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Show Summary
In this episode, Dylan interviews Eric Tan of Silk Development about real estate investment opportunities in Batumi, Georgia. Eric explains why the country is attracting international investors due to its investor-friendly policies, low taxes, and growing tourism industry. He discusses property prices, different types of investors entering the market, and the long-term potential of Georgia as an emerging real estate destination.
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Investor Fuel Show Transcript:
Eric Tan (00:00)
I noticed that in fact, Georgia has made a lot of people a lot of money in real estate. And this goes back to six, seven years ago. And I noticed that it’s the Israelis.the Palestinians, the Ukrainians, the Russians, the Turkish, the Greeks, Azerbaijan, Polish as well, all the neighboring countries are fellow citizens, right? They know about Georgia because Georgia is known as the Las Vegas of the Black Sea. And when you are here, you do see bright lights, casinos, and during summer, the beach is full, really full, I’m not kidding you.
Dylan Silver (02:10)
Hey folks, welcome back to the show. Today’s guest, Eric Tan is the head of international sales with Silk Development, developers in the country of Georgia. Thank you for joining us today, Eric.Eric Tan (02:23)
Happy to be here, Dylan, and thank you for having me.Dylan Silver (02:25)
Absolutely. Now, when we talk about developing in some markets outside of the U.S., I mean, it certainly is a market that I frankly knew very little about until speaking with you just now. I’d like to start there. How did you get into developing in Georgia?Eric Tan (02:45)
Now, I’m not the one developing. work for this company that is the largest conglomerate in the whole Caucasus region. We are called the Silk Road Group. So if we talk about the genesis, why am I here, right? So as I mentioned to you, Dylan, just now, that’s an interesting story. So I was living in Romania before I decided to take on this role in Georgia. And before that, I didn’t even think about Georgia in my head. And…So what is famous in Georgia right now, if you were to just go look on the internet, very famous Ali and Nino statue, right? Where there are two metallic statues that goes towards each other and just merge and go past into the male and female is a very famous love story. So that is one of the iconic landmarks in Batumi. So our project is just right beside Ali and Nino. So it’s a location second to now. So anyway, for me, I’m known as the Chinese here in Batumi, interestingly.
And that’s one of the reasons why I decided to take up the role because I came here for market research when the company brought me here. And then I did a lot of studies. I looked at it. I immersed myself.
I noticed that in fact, Georgia has made a lot of people a lot of money in real estate. And this goes back to six, seven years ago. And I noticed that it’s the Israelis.
the Palestinians, the Ukrainians, the Russians, the Turkish, the Greeks, Azerbaijan, Polish as well, all the neighboring countries are fellow citizens, right? They know about Georgia because Georgia is known as the Las Vegas of the Black Sea. And when you are here, you do see bright lights, casinos, and during summer, the beach is full, really full, I’m not kidding you.
And ⁓ even at 10 p.m., you see people walking.
along the streets, taking photos, having fun and having parties every other corner, every single day. No kidding. I witnessed it last year. So I’ve been here for almost a year. So this will be my second summer. And so back to those countries that I mentioned. So these people have been here investing in real estate where it was as low as 20, 30 or even $40,000 per studio apartment.
Now, of course, back then, the…
whole environment wasn’t so certain. So you really need to be very bold and I call it, you need to have balls of steel to come in, right? And those fellows, high risk, super high rewards. They made their money today. Now, today the environment is very different from back then. It’s very stable. The taxation system is fantastic for all investors. Just so you know, it’s zero capital gain tax, zero percent property tax.
and ⁓ super easy to open a bank account, super easy to open a business here. And when I say easy to open a bank account, say as a tourist, say you’re from the US. When you enter the country of Georgia with your US passport, you can stay here one year visa for free. And you walk into a bank and in 30 minutes, you open a bank account. It’s as simple as that. Because I did it on my own. ⁓
It’s easy and I’ve got many other customers doing the same as well. So yes, so the investment climate, of course, as we speak right now, Iran and Israel is having the situation and then you have the UAE being affected as well. So it shows to the world that UAE is no longer bulletproof. So we’re not trying to sell on other people’s misery, it’s not that, but it shows that for Georgia, we are in a very unique position geographically and it’s proven.
to be a really safe heaven. Of course, it’s not gonna be forever like that, right? If I would say it’s gonna be forever, I’m starting to sound like a scam, it’s not. But I can dare say in the next 10 to 15 years, the emerging market status and when you look at the growth chart and all this, it’s really something that everyone can consider because of the investor friendly environment, the tax systems, the visa, you know, the easy visa entry and the way the full market is.
is right now. You see, it’s really very difficult and using words to describe until you are here to see for yourself, a lot of my Asian friends or open-minded friends, when they ask me, Eric, where are you? I’m like, I’m in Zoujibataimi. Now those who are closed-minded, they will say, what is that? Is that a James Bond villain actually or what? And what are you doing there? Human trafficking? I said, no. Those who are open-minded, they come and then they tell me,
I understand why you are here and I understand what can be done here. I mean, I have a lot more things to say, of course, on what kind of investors are here, but yes, Dylan, I’ll stop here and I will let you carry on with your question.
