Property investment – how even a conservative investor can grow their money
Despite their initial reaction to the start of the pandemic, property prices continue to rise and no fall can be expected. The crisis and uncertainty surrounding economic developments have encouraged even people who previously did not seek investment opportunities to start investing. Property is a suitable choice especially for more conservative investors, as it offers relative security, minimal risk and stable income. At the same time, it does not lose value and appreciates over time.
3 stages of property investment
Investing in property is, in most cases, not a matter of a few months, but rather years. To bring it to a successful conclusion, you need to manage each of the three stages involved in property investment. Each stage comes with different pitfalls and requires different knowledge.
Stage 1 – Monitoring and finding properties
At the outset, set clear criteria:
- which location you want to invest in,
- what type of property you want to buy.
It must be said that property searching can occupy someone full-time, so it may be worthwhile seeking professional help. It will save you not only time, but also money. What is more, you will gain access to better listings, which you will be alerted to as soon as they come onto the market. This ensures that you do not miss anything, receive a thorough property assessment and secure the best purchase price.
Stage 2 – Property management
Once the property search stage is complete, stage 2 – management – begins. To achieve the highest possible return (capital growth + rental income), it is essential to have quality tenants with a good payment record while also investing in the property on an ongoing basis to ensure it does not deteriorate.
In addition to tenants, you will need to deal with authorities, lawyers, accountants, utility and energy providers, as well as a host of other administrative tasks. If you already know this is something you are not confident handling, you can use our guaranteed rent service, which removes all these concerns.
Stage 3 – Selling the property
The sale of a property needs to be timed correctly, which is why it is best to sell when you are not under pressure to do so. There are countless strategies that can help increase market value, and an experienced broker will be able to advise you on many of them. It is not about timing the market; you need the right tools and know-how.
How much money should you invest in property?
The general rule is: “As much as I can afford to lose.” When it comes to how much of your own money to invest in buying property at present, it can be said that it is advisable to take out the smallest possible mortgage. Given current interest rates of around 6 - 7 %, repayments on an 80% mortgage start at around CZK 15,000, depending on the amount borrowed. It is important to consider whether you can afford it, so that it does not become financially crippling.
Property market developments in 2023
2022 was marked by a rather negative trend, but this year a change can be expected to give investors fresh momentum. Experts predict falling flat prices, particularly for older properties. If you are considering a purchase, pay particular attention to the technical condition. Although property prices are expected to fall, the cost of materials and services will rise, and any renovation may significantly increase the purchase cost. As with any property, location is also important for older flats. Northern Bohemia, for example, typically has substantially lower prices, but values cannot be expected to rise as much as they would in Brno or Prague.
What returns do properties achieve?
The long-term average return from renting out a flat is around 3 - 4 % p.a. At Bohemian Estates, we achieve returns of up to 7 % p.a. because we can identify suitable investment opportunities and, thanks to our experience and market data, achieve greater efficiency in property management and lettings. We can find the ideal property investment according to the client’s requirements.