The experience of previous years shows that a significant number of home buyers are buying property for investment. This is understandable, as credit rates have stagnated far below expectations, home prices have soared for a few years, rents have skyrocketed, and home rentals seem like an easy way to earn a living, even when it comes to buying a loan!
Housing prices in Hungary have increased significantly over the past 4 years. Anyone who was able to rent out his existing home or buy a home for investment purposes around 2014 definitely invested his money well.
Residential real estate prices rose 12% year on year to 1.5 times their value. This was a very good return, as interest rates were at historic lows, with bank deposits barely bringing in a few% per annum.
Borrowing rates were also so low that those who bought a home and rented a home on a loan also promised a high yield, raised the loan repayment due to the price increase, and left a reserve.
- The price increase in the city center was doubled as well.
- real estate prices rose above the national average also in the outer districts. V, VI, and VII. In districts the annualized yield was around 15-20%. With the release, this yield can be further increased.
For most investment buyers, there are two ways to expect a good return
- or rent your apartment for short term and operate it as a kind of accommodation,
- or looking for a long-term tenant.
Both options can be both beneficial and risky.
It is a good idea to decide which yield to choose before buying
With short-term, accommodation-type service, a great deal of work and attention is put on the owner’s shoulders. True higher returns than long-term spending, but with more casualties, we will almost have a second job.
- Provision must be made for the operation of the apartment as accommodation, its occupancy, the reception of the guests, the solution of the problems in the rooms, the provision of cleaning and continuity. Sometimes we even have to organize programs!
- The efficiency of the accommodation type investment is seasonal, in summer it is easier in the tourist season, in winter it is harder to catch the guests. Due to tourism, the apartment should be in a place where tourists like to stay overnight and have easy access to the accommodation.
Long-term renting requires..
- Less time
- Less Risk
- Find a suitable tenant
- A well-paid family or student who feels comfortable with the equipment and the apartment, does no damage, and strives to preserve the consistency.
Buying real estate is not a risk-free investment, so while we can compare yields with those available on bank deposits, we need to work, maintain and protect our real estate for that return.
Additional costs for buying a home:
- Home purchase attorney fees,
- property purchase tax related to the purchase,
- the cost of any renovation or equipment is also to be considered.
It is worth checking out the availability of accommodations in the area, and a more cautious estimate should be made of the expected yield.
The annual rent is calculated for 10 months, caution, costs are inevitable, insurance, common costs, renovation fund.
Income is taxed, and avoiding it is less and less worthwhile, as homeowner burdens have dropped significantly this year, which helps to whitewash homes.
What is the average return on a home purchase for rent?
Current housing market expectations in Budapest, for example, could be around 10% higher than expected this year. For long-term home purchase, we can expect a cautious estimate of a 3-5% rise in prices depending on location.
The profit that can be made is higher than the deposit yields, but also the risk taking! However, with the expected 3-5% price increase, the total yield will jump to 6-8.5% immediately, which is much higher than the deposit yield.
Even with short-term rentals, you can get even more substantial returns, but here, too, the owner pays more attention and more work to the cost of a good investment.
The above calculations characterize the high average, in case of individual properties the yield results will be different, it is worth to do an individual calculation!
Home loan is a big financial decision in everyone’s life
All information on new family home improvement discounts and qualified home loans is available in one place upon request. We answer individual cases, explore the most important practical issues, and help adjust to the new CSOK. We will also help you to make Home Savings Cash!