Dylan Silver (08:34)
One question that I have is you mentioned the price of ⁓ an apartment. Right now, if someone wanted to buy a condo or an apartment, what would the prices be for a modest one or two bedroom apartment somewhere in the capital?Eric Tan (08:52)
Now the prices starts from $100,000 and above. Of course they are cheaper ones, but I wouldn’t recommend investors to go for cheap ones because I noticed as well, why are they so cheap? There’s a reason because of the building quality. They are probably built like a shoebox. Soundproofing is super bad. So I kid you not, the dude beside you, if he cough, if he farts, you can hear him. True story.Dylan Silver (09:22)
The walls will be that thin, yeah.Eric Tan (09:24)
Yes, true story. the building code is very different from what we have in the US or First World countries. So you can see a big building with hundreds of units, but they only have two elevators. So during summer, people wait for an hour or so just to get up and down. So that is also a problem. That’s the reason why they are cheap. So you don’t want to buy those kind of developments.Dylan Silver (09:53)
If we talk specifically about, you know, comparing the quality of life and then also, you know, what people expect versus the U.S. versus China and other countries, are people going to have a consistent energy grid? you know, all the plumbing, you know, drinkable water, what’s consistent throughout the city?Eric Tan (10:52)
All that you have mentioned is consistent because I’ve experienced it myself because I stay here in Batumi. And mind you, I come from Singapore, first world country, super expensive. So we would expect super efficiencies here, but of course it’s not. But as you mentioned, those consistencies are important and they are here because don’t forget, Batumi relies very much on tourism. So if they are not consistent on that, they can’t call themselves the Las Vegas of the Black Sea, right?And what I like about here would be the pace of life, food, accessibility to really real healthy organic food. know back in US, real healthy organic food is going to cause a bomb or is non-existent. GMOs and stuff like that. Over here, I tell you, every summer, we get so much raspberry, blueberries, and blackberries, they’re organic. Why do I know that? Because when you buy them home, in three days time, if you don’t eat them, they rot.
Exactly. So you know, these are the real deal.
Dylan Silver (11:51)
You knowthere’s no preservatives in it. I would like to ask you a little bit about the climate for folks who are getting into real estate investing out there.
Is it is it is the typical person investing out there a full time real estate investor or developer? Is this somebody who they do this as their occupation? Or are you also seeing maybe folks from other countries who are buying, let’s say, an apartment or a condo or someplace, maybe as somewhere where they’d like to vacation from time to time, but also as a passive investment of some variety?
Eric Tan (12:25)
You’re right. And since the day I got here to now, the kind of deals that we’ve done, we’ve got people from all around the world. In fact, we have got two Americans who invested in our project. So to make it simple, I break it down into three categories of investors that we have. So imagine a pyramid. So at the bottom, I call it the low stakes investor. So what do I mean by low stakes investor? Meaning if you have a…If your budget is about 100 to 200,000 US dollars, because that’s what you have at max, right? Go for it. Because you’re at the stage where we call this a forced savings. You’re forcing yourself to save money every month, because as a developer, we offer 0 % interest, 48 months installment. So you don’t have to go to the bank to get a mortgage. So you’re forcing yourself to save every month or every three months. That’s where the payment frequency is.
And then at the same time, you can write the capital appreciation. So we have typically like that. Now the mid tier, the mid tier investors are also interesting because these are the guys that say, hey, Eric, I’ve got a million to 1.5 million US dollars. So they come in, typically they buy about 10 units. So why about 10 units? Because in the end, or at some point, they can sell five and keep five.
So the mid tier stakes investors is about wealth generation. They have enough capital, they still want to generate more wealth. We have them as well. Now the top tier is the most interesting. So recently, ⁓ in fact, three of them, huge ones. I’ve got a text advisor from Cyprus, yeah, and he’s German, super smart guy. So he came, we spoke, he loved the project, cut the long story short. He said, I want five units. So he bought five. The next day he came back.
Say, Eric, I like what this presenter, I like your project. I’m gonna do another 30. So in total, he bought 35 units worth 4.4 million US dollars. So why is he doing that? Because at this stage is about wealth protection, right? They want the money to be parked in a safe environment where they know they can liquidate and with very beneficial tax systems.
Then we have another case, which is a 78-year-old Jewish doctor from Germany as well. He knew about the project, he’s 78 years old. And he said, look, I love it because the inheritance tax in Germany is ridiculous
and I need to take out the money, put it somewhere in Georgia, which is your project. I know it’s gonna help me pass down this asset to my next generation. So he came in with $2.8 million.
So with many examples like that at different stakes that the investor can afford, we are able to cater to your needs.
