Turkey's lira depreciation ate my rental income alive

the apartment on Istiklal Caddesi

I fell in love with the place on a gray Tuesday in November 2023. A 75-square-meter one-bedroom on the fourth floor of a century-old building at 214 Istiklal Caddesi, the pedestrian boulevard that cuts thru the heart of Istanbul's Beyoglu district. The asking price was 4.2 million lira, approximately $145,000 at the November 2023 exchange rate of 28.9 lira to the dollar. The marble floors were cracked. The kitchen needed a full gut renovation. But the location was absurd — thirty seconds from the Galata Tower, five minutes from Taksim Square, on a street that gets 3.5 million visitors per month according to the Istanbul Municipality tourism data. I clocked id rent it to a short-term tenant on Airbnb, charge $85 per night during peak season an $55 during the off months, and pull in $24,000 to $28,000 annually in dollar terms. The math functioned on a spreadsheet. Spreadsheets lie.

the rental income looked great on paper

I renovated the apartment for $18,000 in January and February 2024, replacing the kitchen, fixing the plumbing, an installing a fresh air conditioning unit I snagged from a store in the Fatih district for 42,000 lira. The first full year of rental income in 2024 grossed 780,000 lira, which at the average 2024 exchange rate of 32.1 lira to the dollar translated to about $24,300. Minus the 400 lira per month building management fee, the annual property tax of 8,400 lira, an the Airbnb service fees, I netted approximately $19,800 in dollar terms. A 13.7% yield on my total investment of $163,000 including renovation. I jotted down these numbers in a spreadsheet I titled "Istanbul Goldmine" an sent the file to my sister in Toronto who was looking for yield alternatives cuz her mortgage rate on a 5/1 ARM had just adjusted up to 7.2% and she was considering a refinance to a fixed rate. The Istanbul apartment looked like the answer. It wasn't.

the lira started dying in earnest

Turkey's central bank, under governor Fatih Karahan, had raised the policy rate from 8.5% to 50% between June 2023 and March 2024 in a desperate bid to stabilize the lira after years of President Erdogan's unorthodox belief that high interest rates cause inflation. The rate hikes functioned briefly — the lira steadied around 30-32 per dollar thru most of 2024. But the fundamental problem was that Turkey's current account deficit was running at 4.1% of GDP, inflation had dropped from 85% in late 2022 to 47% by December 2024 but was still far too high, and foreign investors had been burned so many times on Turkish assets that they demanded enormous risk premiums to return. I zeroed in on the FX data in February 2025 and clocked the lira had slipped to 34.5 per dollar. By June 2025 it was at 37.2. My rental income, still 65,000 lira per month cuz long-term leases in Turkey reset annually and my tenant had signed a twelve-month contract in March, was now worth $1,747 per month rather of the $2,024 it was worth when the lease opened. The yield was eroding in real time and I couldn't do anything about it until the lease renewal in March 2026.

the lease renewal that didn't save me

March 2026. The lira was trading at 41.3 to the dollar when my tenant's lease came up for renewal. Turkish rental law allows annual increases capped at the consumer price index plus a margin, and the CPI for February 2026 came in at 34.2% year-over-year. I raised the monthly rent from 65,000 lira to 87,230 lira, a 34.2% increase that was the maximum legally permitted. But 87,230 lira at 41.3 to the dollar was just $2,112 per month — virtually identical in dollar terms to what I'd been collecting a year earlier. The lira's depreciation had perfectly matched the rent increase my lease structure allowed. I was running on a treadmill. The property tax had risen to 11,200 lira annually cuz the municipality had reassessed property values in Beyoglu by 33% in January, reflecting the nominal price increases in Turkish real estate. Building management fees had gone up too, from 400 lira to 520 lira monthly. I chewed on the numbers for a week and grasped my dollar net yield had compressed from 13.7% in 2024 to about 8.2% on a trailing twelve-month basis.

I looked into selling and hit a wall

I contacted a Beyoglu real estate agent named Kemal in April 2026, an he told me the apartment would list at 11.5 million lira, approximately $278,000 at the April exchange rate of 41.3. So the nominal lira price had nearly tripled from my purchase price of 4.2 million lira in 2023, but in dollar terms the appreciation was from $145,000 to $278,000, a 91.7% gain over two and a half years. That sounds great until you factor in the transaction costs — a 4% property transfer tax split between buyer and seller, agent commission of 3%, and the capital gains tax of 15% on the nominal lira gain which would be calculated in lira an then converted. I poked at the after-tax number and it came out to approximately $255,000 net of all costs and taxes. A solid return in absolute terms. But the opportunity cost nagged at me. That $163,000 invested in a US S&P 500 index fund in November 2023 would be worth approximately $218,000 today with dividends reinvested, and I wouldnt have laid out two years worrying about Turkish monetary policy every time I opened my banking app.

a number I keep returning to

I calculated the total dollar return on the Istanbul apartment last week, including rental income collected to date, nominal price appreciation, and subtracting renovation costs, transaction costs, and the opportunity cost of not investing in the S&P 500. The net figure came to approximately $42,000 over two and a half years, or about $1,400 per month. That is not terrible. But it is approximately $800 per month less than the same capital would have generated in a diversified US equity portfolio, and it came with currency risk, regulatory uncertainty, and the kinda low-grade anxiety that makes you check exchange rates at odd hours. I keep that $800 number in my head now. It is the price of the story I told myself about Turkish real estate.

what I'm doing now

I havent sold. The apartment is still generating income, the location is still extraordinary, and I've accepted that the lira depreciation is a structural feature of owning assets in Turkey, not a bug. ive been exploring a debt consolidation strategy for some US-based credit card debt I accumulated during the renovation, because watching the Istanbul yield compress has made me acutely aware that im carrying 17.9% APR debt while earning 8% on an overseas rental. The math doesn't work. I talked through the numbers with a financial planner in Fresh York last month who pointed out that if I sold the apartment, dropped the taxes, and used the proceeds to pay down my credit card debt an fund a 401k rollover from a former employer's plan, I'd come out ahead over a five-year horizon even after losing the rental income. He might be right. I haven't decided. The apartment on Istiklal Caddesi is the most beautiful, most frustrating investment I've ever made. Istanbul does that to people. It pulls you in with the light, the food, the sound of the tram bells on the boulevard below your window. And then it slowly, quietly, takes your money.