Purchasing an investment property is a common idea – and often a popular choice – for those who want to start appreciating their earned money. However, before making the actual decision to buy, it’s best to consult an experienced advisor who will assess the entire situation from a broader perspective. The result will be, among other things, a properly structured investment portfolio.

There are many ways to invest in real estate (we’ll write about those another time). Today, however, we’ll focus on a situation where the decision has been made to purchase an investment apartment intended for rental.

Whether you handle everything yourself or take advantage of our services, the key is to gather as much diverse information as possible:

Potential Return on Investment (%)

You can calculate the simplest form of yield by relating the net annual rent (i.e. rent after deducting all costs, fees, and taxes) to the purchase price of the property.
For example, with a net annual rent of 180,000 CZK (≈ 7,200 EUR) and a purchase price of 4,000,000 CZK (≈ 160,000 EUR), the potential net return is 4.5 %.

We’ll gladly help you find a suitable property – the current yield isn’t always the decisive reason for purchase.

Adequacy of the Asking Price

It’s advisable to find as many comparable reference properties as possible and evaluate whether the asking price of your target apartment is competitive. We recommend comparing the price per m² of usable floor area.
Usually, it’s not worth buying relatively overpriced properties – you’re not buying them for personal use. Even in an expensive apartment, the rental income will typically be very similar to that of a reasonably priced one.

Apartment Condition

For older apartments or those last renovated many years ago, it’s sensible to factor in renovation costs, or at least the cost of refreshing the apartment before rental.
We prepare a detailed itemized renovation budget and offer a physical inspection by a certified building inspector.

Neighbors

It’s important to check who lives in the neighboring apartments on all sides. During a viewing, both presentation and a calm environment play a big role for potential tenants.

Tenant Situation

If the apartment is already rented under an open-ended lease with below-market rent, it’s usually better to look for a different investment opportunity.

Type of Ownership

Did you know that with a cooperative apartment (as opposed to one in personal ownership), you cannot apply tax depreciation in your tax return?
Yet depreciation can legally save you tens of thousands of CZK (hundreds of EUR) annually on income tax – often reducing it almost to zero.

Amount of Fees

For all compared apartments, we carefully study the itemized statements (evidenční listy) showing how much owners pay monthly to the homeowners’ association (SVJ).
Not all fees can be passed on to tenants – typically, contributions to the repair fund cannot.
High fees can therefore significantly reduce the net yield of the apartment.
If you try to raise rent to offset high fees, you may lose competitiveness against other rental offers.

HOA (SVJ) Loan

Are you, by purchasing the apartment, also taking on an obligation to help repay a loan that the homeowners’ association took – for example, for façade renovation?
The loan repayment item can reach several thousand CZK (hundreds of EUR) per month and, of course, cannot be transferred to tenants.
We always ask about the remaining loan balance and the overall financial health of the association.

Repair Fund Balance

The more the association has saved, the better.
If the repair fund holds, for instance, 1,000,000 CZK (≈ 40,000 EUR) for 10 units, then you’re effectively “acquiring” 100,000 CZK (≈ 4,000 EUR) with the apartment.
Comparing two otherwise identical apartments, the one in a building with zero repair fund is essentially that much more expensive.

Contribution to the Repair Fund

Especially in older buildings, contributions can reach several thousand CZK monthly, which again significantly affects the apartment’s net yield.

Building Condition and Planned Renovations

If the building will soon require major repairs (and the repair fund is insufficient), the homeowners’ association will likely take a loan – increasing the owner’s monthly payments.
Ideally, you want a situation where the building is in good condition, requires no major investment soon, has no outstanding loans, and has sufficient savings in the repair fund.

Legal Aspects

For a safe purchase, it’s essential to thoroughly verify the seller (for instance, whether they are legally entitled to sell the property), review all contract documentation with experienced lawyers, and confirm public road access to the building.

Gathering all this information and analyzing it properly can take dozens of hours, and not all data is easily accessible from public sources.

If you want to expand your assets with an investment apartment – and also value your time – we are here to lend a helping hand. Contact us, and we’ll gladly assist you with at least some of these steps.

Note: All amounts in CZK (Kč) have been converted to EUR at a fixed exchange rate of 25 CZK = 1 EUR.