Buying a Riad in Morocco

Investing in a riad may sound like a fabulous dream to many, but it is a dream that is within the grasp of those adventurous enough reach out and seize it. Like any serious financial investment, purchasing a riad carries its own risks, but the rewards - owning a beautiful house in a stunning exotic country, having a lucrative source of additional income - are enormous.

Morocco is one of the world's hottest travel destinations for discerning travellers. Over the last five years the country's tourism industry has experienced an unprecedented boom, creating a real demand for authentic Moroccan riads for holiday homes or boutique hotels. Here are the main points - both positive and negative - to consider before you leap in and buy a beautiful piece of Moroccan history and artistry.

Riads are traditional Moroccan townhouses built around a central courtyard. The beauty of their architecture stems from their privacy - each riad is a secret waiting to be discovered. From the street, all you will see is an unassuming, modest door, and, if it stands open, perhaps a glimpse of a corridor beyond. Step inside, and you will discover a hidden world, an elaborately decorated corner of paradise.

Ideally, most people interested in buying a riad would like nothing more than to keep it as a holiday home for themselves, a tranquil base from which to explore the delights of the bustling cities and breathtaking natural scenery the country has to offer.

However, if your financial situation does not allow for this kind of luxury, investing in a riad in Morocco can also become a lucrative source of income, if you turn your riad into a holiday let or a small hotel. With rooms and suites in riads going for anything between €100-€1000 a night, the opportunity is there to make serious money from your investment.

Moroccan riads are found in the centre of its old cites, in the medinas. The most obvious choice is Marrakech: it is a hugely popular tourist destination with a large medina full of fantastic old properties. However, prices in Marrakech are higher than in the rest of the country. The city of Fez, north of Marrakech, has a beautiful old medina with beautiful riads that are much more reasonably priced, but tourism is not as well developed as in Marrakech. On the coast, Casablanca, Essaouira, and Tangier are all popular destinations, attracting tourists looking for a beach holiday.

It is wise to be extremely wary and careful when investing money in a foreign country, especially if you don't speak the relevant languages (French and Arabic). The best way to guard against problems is by informing yourself as much as you possibly can before you get in too deep.

Here are some common problems and points to consider before buying a riad.

• The political situation. At the moment, since the advent of the Arab Spring, a large part of the Arab-speaking world has been undergoing momentous, and sometimes violent, political change. Whilst this is a fantastic opportunity for the people within these countries, and everyone hopes that these changes will prove to be positive and lasting, it is causing a downturn in tourism in these areas, including Morocco. At the same time, Morocco tragically suffered a suicide bombing by Al Qaida, who killed fifteen people in Marrakech. Although this has not affected tourism as much as some thought it would, it is still a serious consideration, as are the ongoing political protests in other parts of the country, particularly Casablanca. However, it is important to note that The Economist ranks it as one of the most stable countries in the area, with a low likelihood of serious unrest.
• Morocco's antiquated property titling. A lot of properties in Morocco still have old-fashioned, vague titles which are no longer valid, and can lead to nightmares over ownership. If this is the case with a riad you have fallen for, you will have to pay to get the titles modernised. It is extremely important to establish the state of the property's titling before you sign anything, as titling can be a long and messy process. If you decide to buy a property despite its titling being out of date, it is possible to pay for an English-speaking person to act on your behalf to speed the process up - but it could still take months, and cost several thousand pounds. However, once the titling has been clarified and modernised, it will immediately add value to the property.
• Taxation and financing. In order to buy a riad you will have to open a Moroccan bank account. The Moroccan tax system as a whole has often been described as overcomplicated and difficult, and there is corruption in the system, so baksheesh (bribes) must be paid in some cases. It is important to hire a reliable English-speaking tax advisor to help you navigate the system.
• Problems with renovation. It is very important to discover as much as possible about the structural stability of a riad before you buy it. Often these old buildings have little or nothing in terms of foundations, and can be built out of plaster or clay. In this case, it is often best to demolish the riad completely and rebuild it in a more stable manner. This can end up costing as much as the asking price of the riad itself.
• Ongoing costs. If you are planning to rent out your riad as a holiday let or run it as a guest house, this obviously involves a certain amount of effort and continued expenditure, both in terms of time and money. For example, electricity costs in Morocco can be high (although, with over 300 days of sunshine a year, investing in a solar panel helps lower this.) Unless you are planning to move to Morocco and run the business entirely by yourself, you will also have to employ an agency to service your property on your behalf. This will still require oversight, especially if you are planning to run your riad as a guest house. You will need to be prepared to travel to Morocco frequently to check on your property, its business and on its finances.
• Length of investment. Capital Gains Tax in Morocco is set up to discourage people from making a quick turnaround profit on a riad. For this reason, CGT is at 20% if you sell the property within 0-5 years of purchasing it; then at 10% between 5-10 years of purchase, and then at 0% after that. In order to maximise the profit from your investment, you will need to keep your riad for at least 10 years: this is why many owners choose the rental approach as their main source of income from the property.

The most obvious benefit of owning a riad is the pleasure of the riad itself: the intricate zellige tilework, the serene courtyard with a bubbling fountain or a cool plunge pool, the thick-walled bedrooms full of glistening tadelakt plasterwork and authentic Moroccan furniture bought in the surrounding souks.

However, the financial benefits of owning a riad are also extremely attractive.

• Naturally, the cost of holidaying in the country is reduced, making it possible to visit the country as often as you want.
• Renting your riad can be extremely lucrative. If you aim it towards the top end of the market, with luxurious facilities, beautiful decor and brilliant service, you can hope to charge as much as €1000 (around £880) per night. On a three bedroom, mid-range riad, bought for £70,000 unrenovated or c.£150,000 renovated, you might reasonably expect to have an income of £10,000-£15,000 a year (these are rough estimates). A 15% per annum return on an investment is not uncommon. It is important also to note that Morocco has a Double Tax Treaty that ensures you will not pay tax twice on your rental income.
• Selling your renovated riad can also make a mouthwatering profit. A small unrenovated riad can be bought for £50,000-£100,000 depending on condition, size and location. The equivalent property, fully renovated, would be worth at least £100,000 more. Renovation costs in Morocco are relatively small, as labour and most materials remain cheap.
• No 'seasons'. Morocco has over 300 days of sun a year, and is a popular holiday destination in all seasons. It is not unreasonable to expect 80-90% occupancy rates in your property.
• If you grow your riad as a business, and establish a good reputation and a solid client base, you can expect to sell it on for even more profit as a going concern. Many people are looking to buy existing businesses in order to take advantage of the benefits of riad ownership without having to go through the initial hassles.

Owning your own Moroccan riad can be an extremely rewarding experience, benefitting not only yourself, but the local economy, and the continuation of unique Moroccan artisan crafts such as zellige tilework, wood carving, and tadelakt.

It is incredibly important to find out as much as possible about your riad in particular, and the process of buying, renovating and renting riads in general, before you buy. If possible, travel to the country several times while you research your purchase to get a feel for the market and for area in which you are planning to buy. The more knowledge you have, the less risks you will encounter during your Moroccan adventure.

Click on the links to access:

A good guide to investing in Morocco.

An interesting article in the Independent on buying property in Morocco.

A blog about renovating riads.

A guide to buying a riad from an estate agency.

An article from Country Life about buying riads.