If you’re thinking about Czech property as an expat living in the Czech Republic, buying real estate can be a smart investment if you have the funds for it.
Property investment is generally considered a safe option that appreciates over time and can provide a steady income if rented out. However, like any investment, it comes with its own set of risks and rewards.
Consider the Advantages
Compared to other countries, the cost of property throughout the Czech Republic is relatively affordable, especially when compared to average expat salaries and the cost of living.
Although properties in Prague can be expensive, expats typically earn more than the average Czech salary, making property investment a good option for those seeking a long-term investment.
Moreover, the Czech Republic is a popular destination for international businesses due to its advantageous location and lower cost of doing business compared to surrounding countries.
This, along with a strong manufacturing sector and position as a trade transit hub for the rest of the EU, makes the Czech Republic an attractive option for long-term property investment.
In addition, the Czech Republic offers a relatively low down payment rate, making it easier to leverage a mortgage and potentially purchase multiple properties, thereby amplifying returns.
The country also has a strong rental market, especially in its largest cities like Prague, which can provide a steady income stream for investors.
Important Cons to Consider
There are also some disadvantages to consider when investing in property in the Czech Republic as an expat.
Being financially tied to the country can be risky, especially if you need to move in a hurry and want to recoup your investment.
While retaining the property and renting it out could be a viable option, it may not always be financially feasible due to mortgage repayments and other costs.
There have been crackdowns and proposed restrictions on the zoning of properties for short-term rental options (e.g., Airbnb’s) in some cities and neighborhoods so you’ll need to be sure that’s an option you will have should you want it in the future.
Another big challenge for expats is the language barrier – Czech can be a challenging language to learn, and even those who speak a Slavic language may struggle to navigate the legal and administrative process involved in buying a property.
Additionally, the bureaucratic process in the Czech Republic can be super frustrating and challenging, especially for those who are not familiar with the local system.
Avoid the Most Common Buying Mistakes
So after you weighed the pros and cons, if you’re ready to jump into the Czech real estate market, Pexpats has compiled a comprehensive Buyer’s Checklist you can use as a guideline for purchasing Czech property, with extensive detail on several aspects, including:
- Inspecting the property thoroughly
In addition to a thorough physical inspection, it’s imperative to investigate the legal status of the property in question through the Czech real estate cadastre, which lists property ownership, detailed information about the real estate, land size, and the cadastral map.
- Investigating the seller
This involves checking for any property liens or debts the seller might have with the homeowners’ association or a cooperative because you, as the buyer will take these over, so you’ll want to know exactly what debt you’re signing on for.
- Considering the neighbors
This involves interviewing the sellers, and then, if possible, asking people residing in the house or apartment about the area to learn more about the property or even arranging a meeting with a building’s management, or the owner of the association or cooperative.
- Signing a real estate reservation contract
It’s important to check that the contract is comprehensive and fair. The reservation agreement states the agreed conditions for the buyer to purchase the property, and that the seller will sell it. Insist on completely clear, unambiguous conditions for the real estate transaction.
- Making a reservation deposit
When the contract is drafted, every seller and agent will require confirmation of interest via a reservation deposit. Once paid, the seller is assured you will be making the purchase, and your real estate is taken off the market so you need to safeguard your deposit.
- Preparing the purchase contract
After the conclusion of the reservation contract and deposit, next is drafting a contract of future purchase or straightforward purchase. Preparation of the purchase contract builds on the agreements from the beginning of the booking agreement.
- Guaranteeing of the purchase price
Once all parties agree on a purchase price, you have to ensure its safe storage through a lawyer, notary, bank, real estate agency, or any third party.
- Deposit proceedings in the real estate cadastre
Here, the buyer pays a small administrative fee, and then, by law, the cadastre must wait 20 days until they can make the buyer’s deposit. After this protection period, the deposit is processed, with the whole procedure taking usually around 30 days in total.
- Transferring of ownership
Typically, within 7 days of the deposit being processed, the property and all utilities are transferred to the new owner – this is not always a condition and can be negotiated, even up to a year after making the purchase.
- Assessing real estate acquisition taxes
In the Czech Republic, you’re obligated by the state to file a real estate tax return by January 31 of the year following the deposit of ownership.
Other Considerations in Making the Final Decision
Investing in real estate in the Czech Republic can definitely be a daunting prospect for expats. According to those who’ve taken the plunge, there are several other lesser-known details about the process, including:
- Down payment – can be big, when the bank doesn’t value the property as high as the actual selling price during inflationary periods. The bank will want more cash down to issue a mortgage.
- Mortgage – often, banks won’t offer mortgages to you as an expat if you don’t have ties (business, family, etc) to the Czech Republic.
- You must have a lawyer – the lawyer in Czechia does what the Title company does in the U.S.: reviews property legalities, etc.
- You must have a Czech bank account.
- You will have to provide extensive employment and salary records – notarized – to get a mortgage.
- You must pay for translation of all documents: reservation contract, buying contract, etc. It can be a big expense.
- The process can take months. If you are completing the purchase from elsewhere, you’ll need to give your attorney broad power of attorney rights to sign things for you. Some documents can only be signed in person, so have your attorney draw up those items and sign them when you’re in town.
Making the Final Decision
Ultimately, buying Czech real estate as an expat can potentially provide a steady income stream and appreciating asset value, making it an attractive long-term investment.
Like any property market, however; it has its pitfalls and risks. But with careful planning and following certain steps, you can protect your investment and hopefully avoid common mistakes.
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The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
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