When it comes to investing in property, buying a house or apartment for yourself is not the only option.
In this article, I’m going to talk about some other options that can get you on the property ladder.
Of course, the most common investment is a property for yourself, either as a short-term solution with the idea that it will increase in value and you can sell it for a profit when you’re ready to move on, or leverage its value to buy something bigger and better later.
For some, this kind of personal investment can last for generations too.
1: Buy, but get flatmates to help cover the mortgage repayments
Another option, similar maybe, is to still buy something for yourself, but to buy bigger than you need and get flatmates in to cover the extra mortgage repayments through their rent contributions.
Along with buying something to live in yourself, this is probably the most common option, and probably the easiest to realise value on. Given the rate of inflation, money kept in the bank is effectively being devalued, whereas if you invest in property, your investment will most likely gain value and with this option, you’re likely to be able to buy something bigger than you could otherwise. A word of caution though – some banks might not consider this additional rental income a safe option so it could be more difficult to get a mortgage.
Another option for investing in property is the buy-to-rent model, where you buy something with the purpose to rent it out, rather than to live in it yourself. However, at least in the current market, it can be hard to break even on a monthly basis in the short term given the high interest rates. As property prices drop and rents rise, though, you could reach that break-even point if you get a good deal.
For anyone interested in this option, I would say maybe look outside of Prague at smaller cities such as Ostrava. Or, if you have the time to spare and really want to buy in Prague, consider short term rentals such as Air BnB rather than long term rentals, as these shorter models tend to earn more money.
3: Joint venture
If you have some money, but not enough to get a mortgage alone, you can partner with someone and invest together. I don’t necessarily mean a husband or wife or similar, even friends can go in on this kind of investment and whether you live in it, or rent it out, it’s a good way for people with less savings or lower incomes to become property owners.
Just be sure to check all the contracts carefully to make sure they are all in both names (or more if there are more of you), and consider drawing up an extra contract to cover all parties involved.
4: Build a house to sell for profit
Increasing on the difficulty scale, particularly for expats, is to build a house and then sell it for a profit. There are a lot of developers building houses around the outskirts of Prague and neighbouring towns/cities/villages, and for most, if you get in early, you’re able to completely customise what it looks like on the inside.
For those of you with the time, means, and perhaps some flair for design, the right fit-out of a house and garden can greatly increase its value.
5: Buy land that will appreciate in the future
Now, unless you have the time to invest in seriously tracking local government discussions and decisions, or you know someone involved, this can be very tricky. The idea is that the best deals would occur right before the zoning plan is about to change.
For example, you buy a piece of empty land close to a city or village and in a few months, the city decides to zone it for housing or building, meaning it’s now worth A LOT more money, and you can make a nice profit.
To get that information and close a deal in time is very, very difficult though.
Bonus: other alternatives to buying
There’s a reason I’m putting this at the more difficult end of the scale, and why I’m summing them up in one – these options are difficult for Czechs, and arguable more so for expats.
Firstly, buying through auction or foreclosure – you can sometimes find good deals through such selling routes, but it’s almost impossible to buy these properties with a mortgage unless you have another property as collateral.
Secondly, commercial property. I’ll admit, I don’t know as much about buying and selling commercial property as residential properties. There might be different taxes involved, the financing structure is different, and rents are calculated differently. For that, I always reach out to my colleagues for advice.
Lastly, buying forest or agricultural land. Again, not something I’m overly familiar with, but something I know works as an investment for some people.
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