I have seen many smart, successful investors come here from America and try to apply American investment techniques with varying levels of success. 

Anyone looking to invest in Eastern Europe would be well advised to understand the unique factors that motivate the market in this region. 

European readers of this article may find it less useful then there American counterparts. Many of the distinguishing factors of Eastern European real estate are actually distinguishing factors of European real estate while others are purely regional in nature.

Here is  the long and short of what you need to know to think European and invest wisely in Eastern Europe 

The European Union drives the market or it does at least partially. Most Eastern European countries are being considered for EU membership or soon will be. The prices of the European Union set the benchmark for prices in emerging European markets and drive speculation. Eastern Europe is not similar to Central South America which has no similar benchmark to follow.

Europe tends to be more expensive then America in almost all facets but in particular in regards to real estate. Prices may seem high by American standards in some Eastern European locales (particularly Capitol cities) but may be quite low by European standards.

Time and time again, Central and Eastern European markets have proved that the EU has a tremendous impact in increasing property values. Just look at Hungary, Poland, the Czech Republic and the Baltic States. Each market saw a steady growth in value in the time leading up to EU ascension and continued/s to see remarkable growth for a period after.

Note also, that many of the prices in the above countries for everything from apartments to land are more then they are in most American locations.

In some ways Bulgaria or Croatia joining the European Union is akin to Alaska or Hawaii joining the United States of America. It is a radical transition with radical implications.

And yes, 1300 Euros a square meter for office space in Bucharest sounds expensive until you find out it's 13,000 Euros a square meter in Paris.

Prices have went way up and, though they may not reach Paris prices, still have long ways to go.

Cheaper is not always better

I am told of the story of an American women from Washington state who was looking at a raw land opportunity in the north of Romania in 2002. When she discovered that per square meter/foot price was actually higher then in her hometown she promptly advised her agent that there was no way she was going to pay more money for land in Romania then she would in suburban America. Her thought process is quite understandable. However, it also proved to be quite incorrect. Land in her hometown has shown reasonable growth over the past 4 odd years but the land that she could have acquired in Eastern Europe would have earned her about a 400% profit has she sold in the summer of 2006.

Similarly, many investors come to me and ask me "how much land can I get for x amount of dollars." The answer I inevitably give them is "a lot, but unless you are starting a park or a farm, I'd rather help you buy the most profitable land, not simply the most land."

An investment in a smaller plot of land at a higher price can be better then a lot of land at a lower price. 

In the right area, the property value will also increase much more rapidly then somewhere in the middle of nowhere where property is particularly cheap.

The game of Eastern European investment is capitalizing on the rapid growth of property value. If you pay more your land then it would cost in Hometown, USA it can still be an incredible steal.

Follow the market.

My friend bought an apartment in 2001 for $10,000 and she just sold it for $60,000. She doesn't have any real estate training. She more or less made the profit by accident. She just "followed the market" to use her words. Had I seen the apartment 5 years ago, not fully appreciating then what I appreciate now, frankly I wouldn't have given even $5,000 for the place. The neighborhood is full of old, grey, semi-dilapidated looking buildings. Neither the neighborhood nor the apartment building could be less inviting. I would have assumed, that despite the super sturdy hurricane proof build of the local apartment complexes that someone would come and knock them all down one good day....Boy, was I wrong....

Now a studio in one of the building sells for $60,000, a 2-bedroom for over $100,000. A new subway station comes close-by and a number of larges stores have opened for business. It's so convenient that a studio apartment will rent for $350 a month within two days time. People post announcements near the mailboxes of the residents that they are looking to buy or rent there.

Even today, I wouldn't pay $100 a month to stay there, but I sure wish I would have paid $10,000 five years ago to own an apartment there. It would have done me a lot better then collecting a few percent interest in the bank.

Europeans like to live in the city, in apartments often over houses in the suburbs. So now matter how much new development there is, a premium remains on apartment complexes inside of the city.

The moral of the story is follow the market. No, it doesn't make a whole lot of rational sense what happened and happens frequently in Eastern Europe but the market is wildly profitable and if you follow it, it will lead you to profit too.

Western Europeans, Brits in particular, have popularized investing in "Off Plan" properties to capitalize gains in Eastern European markets. 

I was recently speaking with a US-based real estate friend of mine and referred to off plan opportunities in Eastern Europe. He was relatively unclear on what I was talking about. Even the most qualified real estate investors in America aren't clued-on to the off plan real estate phenomena in Europe and the UK in particular.

If you google the term "off plan properties" you'll see scores of web sites listed, most of them from the United Kingdom. Off Plan properties are big business on the other side of the pond and are increasingly the most common way for British investors to seize opportunities in emerging markets of Eastern Europe.