How to choose an investment apartment?

It’s mostly small flats in university towns that earn!
26.May 2021
 
Homepage New articles

According to experts, every third apartment in the Czech Republic is an investment apartment. The typical buyers of investment apartments are people in their thirties and forties, but younger age groups are no exception either.

Investment properties are still seen as very attractive. And why shouldn’t they? In most people’s eyes, they represent the security of a stable income in the form of a regular rent. Provided that you successfully rent the apartment and have responsible tenants who pay on time. But that’s not always the case. That’s why every entrepreneur should always keep some backup money, as advised by the Minister of Justice Marie Benešová.

Mladý muž zvažuje koupi bytu na investici
Mladý muž zvažuje koupi bytu na investici • Source: Freepik

Don’t forget about expenses!

Without trying to discourage you from buying an investment apartment, we feel the need to warn you: there are significant expenses involved in it. Due to that, should you, for example, set your rent too low, you can easily lose money on your real estate investment. That’s why buying an investment property needs to be given due consideration. And you need to do your calculations.

Byt Malá Strana Magenta 31m
Byt Malá Strana Magenta 31m, Praha 1

Investment property, yes or no?

First of all, ask yourselves whether buying an investment apartment is even worth it for you. Owners of short-term rentals (Airbnb), for example, suffered a lot due to the coronavirus pandemic and the associated lack of tourists, often landing in a debt trap. Especially if they were paying off their mortgage exclusively from rent money. In this respect, long-term rentals are a safer bet. However, the coronavirus pandemic had a significant effect even on those.

Up to a 6% drop in rents

In the last three months of last year, rents for apartments in downtown Prague fell by up to six percent. Precisely because the offer was expanded by apartments in the city centre previously used for short-term rentals. As you can see, even long-term rentals aren’t a completely safe investment. However, that doesn’t change the fact that the demand for investment apartments is still high. It’s actually so high that it significantly contributes to the high demand for real estate as such.

"I personally recommend investing in a 2-bedroom apartment, because the trend of their popularity will continue. As a result of the covid pandemic, people will try to buy more economical housing, aiming to fit as many people as possible in the maximum area. In the Czech Republic, there are a lot of families with two children, for which apartments with two bedrooms are the most suitable,"

says Elena Jakubovič, owner of a real estate agency with luxury real estate.

Luxusní byt na prodej - Praha 2 - Vinohrady
Luxusní byt na prodej - Praha 2 - Vinohrady, Praha 2

How to choose an apartment in which you’re not going to live?

The answer to this question must be based on market demand. You should mainly be concerned with two key questions: Which size of apartments are people most interested in, and in which localities?

The layout of an investment apartment

According to statistics from the website GarantovanyNajem.cz, a typical investment apartment has an area of up to fifty square meters. That means it is either a studio or a 1-bedroom apartment with a kitchenette (or possibly a small 2-bedroom apartment with a kitchenette). However, properties after reconstruction with low operating costs are also in demand.

Mladý pár právě si dělá selfie s klíčem od nového bytu
Mladý pár právě si dělá selfie s klíčem od nového bytu • Source: Freepik

How much will you earn on your apartment?

Before investing in an apartment, it’s a good idea to calculate how much you can earn by renting your investment property. For this, you need to know the net monthly rent, which you can use to calculate the gross and net rental return. The net rental return also includes the costs of owning and renting the property (insurance, necessary repairs, etc.)

The formula for calculating gross return:

Vzorec pro výpočet hrubého výnosu z investice
Vzorec pro výpočet hrubého výnosu z investice • Source: Y&T Luxury Property

The formula for calculating net return (takes into account the cost of maintaining the investment):

Vzorec pro výpočet čistého výnosu z investice
Vzorec pro výpočet čistého výnosu z investice • Source: Y&T Luxury Property

Who will be your tenant?

This may come as a surprise, but the majority of tenants in investment apartments are university students. University cities (Prague, Brno, Ostrava, České Budějovice, Opava, Liberec, etc.) can therefore be considered the ideal locality for an investment apartment. If you buy a small apartment in such a locality, the probability that you’ll find a tenant is very high.

Luxusní byt na prodej Praha 3 - 73m
Luxusní byt na prodej Praha 3 - 73m, Praha 3

Small apartments for young people

Of course, not only students rent apartments, but young people in general. Families with children usually try to invest in their own property. Again, large cities with good infrastructure and a big selection of civic amenities belong to top localities. Localities near office complexes are also a good choice.

How to determine the amount of rent correctly?

Simply put, there are two types of landlords. The first need their investment apartment to earn (they’re keeping the apartment as an actual investment), while the latter are "satisfied" when their expenses are covered (they intend to retire in the apartment or bought it for their children, etc.). But they need to do their calculations, too. Otherwise, they might eventually have to pay extra for their investment apartment - or even accumulate debt. That is why it’s extremely important for the apartment owner to correctly determine the amount of rent. This must result from an economic consideration of assets and liabilities, i.e. returns and expenses.

