and go up to 2.000 TL.
2. Let on Lease: Rental Property Expenses
Leasing property is the main goal of our investors after purchasing it. The costs of purchasing the property in Turkey do not end in the first two stages explained above. Renting out your property also has some costs, which we will explain below.
2.1. Property Tax*
Property tax is an outcome of being an owner. Therefore, in any case, as long as one kept ownership, pays the property tax. This part is explained above. Consequently, check Chapter B, Article 1.1.
2.2. Compulsory Insurance (DASK)*
The owner is responsible for buying DASK insurance. This part is explained above. Consequently, check Chapter B, Article 1.2.
2.3. Rental Income-Tax
In Turkey, the legal or real person’s income is taxed. According to this rule, the income of the person who earns by renting the property is taxed. The rental income-tax calculated on the declaration and is paid in two equal installments in March and July of per year. The income tax rate for investors who earn from rents under the new law is as follows.
For rental income:
15%: Taxable income up to 22,000 TL,
20%: Income over 22,000 TL and up to 49,000 TL (plus 3,300 TL for 22,000 TL),
27%: Income over 49,000 TL and up to 120,000 TL (plus 3,300 TL for 49,000 TL),
35%: Income over 120,000 TL and up to 600,000 TL (plus 27,870 TL for 120,000 TL),
40%: Income over 600,000 TL (plus 195,870 TL for 600,000 TL),
* The costs indicated by the star are the expenses arising from ownership.