How to choose the right property for investment? The term investment property refers to a property acquired with a view to earning money, most often through renting it out. Property preserves the value of money and protects it against inflation. That is why property investment is considered one of the safest ways to grow your funds. Not every property, however, is suitable for investment. The most sought-after are small-sized apartments in the city centre.
The building's technical condition matters – and not just with investment property
Pay close attention to the structural and technical condition of the property. Technical documentation and a personal viewing will both help you assess the condition of the building. Check for damp and structural cracks in the walls, and ask about insulation of the walls, ceiling and roof. You should also take an interest in the windows and doors. Are they new and properly fitted? Don't forget the roof either. Check the roof covering and the roof truss. Is the roof free of pests and rot? The technical condition of a property will tell you a lot about future investments you will need to make.
Is it worth investing in a housing cooperative apartment?
On the market you will find plenty of cooperative apartments for sale at significantly lower prices. But do they have investment potential? The advantage is that when buying a cooperative apartment you are not obliged to pay property acquisition tax. You become the owner of a share in the cooperative, not of the property itself. You also save time, as there is no need for registration in the Land Registry. A fundamental disadvantage, and not just for investors, is that you cannot obtain a mortgage loan. Cooperative apartments are often also subject to limiting conditions on how the apartment may be used. Cooperative apartments are therefore better suited to personal use than as a form of investment.
Property investment and mortgages
Property is a capital-intensive investment with a longer time horizon. It is also one of the few assets against which a bank will lend you up to 90% of its value.
Because a mortgage takes up a considerable part of the family budget, once a year you can reduce your tax base by the interest paid to the bank and thus save tens of thousands of crowns. To reduce your tax, you must be a party to the mortgage agreement and own the property the mortgage is drawn on. A further condition is that the property must serve to meet the housing needs of the party to the mortgage agreement or of their close relatives. You can only deduct mortgage interest if the income tax you pay in 2020 exceeds the taxpayer's tax credit (24 840 Kč).
Do you own an investment property but can't find a suitable tenant? Contact us, and we will take full care of renting it out and of guaranteed income for you.
* All of the above information consists of general provisions only and offers a basic insight into the topic of property investment. To resolve specific issues, do not hesitate to contact the specialists at Flat Service directly