Mladá rodina v novém bytě
Mladá rodina v novém bytě • Source: Freepik

Consult an expert

The amount of rent is affected by a number of factors, the main ones being the type, age and attractiveness of the property and, as we have already mentioned, its locality. However. when determining the amount of rent, one must also take into account the price of the property, or the APR of the bank loan (in case mortgage was used to secure the apartment). In any case, experts have calculated the ideal amount of monthly rent at CZK 3,500 for each million invested. You should definitely avoid losing money on investment real estate, wherefore it is advisable to consult a financial or investment adviser to determine the correct amount of rent.

Byt na prodej - Praha 6 - Liboc - 47m
Byt na prodej - Praha 6 - Liboc - 47m, Praha 6

Mortgage for investment real estate - yes or no?

If we were to generalize, an investment in real estate generally pays off, provided that the landlord at least partly covers it using his own financial resources. But that doesn't mean you won't get a mortgage on an investment property. If you’ve managed to save up at least twenty percent of the purchase price, the bank will lend you the remaining eighty percent if you meet a set of clearly defined conditions (these are identical with those for a mortgage on a residential apartment). The amount of the mortgage payment will then form the basis for determining the amount of the lease. However, you’ll need to add more items.

What should the rent cover?

Take the amount of the mortgage payment, and add the expenses associated with the property. Every property, no matter if you’ve bought it as an investment or are using it as permanent housing, needs to be taken care of. That can cost quite a lot. If anything goes wrong in the apartment, it’s you who will have to pay for all the repairs. And don't forget that you’ll have to pay tax on the rental income. You should also take into account that the property may be left without a tenant for some time. These are all items that increase the amount of rent.

Šťastná mladá žena na posteli vyhazuje peníze nad hlavu. Získala hypotéku!
Šťastná mladá žena na posteli vyhazuje peníze nad hlavu. Získala hypotéku! • Source: Freepik

According to the website rondainvest.cz, a Czech with an average income has to work for eleven years to be able to buy an average apartment. For Praguers, this period is three years longer.

In most regional cities, rents are rising. People pay the most for living in Prague and Brno. The price of a rental apartment in Prague is currently CZK 298 per m2 in Prague and CZK 263 per m2 in Brno.

How do experts see it?

"In the long-term horizon, the value of real estate keeps growing. Moreover, it brings an effective return in the form of rent. If you buy a suitable property, the operation costs don’t necessarily have to be high,"

real estate agent Michal Souček highlights the advantages of owning an investment apartment on the investujeme.cz website.

"Prague is and always will be very specific from this point of view. People are moving to the metropolis on a large scale for work, students and foreigners come here too. And little is being built in the city. The demand for rental in Prague is therefore exceptional, when compared with the rest of the country,”

Jan Martina from a real estate agency says for idnes.cz.

Byt na prodej - Praha 9 - Kyje - 71m
Byt na prodej - Praha 9 - Kyje - 71m, Praha 9

“The best types of investment today are small and medium-sized apartments in Prague. 1-bedroom, 2-bedroom and 2-bedroom apartments with a kitchenette are both a good starting apartment type and a safe investment in real estate for rent. The most popular Prague localities are Bubeneč, Vinohrady, Dejvice, Letná and partly also Žižkov. Civic amenities and proximity to public transport play an important role, "

real estate agent Max Kerndl said for LP-Life.

"If you plan to keep the real estate for a period that spans over decades, it is situated in a location that will prosper in the long run, and if you don’t overestimate your financial possibilities, buying a property will pay off for you even today,"

says Josef Klouček from a regional real estate agency.

"Currently, I’d recommend looking for lucrative places, especially in university towns or in their vicinity. Towns such as Pilsen, Ostrava, Olomouc, Hradec Králové or Pardubice. Students moving to these localities set the market in motion by frequent switching of apartments,”

Viktor Mejzlík from the project GarantovanyNajem.cz said for e15.cz.

What to say in conclusion? Perhaps only that in the long run, it pays to buy any real estate, because you can be absolutely certain that in the horizon of ten or more years, its value will be higher than its original purchase price.

