Discover top 7 strategies we use daily to find and win best real estate deals in Prague

Post date: Mar 30, 2020 9:9:4 PM

Discover top 7 strategies we use daily to find and win best real estate deals in Prague

Over our decade on the Czech Republic real estate market, we’ve employed a variety of investing strategies. Here, we list those we consider to be essential to our success on the extremely competitive Prague real estate market. Further we describe practices and software tools we use on daily basis to improve our sourcing and analysis of investment deals. We also systemized a process of deal presenting to our clients so that we can act faster than our competitors. More than this, our overall strategy is to gain as complex experience in the field as possible to dramatically increase our worth for clients.

1. We aim to be the first to know about the best deals.

How? By constantly developing a lead funnel of "off market" offers. We see real estate as a relationships based business. Accordingly we have invested, and continue to invest, a lot of time and energy in creating and developing valuable connections across the market. After many years of active business development efforts, we become an integral part of the unofficial realtors’ network in Prague. Barely a day goes by in which we do not receive some offer from one of our colleagues, which include real estate agents, investors and other realtors. Many of the offers which come our way are "off market" - unlisted on any Czech public real estate platform.

There are various reasons why sellers might wish to offer their properties "off market". For instance, when the property on sale is an apartment building, the seller often wishes to keep the information about the sale from spreading among his tenants. Another common reason is that the seller simply wants to save himself the marketing costs and therefore seeks to the word about the sale via his network of his real estate investors contacts before he lists the deal publicly. This is often the case in smaller developers’ projects.

We are subscribed to the mailing lists of all Prague major developers. We have met many of them face to face and have negotiated special cooperation terms in personal meetings. As a result we receive many presentations of new residential real estate projects in Prague before they reach the general public.

Such off market real estate offers in Czech Republic are often very interesting for investors, since their conditions can be quite attractive. And we don’t just mean good pricing. But often there can be other benefits – interesting deal financing options, property location growing potential, discount possibilities etc. 

2. We also purchase directly from properties owners.

Our daily routine includes screening real estate listings from private individuals. It is very common practice in Czech Republic to sell, purchase or rent a property without any help from real estate professionals. is the primary reason for this is the widely spread distrust of real estate agents due to the absence of proper regulation of their professional entry requirements, due to poor legislation. Such real estate agent absent transactions represent a very significant portion of Czech real estate deals. Therefore, there are quite a few websites which specialize on this type of listings.

What makes those deals potentially interesting for investors? If the owner sells without an agent, the price is often lower because the owner does not know the market well as a professional agent and may price the property much cheaper than the market would allow (of course, they quite frequently overprice very their property and cannot secure a purchaser)

To make searching for these deals more effective, we use specialized search engine software for investors with paid subscription. These engines monitor private listings market on an hourly basis and we are rapidly notified if a good offer surfaces.

Deals with owners are often more challenging in terms of negotiation, since the seller is not a real estate professional and that communication with him may be more emotional and volatile. It is therefore very important for buyer to be familiar not only with general real estate negotiation strategies but also with the mentality of the local real estate owners.

3. We tack developments in real estate prices based on data from the Czech Land Registry

Statistics show and average 10-15%  difference between the listed prices and the final closing prices of real estates in the Czech Republic(in Prague 1 and 2 the difference is over 30%). Therefore, it is extremely important to be aware of the final prices for which a property in a particular location has actually been sold. For this purpose we use another prepaid tool – Pricemap – which collects big data from all real estate sales registered in the Czech Land Registry (every real estate purchase in Czech Republic must be registered in the Czech Land Registry “KatastrNemovitosti”). 

Knowing the real closing prices of real estate deals gives us the confidence we need not only to optimize the outcome of negotiations but also in our business planning. Especially when working on sales projections for bigger real estate projects, we want our business plans to be as accurate as possible. Therefore, we always analyze real prices from Pricemap.

Overvaluation of listed prices of real estate in Prague neighborhoods. Y axis: overvaluation in %. X axis: timeline

From Czech Real Estate Conference 2019.

4. We systemize the process of deal presentation to our clients and closing.

The hard truth about investing in real estate (not only) in Prague is that attractively priced deals disappear in days, even hours in some cases. Every fifth apartment in Prague is bought by investor. So there is really big competition between investors in Prague market.

Our position as deal broker is even harder because we need to wait for client´s approval about closing the deal. We try to mitigate this time disadvantage by using a systematic approach:

5. We are not afraid of difficult transactions, if the price and potential benefits justify them. 

We have gained  broad experience and knowledge in hundreds of real estate transactions done in the Czech Republic. We work with lawyers, accountants, bankers and other professionals specialized in real estate transactions. We know how to purchase a problematic property for a low amount of money. However, in such cases we always ask ourselves the question – is this property really worth our time and money? If the answer is positive and we can eliminate the potential risks of deal by thanks to our experience and knowledge, we provide the seller with our offer.

What kind of challenges are we talking about? It can be the purchase of property with the pledge of private creditor. Or a scenario in which the owner wants to sell his apartment now but for various reasons wishes to continue living in it for a few more months. Or a case when the subject of purchase is not a property itself but an SPV company which owns the property. Most of the time such deal require us to invest some extra time and resources into due diligence process, contracts negotiation etc. But it pays off once the deal is finalized and the problems are solved, because the value of the property increases dramatically. Also, if the deal looks more complicated at first glance, there are fewer potential purchasers. This represents a good opportunity for professional investors to negotiate good price.

6. We can help our clients to invest in “fixer-upper” properties 

Properties which require redesign and reconstruction are typically offered at a low purchase price. Every year we carry out many reconstructions of apartments. We have experience with the whole process of reconstructions – interior designing, budgeting, allocating resources (people and materials) and project management. Therefore, we can do the math for our clients. We calculate the finances and time scale of such a project as well as the expected profit after increasing the value of the property. And after purchase we can do the reconstruction project management.

7. We try to learn the real estate business from all sides

Our general approach to real estate which we try to apply daily is to gain as complex an experience in the field as possible. As real estate experts we know that there is more than one way of making significant profits in real estate investment deals. In one deal profit can be achieved almost immediately by sourcing a good deal and negotiating the price. In other deals profits can be delayed until the property´s value is increased by reconstruction – but they can be much higher! And all rental property owners benefit from good tenants.

We are used to act daily in various roles: as an investor, real estate agent, property manager, construction manager or business consultant. 

For example, in addition to mediating deals for our clients we too make our own investments in real estate. That gives us important firsthand experience of having our own capital at a stake. We also manage a large portfolio of apartments in Prague, Pilsen and other Czech towns. We therefore understand the Czech rental market, tenants’ behavior and property management issues very well, from personal experience.

We believe that being able to think and act in all of the aforementioned roles gives us strong advantage when creating strategies for our clients - investors.

Want to join in the success? Contact us