We’ve been getting a lot of customers lately whose experience could be summed up like this: They wanted to buy an apartment for investment and so they went to the REA/developer and asked about the buy to let property. After a short meeting and a promise of a high return, they invested considerable funds in a new apartment, but after taking possession and then trying to rent it, they were faced with an unpleasant sobering up in the form of a drastic reduction in the rental price, sometimes by tens of thousands. So how not to fall for either fraudulent or unprofessional behaviour?
Do they promise you high return on investment? How not to fall for it.
Realistic Rental Price Expectations
First and foremost, it must be stressed that you must have realistic expectations. Gone are the days when you could buy an apartment in Prague and hope to get a 5% return. Just for comparison, this would mean that at today’s prices of some 2+kk with a price of around CZK 8,500,000, you would have to have a rental price of around CZK 36,000 + services. For an apartment around CZK 10,000,000 it would then have to be around CZK 42,000. Unrealistic? Not in some parts of Prague, but not everywhere. If you insist on a higher return, it’s probably wiser to look elsewhere in smaller cities where purchase prices are lower and rental prices are lower, but the return may be a little better.
How to Find Out the Market Rent
So how can I find out for yourself? Quite simply. If you are planning to buy an apartment in an area, look on sreality.cz or another real estate server that is dominant in the area (which in 90% will be sreality.cz) and enter the apartment of your category for rent. How many apartments are there in the same category? 5,10, 200? In other words, how much competition will you have in that location? Feel free to add neighboring or otherwise relevant locations to get a complete picture. Then look at the price range in which the units are offered. This will show you where you might be able to range as well.
And finally, the hardest part, go through the offers and compare it with the apartment you will be renting. Just be honest with yourself at this stage. Yes, we understand that the apartment you have just booked may be your first step into the world of real estate investing and that it is therefore something special for you. However, remember that for prospective tenants it is just one apartment out of many and that they may not see it as you do. If you are buying a new 2+kk apartment with a parking space, 50m2 and with an idea of 30000 CZK + services and there are 30 other 2+kk apartments with parking on offer in the area, some equipped, some not equipped for the price of 27 000 – 31 000 CZK + services, then you will have quite a lot of competition, not to mention the fact that this is only 1 category of apartment (surely there will be 2+1, 3+kk, 3+1, large 1+kk, 1+1, etc. ) and therefore, if you insist on an unrealistic rent, it may cost you either your nerves or precious time when you could have rented the property for a little less but a lot sooner.
Be honest with yourself. Does your property really stand out above the competition?
How to Choose a Trustworthy Property Manager
Of course, if you don’t want to deal with this, then hand it over to a professional company to do it for you. There are already several in the Czech Republic and they offer either with or without a rent guarantee. The rule is that with a rent guarantee you will receive less but steadily by about 5-10% than with a traditional rental management. It means that it is therefore not extra advantageous for those who want to get the most out of their rental. Remember that companies would not offer guaranteed rent unless it was beneficial to them in the first place. With any such firm, you should be interested in how long they have been in business and how many apartments they manage. They may not manage thousands, but going to a firm that manages, say, 20 apartments or less could be risky.
Get quotes for the rental price and then compare them carefully with what you can find out for yourself on the Sreality above. We recommend not to go for the highest offer right away, as this is often just an attempt to “onboard” the customer and then just persuade them to stay when the REA/developer will slowly lower the rental offer price. You would be far better off with companies that are willing to tell you even if your expectations are out of line with reality and would rather not take you on as a client than to accommodate your inflated expectations. Well, let’s illustrate – how you would feel in a car repair shop where you put your car in for service and the technician came to you and said the clutch needed to be replaced and you, as a layman, would tell him that you didn’t think the clutch needed to be replaced but rather the gearbox, and he would say, “OK, let’s change the gearbox, you’re right”. I’d rather take the car and go elsewhere. And the car is usually worth a lot less than your apartment.
So don’t be fooled by a honey-mouthed real estate agent. Better a little common sense and a professional partner in the market.
Updated/Aktualizováno: July 29, 2024,