Luxury Prague Life

Share / become a fan

Photo gallery (0)

View photo gallery

About the author

Jana Tržilová
Luxury Real Estates
Luxusní vila na prodej v Průhonicích
Okolí Prahy

Luxusní vila na prodej v Průhonicích

4 + 1 500 m², ter. 200 m²
price upon request
Show property
Luxusní prvorepubliková vila na prodej v Praze

Luxusní prvorepubliková vila na prodej v Praze

9 + 2 620 m²
price upon request
Show property
Rodinný dům na prodej Praha 4 - Braník - 217m
Praha 4

Rodinný dům na prodej Praha 4 - Braník - 217m

5 + KK 217 m²
21 594 643 CZK
Show property
Luxusní vila na prodej - Praha - západ - 632m
Okolí Prahy

Luxusní vila na prodej - Praha - západ - 632m

6 + KK 632 m²
price upon request
Show property
Luxusní vila na prodej v Šáreckém údolí
Praha 6

Luxusní vila na prodej v Šáreckém údolí

7 + 2 440 m², bal. 5 m²
price upon request
Show property
Luxusní penthouse s terasou Troja 310m
Praha 7

Luxusní penthouse s terasou Troja 310m

6 + KK 310 m², ter. 12 m²
price upon request
Show property
Luxusní penthaus na Praze 1 - 226m
Praha 1

Luxusní penthaus na Praze 1 - 226m

4 + 1 226 m², bal. 7 m², ter. 24 m²
price upon request
Show property
Prodej luxusního bytu Praha 1- 212m
Praha 1

Prodej luxusního bytu Praha 1- 212m

4 + KK 212 m², ter. 7 m²
price upon request
Show property
Byt Smetanovo nábřeží 191m
Praha 1

Byt Smetanovo nábřeží 191m

4 + KK 191 m², bal. 3 m²
price upon request
Show property
Luxusní byt se zahradou na Praze 8 - 346m
Praha 8

Luxusní byt se zahradou na Praze 8 - 346m

4 + KK 146 m², ter. 27 m²
price upon request
Show property
Byt Malá Strana Magenta 31m
Praha 1

Byt Malá Strana Magenta 31m

1 + KK 31 m², bal. 3 m²
price upon request
Show property
Penthouse s výhledem na Hrad na prodej - 288m
Praha 1

Penthouse s výhledem na Hrad na prodej - 288m

5 + 1 288 m², ter. 42 m²
price upon request
Show property
Pronájem luxusního bytu Praha
Praha 4

Pronájem luxusního bytu Praha

4 + KK 246 m², ter. 39 m²
price upon request
Show property
Luxusní byt na pronájem Smetanovo nábřeží 235m
Praha 1

Luxusní byt na pronájem Smetanovo nábřeží 235m

5 + KK 235 m²
69 000 CZK
Show property
Luxusní byt na prodej - Praha 2 - Vinohrady
Praha 2

Luxusní byt na prodej - Praha 2 - Vinohrady

2 + KK 53 m², bal. 3 m²
11 850 000 CZK
Show property
Pronájem luxusního bytu s terasami Praha 4
Praha 4

Pronájem luxusního bytu s terasami Praha 4

3 + KK 137 m², ter. 17 m²
price upon request
Show property
Luxusní byt k prodeji - Praha 5 - 93m
Praha 5

Luxusní byt k prodeji - Praha 5 - 93m

3 + KK 93 m², ter. 11 m²
11 258 000 CZK
Show property
Vila na pronájem - Praha 6 - Hanspaulka - 256m
Praha 6

Vila na pronájem - Praha 6 - Hanspaulka - 256m

5 + KK 256 m², bal. 15 m², ter. 24 m²
price upon request
Show property
Pronájem luxusního bytu s terasami Praha 4
Praha 4

Pronájem luxusního bytu s terasami Praha 4

3 + KK 137 m², ter. 17 m²
price upon request
Show property
Luxusní byt na pronájem Na Hřebenkách - Praha
Praha 5

Luxusní byt na pronájem Na Hřebenkách - Praha

4 + KK 199 m², ter. 14 m²
85 500 CZK
Show property
Prodej rodinného domu na Praze 5-191m
Praha 5

Prodej rodinného domu na Praze 5-191m

5 + KK 191 m²
19 850 000 CZK
Show property
Luxusní byt na prodej - Praha 2 - Vinohrady
Praha 2

Luxusní byt na prodej - Praha 2 - Vinohrady

2 + KK 53 m², bal. 3 m²
11 980 000 CZK
Show property
Luxusní byt na prodej - Praha 2 - Vinohrady
Praha 2

Luxusní byt na prodej - Praha 2 - Vinohrady

2 + KK 57 m²
11 920 000 CZK
Show property
Byt na prodej - Praha 6 - Liboc - 47m
Praha 6

Byt na prodej - Praha 6 - Liboc - 47m

2 + 1 49 m², bal. 2 m²
5 746 000 CZK
Show property
Luxusní byt na prodej - Praha 2 - Vinohrady
Praha 2

Luxusní byt na prodej - Praha 2 - Vinohrady

3 + KK 93 m², bal. 3 m²
19 960 000 CZK
Show property
Luxusní penthouse na prodej Praha
Praha 6

Luxusní penthouse na prodej Praha

4 + 1 242 m², ter. 68 m²
price upon request
Show property
Byt na prodej - Praha 6 - Liboc - 105m
Praha 6

