A common theme in newly developing markets is for investors to snatch up old properties, refurbish them, and then rent them out to expatriates and the newly affluent. It is happening in Nicaragua, it happened in Hong Kong, and the trend is starting to hit Mongolia as well. For the ambitious and energetic investors, Soviet Apartments make an excellent fixer upper project. But there are things to consider before plunging into these investments.
End pricing
Like any real estate investment, you need to think about the end consumer. Who will ultimately be renting a soviet apartment?
There could be hopes of renovating a project and renting it out for USD 1500 or USD 2000. You may succeed, and if you do, kudos to you or your real estate agent.
Unfortunately, many of the Russian Soviet Apartments are located in areas that are considered unsafe or dangerous. This isn’t my opinion, but it is one I have heard from expatriates looking to rent, and ultimately, it’s them you are renting out to. And those with safety concerns that are able to shell out a couple extra hundred bucks a month will do so for the feeling of safety.
Keep in mind that you may need to rent it out for less, so keep the renovation cheap. It is possible. A fresh coat of paint on the walls can do a lot to spruce up the place, and places like Misheel Expo and Naraan Tuul do offer good prices on decent furniture. Most importantly, a price in the range of USD 200 to 500 per month will be more in the price range of volunteers and NGO workers.
Think Long Term
In my personal opinion, USD 500 per month isn’t bad since the value in the Soviet Apartments is in the long term capital appreciation. It has been a common phenomenon in the former soviet satellites and in other developing countries that centrally located property appreciates in value. Remember that that is what you are playing on.
Get a good agent
Mongolian agents will be able to get you a good deal on an apartment. Go with someone who knows the process of registering properties in the immovable properties offices and can make sure you pay all the appropriate taxes.
Remember Your Alternatives
In my negotiations classes in college, our professor always stressed that you needed to know your BATNA - best alternative to a negotiated agreement. Before you spend a day registering immovable property certificates in your name with an apartment, what other investments are available to you in Mongolia? For very little stress, you can park your money in a time deposit at any of the major banks and earn around 13%. You’ll have similar economic exposures as with real estate in Mongolia, and you won’t have to worry about tenants. Something to consider.
If Time Deposits aren’t for you and you do want the excitement of owning property, make sure your annual rental yield less expenses is greater than 13%.
By Jess Lampe
Real Estate 