Dylan Silver (16:09)
For investors who are, you you mentioned different walks of life. What’s the typical hold time, if you will, for these investments? Is this something where they’re investing for five years? Or is this a longer term investment? Or is it shorter term? It just depends on the goals of the investor.Eric Tan (16:27)
I think if you really want to make money from real estate, it’s never an overnight thing, right? Real estate is about really building wealth. So I think the time horizon, you have to look at at least two years, but before you can see the capital appreciation, worth it for you, right? And at the same time, because over here in Georgia, when you open a bank account, your interest rate offered by the bank is 10 % per annum. So we typically advise clients to open a bank account here, put some money here.earn the interest and the same time you buy real estate. So you know, you’re using all the tools around here to make money. And mind you, the exchange rate between the local currency here, which is Georgian LARP versus the US dollars has been very stable. So I’m not worried about the fluctuations and then you may lose this and that. I can dare tell you it is stable.
Dylan Silver (17:19)
Now for folks who are, mentioned a doctor, you also mentioned people who are buying many units at a time. What is their, ⁓ I would say, overall, and it’s gonna differ person to person, but is there overall strategy to buy and hold, or are you seeing most people who are doing this, like you mentioned, two to five years?Eric Tan (17:46)
As I said, it’s all different risk appetite, right? The low stakes fellows, typically we will tell them to hold for as long as we can because as I said, it’s a forced saving and they want that big payday with the capital precision, right? Fine. So then you need a longer time horizon. The mid-tier stakes guys, short term, two years, three years, sell five, keep five if they have 10 units. Then typically they are already taking back their capital and using that to make more money.Now the top tier, they are not thinking about making more money. They are just wanting to make sure that the money is safe. Because of the tax benefits here. So personally, I’ve seen different profiles and one more thing I’d like to add, In fact, last year I was on the bitcoin.com podcast sharing this project with the Bitcoin guys, And during that period, Bitcoin was at 120 US dollars per Bitcoin.
Dylan Silver (18:23)
for.Eric Tan (18:43)
And right after the show, we had some dudes that are really fast fingers. They got in touch. One of them bought two units with two Bitcoin. So in five minutes, they wired the… I mean, we received USDT as well. We got the deal done. And today, because Bitcoin has gone down, they are happy because they’re using real estate and Bitcoin to hedge against one another. To hedge each other. Yeah. So you see, there’s so many things that…We as a developer or we having such a product, are able to cater to different investors because what is their real intention? We will never uncover. All we know is that we can help them.
Dylan Silver (19:24)
It’s different for every person. I would like to pivot a bit here, Eric, and ask you specifically about the hotel space. And this is really coming from my perspective as a licensed realtor in the state of Texas in the US. When we talk about hotels, hotels, generally speaking, require a significant amount of management. And of course, the management will drive the performance of the hotel overall. And then also the city that they’re in, right? That’s going to be a big driving factor of hotels.that are our hotels expanding is there a need for more hotel years and for people to invest in hotels or is there a sufficient supply currently on market of hotels.
Eric Tan (20:06)
Now there is a huge oversupply of mass market hotel apartments, but there’s a shortage of luxury hotel rooms or hotel apartments. ⁓ And I don’t generally advise people to come in for the cheap stuff because it will not be due by the low price and low entry price because there’s a reason why things are cheap, right? Now.Because on our end, we have the hospitality department and we run several five-star hotels here in Georgia. So we have the staff. Our annual occupancy rate can hit as high as 70 to 75%. Now, mind you, Batumi itself is a seasonal touristy area. So during summer is the peak and during the low season will be the colder months, right? However, for us, we are still able to maintain consistent
occupancy rates, it’s because we have our own casinos as well. So people who come during the low season are the casino fans, right? They don’t care about the weather, they just want to come here and enjoy. And who are the guys that come to the casino here? Here are the Turkish, the Israelis, the Palestinians. Yeah, mostly the Jewish and the Muslim crowd, right? Because back in their countries, they don’t have a casino. So that’s why they are here during the low season where they
enjoy more because they don’t have a lot of the crowd on the streets. So during summer, you see a different crowd altogether. You see a bit more on the family side, more on young, youngster crowd because of the parties. So all walks of life. And that’s where things get interesting because when, when we are a conglomerate, we, have so many different businesses that we understand and we have all the big data. So we know how to be sure that we
We ensure, assure clients that they get the returns that we have projected to them.
Dylan Silver (22:07)
We are coming up on time here, Eric. What’s the best way for folks to reach out to you or your team?Eric Tan (22:14)
Send me an email at [email protected]. I can write to you below for sure I know. And we are happy to host you in but to me if you are here, happy to show you around. There’s so many things really that I’m willing to share insider stories, especially Dylan and with the audience who are interested to know more.Dylan Silver (22:37)
Eric, thank you so much for your time today. Thanks for coming on the show.
