By Property Secrets' Deal Broker

Today I want to talk about what I believe puts some people off investing in Romania. And I want to explain why the reasons are rubbish!

Sorry if I'm blunt, but (and as anyone who reads me regularly will know) I'm passionate about Romania as an investment location.

First, let's making one thing clear - I'm talking here ONLY about making money. Sure, I think a great deal of the country after literally dozens of visits. Buzzing capital. Beautiful scenery. The people are great.

But, I'm a property investor and I'm fundamentally fascinated by the place because I want to make profits. I assume you are too, otherwise you wouldn't be reading this.

One of the first reasons I come across - or have more recently - is the idea that Romania is in some way risky. Why?

Well, one reason is unfamiliarity, I'm convinced. People just don't understand this market, this country, very probably because they haven't been there and they find the startling economic transformation taking place hard to fathom.

Anyone living in a major Chinese city probably wouldn't. Anyone living in Ireland for the last ten years or so probably wouldn't have trouble either. But it is a hard task for many to see this kind of transformation without concluding that it is in some way risky or some kind of bubble.

But, OK, let's face some facts here. There is nervousness around generally about where to invest and what to invest in. It's inevitable. We've had a period of incredible global growth and now we are going to see something of a slowdown.

That's no bad thing.

And I hear people talk about inflation, balance of payments, rising interest rates. I'm not dismissing any of these factors. They're real. They are going to have an effect on economic growth and in turn that will slow property price growth.

Excellent!

Look, taken as a whole, the deals Property Secrets has put together in Romania so far have returned annualised growth of 53%. 53%!

Even I, at my most bullish, know that kind of growth is not sustainable and not even desirable over the long term.

A cooling is exactly what Romania needs right now. I sincerely hope it happens because it will be great news for the property investor.

So, should an investor be put off by this cooling and, let's face it, by these scary headline changes about inflation and so on?

A fair question.

Let me answer it with another.

Why is Ford spending €1 billion in the country?

Why has Nokia - the biggest mobile phone company in the world - just closed its German operation and relocated lock stock and barrel to Romania? It will produce a phone every five seconds, incidentally. More importantly, it'll employ around 3,500 people in and around Cluj.

Why is the German group Daimler reported to be looking at opening a major new production plant in the country, probably in Cluj?

Why does the French retail giant Auchan have a massive expansion plan in Romania underway? They'll have 20 hypermarket outlets there by 2010 and the CEO Regis Mougel jokes that their "expansion in Romania will end only when I retire." They're investing some €320 million over the next few years.

Why is the construction company Mivan spending €300milion on a massive new business complex in Bucharest, €100 million for a new logistics park in Bucharest and €700million for ten new shopping malls?

Why is the South Pacific Group investing €300million in a grand prix circuit in Snagov?

Ok, I'll stop there. I could go on, and on. And I'm sorry to labour the point. But it's an important one. All these investors and dozens and dozens of big spenders like them have a crucial factor in common.

They aren't just talking abut the country being a great place to invest - they're putting their money where their mouths are.

That's the first thing they have in common. But there's something else that I think is just as telling.

Each of them is making a statement about the long term potential for their various businesses, whether they are manufacturing or retail - they are investing for the long-term.

In uncertain times the best strategy is always to follow the big investment money.

Now, I'm the first to admit that I personally have looked at one or two of my Romanian investments, seen the growth, and - yes, I admit this - I've taken the profits. I've sold - flipped, basically.

And I'm not ashamed of this.

Look, I know we at Property Secrets always say think long-term and invest the same way. And I'm the first to advocate that. But we always talk about that as a strategy. Flipping isn't a strategy; but, hell, if the opportunity comes along and the profits are great, why not!

Interestingly, when I've done this, I've sold to a Romanian!

Generally, though, my investment strategy in Romania is long-term because that is how I see the biggest profits being made.

So, back to following the money. FDI was around €7 billion in 2007. The World Bank estimated that €7 billion was sent home by Romanians abroad last year.

These are giant figures.

These big investors are placing their money where they see the best potential long-term. Ford doesn't intend to rip down multi-million euro factories in the next couple of years and relocate to the next super-cheap centre, do they?

So, you want to know where to invest?

You want to piggy back on huge amounts of research, the like of which an individual investor can only dream about and you want to reap the benefits of increasingly affluence created by the seriously big investors?

Then follow the serious money - to Romania.

Yes, times are somewhat uncertain right now - probably all over the world. When we look carefully, nowhere is immune.

But the smart strategy still applies - in the CEE pick the location in which to invest that offers the best long term fundamentals, that is growing form a low base AND the place where the big money is going.

Pick quality. A great investment location is a great location is a great location - for the long-term.

Look at it this way.

The UK market has its problems right now, of course it does. But, would a new build in the heart of Chelsea still be snapped up? Of course it would! ~

OK, here's another one that keeps coming back - Romania is 'expensive'.

This one really drives me nuts. Why? Because when people say this they are drawing a conclusion based on their own lack of knowledge of the market. Dare I say 'ignorance'? Yes, I do!

Expensive relative to what?

What these people are saying is 'I had a fixed idea in my head that it would be cheaper than it is. But the reality doesn't fit my preconceptions, so my conclusion is not that I was wrong. No, it's that it's 'expensive'.

This is so wrong-headed it astounds me.

Romania is not a Borat-like place with donkeys towing cars around! Bucharest is rapidly becoming a modern, sophisticated capital with plenty of high earning professionals.

Look, five years ago people said the same about Poland, that it seemed 'expensive'. Now, would you have bought in Poland five years ago if you had hindsight from today? Well, you don't need to be Warren Buffett to answer that one!

There is so little mortgage debt in Romania that we haven't even seen the start of the real growth in this property market.

Pick up a local paper and check out the price of panelaks - €1400 psm is the going rate in Bucharest - this is more than some of the new builds on offer! And, remember, the overwhelming majority of panelaks are owner-occupied, this is the key point - so that is locked in equity that can easily be transferred to the new build market WHEN the new builds are available.

And right now, of course, they are NOT available. The reason the panelaks are selling for such high prices is that there is simply not enough new product available to buy.

I don't much go for back of the fag packet calculations, but here's one I can't resist.

The official population of Bucharest from the last census years ago was 2.5m.

Last year, 220,000 new cars were registered in the capital. Overall 2.5m are registered. Now let's assume that one car equates to two people, which I think is very conservative, especially in a developing country. Suddenly we have a population of over 4 million.

Now, let's assume that a measly 1% of those want and aim to buy a new property. That's 40,000 people. Last year Last year some 2,500 units came to market in Bucharest. Over the next three years, a further 25,000 will be sold.

And the reality is that the proportion of people wanting to buy is more like 10%.

Now finance.

Yes, finance in Romania ain't great. No one can pretend it is.

BUT, but, but...let's once again look at Poland.

Finance in Poland nowadays is relatively OK, but not easy by any means.

If I'd said to you do you want 60% to 70% growth in Poland a few years ago, you'd have said, 'Sure'. If I'd said, 'Oh, but the finance is quite hard work and the products, though changing, are still not the best. So, do you still want the 70%-odd growth?'

Well, you wouldn't have needed to be Donald Trump to have answered that one, would you?

Besides, the finance market for foreigners is moving at breakneck speed in Romania - it took four years in Poland to achieve what we're now seeing happen in one in Romania.

But, as I've said before - and again today - don't worry about the finance because it will be there. Meanwhile, if you don't want the hassle, take the profits! I did!