Byt na prodej - Praha 6 - Liboc - 105m

3 + KK 105 m²
10 934 000 CZK
Show property
Byt na prodej - Praha 8 - Libeň - 60m
Praha 8

Byt na prodej - Praha 8 - Libeň - 60m

2 + 1 60 m²
6 589 000 CZK
Show property
Byt na prodej - Praha 8 - Libeň - 73m
Praha 8

Byt na prodej - Praha 8 - Libeň - 73m

2 + 1 73 m²
7 490 000 CZK
Show property
Luxusní byt na prodej - Praha 2 - Nové Město
Praha 2

Luxusní byt na prodej - Praha 2 - Nové Město

7 + KK 259 m², ter. 12 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 1 - 721m
Praha 1

Moderní kanceláře k pronájmu, Praha 1 - 721m

Atypický 721 m²
price upon request
Show property
Luxusní kancelář na prodej, Praha 1 - 209m2
Praha 1

Luxusní kancelář na prodej, Praha 1 - 209m2

5 + 1 209 m²
price upon request
Show property
Kanceláře k pronájmu, Praha 1 - 387m2
Praha 1

Kanceláře k pronájmu, Praha 1 - 387m2

Atypický 387 m²
155 000 CZK
Show property
Obchodní prostory k pronájmu, Praha 8 - 280
Praha 8

Obchodní prostory k pronájmu, Praha 8 - 280

Atypický 280 m²
price upon request
Show property
Obchodní prostory k pronájmu, Praha 8 - 70
Praha 8

Obchodní prostory k pronájmu, Praha 8 - 70

Atypický 70 m²
price upon request
Show property
Restaurace k pronájmu, Praha 8 - 519
Praha 8

Restaurace k pronájmu, Praha 8 - 519

Atypický 721 m², ter. 202 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 446
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 446

Atypický 446 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 332
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 332

Atypický 332 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 361
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 361

Atypický 361 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 483
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 483

Atypický 483 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 249
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 249

Atypický 249 m²
price upon request
Show property
Moderní kanceláře k pronájmu, Praha 8 - 490
Praha 8

Moderní kanceláře k pronájmu, Praha 8 - 490

Atypický 490 m²
price upon request
Show property
Luxusní byt na pronájem Staré Město - 212m
Praha 1

Luxusní byt na pronájem Staré Město - 212m

6 + KK 212 m², bal. 5 m²
90 000 CZK
Show property
Luxusní kancelář na prodej Nové Město - 109 m²
Praha 1

Luxusní kancelář na prodej Nové Město - 109 m²

3 + KK 109 m²
17 995 000 CZK
Show property
Prodej luxusní administrativní budovy v Praze
Praha 6

Prodej luxusní administrativní budovy v Praze

966 m²
42 000 000 CZK
Show property
Obchodní prostor na prodej, Staré Město - 215

Obchodní prostor na prodej, Staré Město - 215

215 m²
price upon request
Show property
Luxusní byt na pronájem s výhledem na řeku
Praha 1

Luxusní byt na pronájem s výhledem na řeku

3 + 1 94 m²
34 900 CZK
Show property
Prodej luxusní administrativní budovy v okolí
Praha 9

Prodej luxusní administrativní budovy v okolí

5 + 2 1173 m²
price upon request
Show property
Obchodní prostor na prodej na Praze 8 - Karlín
Praha 8

Obchodní prostor na prodej na Praze 8 - Karlín

Atypický 489 m², ter. 211 m²
price upon request
Show property
Luxusní vila na prodej Braník -217m
Praha 4

Luxusní vila na prodej Braník -217m

5 + KK 217 m²
22 396 514 CZK
Show property
Rodinný dům na prodej - Praha 4 - Braník
Praha 4

Rodinný dům na prodej - Praha 4 - Braník

5 + KK 217 m²
21 365 218 CZK
Show property
Luxusní byt v Troji 149m
Praha 7

Luxusní byt v Troji 149m

3 + KK 149 m²
21 800 000 CZK
Show property
Luxusní byt na prodej na Praze 5 -115m
Praha 5

Luxusní byt na prodej na Praze 5 -115m

3 + KK 115 m²
price upon request
Show property
Prodej luxusní vily v okolí Prahy
Praha 9

Prodej luxusní vily v okolí Prahy

5 + 2 1173 m²
price upon request
Show property
Byt v historické budově Praha 6 - 210m
Praha 6

Byt v historické budově Praha 6 - 210m

4 + KK 210 m²
price upon request
Show property
Luxusní byt s terasami Hřebenky - 251m
Praha 5

Luxusní byt s terasami Hřebenky - 251m

5 + KK 251 m², bal. 26 m²
price upon request
Show property
Supermakléřky - real estate comics