7 reasons to invest in our new residential real estate projects in Prague

Buying apartments in new residential projects in Prague is an interesting investment opportunity for many reasons. Newly constructed apartments close to downtown Prague (Prague 3 to 9) are in high demand given their slow supply on the market. Czech construction regulations really drag our the construction permit process, making it impossible for Prague developers to satisfy increasing demand and pushing new apartment prices constantly up. In addition, new apartments are a desirable housing option for reliable tenants. Accordingly an investor will have a relatively easy time renting out his property to good tenant and can usually price rent higher than a common secondhand apartment.

We have met many of Prague's leading residential real estate development companies face-to-face and have established special cooperation terms with them. This direct connection helps us to secure more attractive conditions for our clients. This often include a discount in purchasing new apartments for the buyers we represent. Other benefits can include favorable financing (see further), longer payment periods and generally better contractual conditions. Here we list several benefits we can provide to clients when representing them in deals with developers. Those benefits obviously provide an added value to their investment.

1. Be among first who to receive an offer! 

As business partners to of many pf Prague's developers we receive many presentations of new residential real estate projects in Prague before they reach the general public. That is how we are able to select the apartments that are most suitable for an investment before they are booked by someone else. 

2. Take advantage of favorable financing: 15% down payment now, the rest after the apartment is completed. 

Projects that we offer to our clients benefit from the following financing structure:

• • Reservation fee payable after the conclusion of the Reservation Agreement. It usually makes up 2% of the total purchase price, generally around 95 000,- CZK, incl. VAT tax

  • 15 % of the real estate price, incl. VAT is payable after conclusion of the Future Purchase Agreement (further as FPA). FPA needs to be signed usually within 1 month of signing the Reservation Agreement. Once the FPA is signed there is usually a 1-month period to pay the second payment. That means the buyer has around 2 months altogether to collect his 15% down payment after signing the Reservation Agreement.

  • The final payment, to the sum of 85 % incl. VAT following project completion. This is usually achieved within 2 years of signing the Reservation Agreement. That means there is a plenty of time for our clients to collect their 85% either from their own funds or by taking out a mortgage in the Czech Republic. 

3. Benefit from more attractive conditions negotiated for our clients

When negotiating apartment purchase conditions our goal is to make ensure that clients’ interests are well represented, and that the contract is as favorable as possible. We usually manage to negotiate longer payment periods for our clients. We seek out developers who understand that the buyers we represent often need to perform international transfers to pay the purchase price, which requires more bureaucracy and time. We also undertake efforts on behalf of our clients to mitigate their contractual penalties, set up protected escrow accounts for their deposit payments, and ensure they are properly notified in a timely manner by the seller regarding any issue which might arise during the project etc. We also make sure that our clients fully understand their rights and duties; that is why we prepare for them a well-structured summary of all contracts including payment instructions and project timeline.

4. Maximize your profit by using mortgage leverage provided by Czech banks 

Those investors who like using bank leverage to maximize their return on investment can apply for personal mortgage in Czech Republic. Currently we are able to help clients finance new projects purchases up to 60% LTV (last updated March 2020).

5. We make sure you will have an exit strategy 

If your plan "A" (=purchase an apartment) doesn't pan out the way you expected, the majority of contracts with developers also provide for a plan "B" – transferring Future Purchase Agreement to another buyer. We always attempt, and are usually successful, in negotiating this transfer clause into our client's contracts. This transfer clause is useful for you in case you have serious reason not to sign the Purchase Agreement and pay the last payment. For example, if you fail to secure mortgage financing in Czech Republic or your personal situation changes significantly (for example, you lose employment income, get long-term illness, etc.). 

6. We help you reach growth of property´s value right after project is finished 

That the premise is that within 2 years of signing a reservation contract and completing the apartment´s construction, the market price of your apartment will grow.

One of major reasons which let us assume that growth will continue for next years is the insufficient supply of new apartments for Prague residents wand the constantly increasing migration to the Czech Capital. You can observe this stable trend of growth of new residential real estate prices in the Czech Deloitte real estate index which maps evolution of those prices.

Of course, we cannot influence how real estate market turns out in years following your signature on a Future Purchase Agreement. However, we can help you increase probability that value of your new apartment will grow. Here is how:

• • We always help our clients select an apartment which our experience leads us to believe is particularly suitable for investment and renting. We consider price, layout, location in building, future rent, etc. and recommend apartment with best cost-benefit ratio

  • We can economically manage kitchen design and installment after taking apartment from developer (in Czech Republic the kitchen is not included in the construction of new apartment),

  • We often get discounts for our clients (especially if client purchases more than 1 apartment). 

7. Benefit from our post-purchase service, including renting and property management

We do not consider our job to be done once we hand over the keys we received from the developer of your new flat. We can continue helping you to make your investment successful. Our post purchase options include:

• • Designing and implementing kitchens at favorable costs 

  • Filling purchase tax reports 

  • Securing reliable tenant 

  • Long term property management including rent collection, dealing with the tenant, solving problems, flat insurance management etc., mortgage management.

  • Filling annual tax returns including payment instructions,

  • Selling your flat. 

Finally, we would like to point out other important benefits of purchasing a newly built apartment.

Standard purchases of apartments are subject to 4% real estate acquisition tax paid by buyer. However, apartments sold directly from the developer immediately after they are constructed and permitted to be used for living (first sale of apartment) are exempt from this real estate transfer tax. Buyer only must submit tax report to authorities with 0, -CZK reported tax.

According to Czech construction laws, real estate builders must provide the buyer with at least 2-year quality warranty. This guarantees the removal of defects found by buyer after moving to his new apartment in the shortest possible time after developer was notified. Some developers even provide the extended three-year warranty period. 

Want to know more about our experience with investments in newly built apartments? Contact us, we will be happy to answer your inquiries.