Russian business in Finnish forest: pro et contra

Russian business in Finnish forest: pro et contra

From business point of view foreign real estate market means high profitability in exchange for additional guarantees, if it comes for Finland. For Russian investors it is often an alternate aerodrome.

Neither Russian nor Finnish parts have no exact information about how many Russians make deals with income generating properties in Finland. According to statistics, in 2003 there were 200 Russians who acquired residential real estate in Finland, in 2008 there were 600 Russians, in 2009 there were approximately 400 people. Since then about 500 deals are made with the participation of Russians annual. Among them are purchases of apartments, houses, land lots and business objects.

Commercial property in Finland, city of Porvoo
Porvoo

Culture conflict

Before the crisis Russian investors put up money overflow in Finnish projects, don’t even care about profitability, as all foreign markets were growing up. But even then, not all of the Russian investments were successful.

"That is not a secret that price of riverside territory in Finland still is not high. But in 2006 – 2008 it was even lower: 10-20 hectare lot costed €500,000-700,000," said Vladislav Maltsev, Director of Nordic Development Oy. "At that time, investors from Moscow and Saint-Petersburg acquired riverside lots in reliance to build there cottage villages, when, according to Finnish legislation, maximum 3-4 houses could be built there. Russian were absolutely sure that they will "settle" this issue with Finnish authorities. However this turned out to be impossible as Finnish officials don't take bribes. Russian business methods are not valid in Finland".

--------------------
"The biggest challenge is to generate business idea that will work. Everything else in Finland is not so difficult"
--------------------

Since then, the Russians more carefully investigate the future project economy. In Finland, there are many cottage settlements built by Russians for rental purposes. "These projects operate and generate profit, but the amount of money spent on their creation is disproportionately higher than the income that these projects generate. Price of one cottage village consisting of 12 houses with infrastructure is €3 million. The rental revenue of these houses is maximum €10,000-12,000 per month. Taking into account taxes and business seasonality, the project pay back period will be 10-15 years", Vladislav Maltsev said.

Today the most popular among investors are chalets and hotel rooms, both ready-to-use and under construction, located at the ski slopes at popular resorts such as Himos, Tahko, Kohli and others, as well as on Lake Saimaa. The cost of these facilities is quite high - from €3,000 per sq.m. Profitability of well located objects may exceed average European level - up to 10% per year.

Property in Imatra
Imatra

Ideas and reality

Today in Finland there are about 260,000 companies. More than 90% of them are small firms with 1 to 9 employees. They employ more than 50% of the population. The share of companies founded by foreigners or non-native born representatives accounts 3% of the total number of firms and enterprises in Finland. Most often, these companies work in trade and services spheres.

"At the moment in Finland logistics, trade, construction, rental and tourism are business niches that bring revenue", said Kirill, businessman from Helsinki. Kirill successfully operates in the construction business in Finland. "The most important advice for a beginner is - do not attempt to estimate the Finnish business management with Russian methods. That means, first you take everything as it is, and only when you understand the process at a professional level, you may start changes."

--------------------
"Russian business methods are not valid in Finland"
--------------------

The most popular question on any forum about Russians in Finland is: What sum do you need to open a business and when money will return to the investor?. And this is also the first question any investor asks. "So, I won’t answer, because the answer does not fit in any common frame, and depends on the situation, the type and size of your future business project. As a minimum you should have enough money to launch the project and to support it for the first year. But as always, the biggest challenge is to generate business idea that will work. Everything else in Finland is not so difficult," Kirill said.

There is a three years old example: company from St. Petersburg bought in Finland the factory territory in order to organize plastic production. Businessman carefully estimated sales market and started their business with a clear understanding that there will be a demand in the Nordic countries market. As a result project was very successful. But in this case business was not acquired it was built up on a base of the commercial real estate.

"At the same time, there are many examples of how Russians acquired for little money in Finland hotels and restaurants that still are unprofitable. Investors continue to invest in the development of these businesses, but they do not bring expected income," Vladislav said.

Buy your job

On Russian sites one may found sale ads about small shops located almost in the forests, on secondary roads and away from large cities. Examine this variants very carefully: it can be put up for sale due to the fact that it was doomed: retail chain object could appear near and this means non profitable offer. "But Russian buyers often even do not guess about that," said Tatiana Vellikok, specialist in real estate transactions of Finnish Properties.

"These objects are often sold because their owners are close to retirement age. But in my opinion," business in the woods" is unprofitable due to the lack of consumers, and not because of the new successful neighbors. Whom you may serve in the forests? Only a small number of permanent residents and summer cottage visitors," Vladislav Maltsev said.

Finnish arithmetic looks like this: even if you have such a small amount for business purchase, as €200,000, you can buy a small restaurant and hope that it will yield 5% of profit annual. "But only a skilled businessmen may manage with a restaurant, bar and hotel. Even at the Finnish market there is a successful, from Finnish point of view, bar or restaurant for sale that brings a small but steady income, there is no guarantee that in the hands of a new owner, it still will be successful," Vladislav said. "However, you may have to work at this restaurant by yourself, at least as a manager. In my opinion, it doesn’t look like a business acquisition; it is the option of buying yourself a job abroad. When I talk about the business, I still mean getting revenues from profitable investment. When investor hasn’t to work night and day at the enterprise he has acquired."

Through business to resident

However, it is considered among the Russians that the purchase of such objects is an adequate way for people who want to receive lawful permanent residence in Finland through the business. This is true, but the reality is more complicated.

--------------------
"Finland is not the Klondike and Alaska, and business here does not bring untold wealth"
--------------------

In Finland the launch of business project does not give the status of resident. Only the investor whose business generates some income may claim it. "For legal residence in Finland a businessman should receive €1,500 pre-tax profits per month. For a family of four it is about €3,000", Vladislav said. "Moreover, immigration authorities always reserve the right to deny a residence permit. You have to assure them that your particular business can not operate and develop without constant involvement and control of the owner, and for these purposes visa is not enough for you."

Business in Finland

"Let me say that if countrymen had more accurate idea of what they would like to do, if they examined business management more thoroughly, then they had better business projects. Finland is not the Klondike and Alaska, and business here does not bring untold wealth. But on the other hand here incomes of business that works without loss are stable and insured!" Kirill said.

Text: Julia Lozovskaya, specially for ee24.com