Welcome to our new blog series. We are going to break down the process of buying a property into key stages. Hopefully you will find it useful on your journey to buying some Czech real estate.
Thinking in terms of monthly spend
We start with calculating a budget. It may seem simple, but there are quite a few factors to think about. You may be buying in cash, or more often with a mortgage. If you are taking a mortgage, you may find it best to work in terms of a monthly budget, rather than a budget as a whole.
Let’s pretend that your monthly budget is 20.000CZK per month for living expenses. In this you will need to fit your mortgage costs and utilities. Utility costs vary from property to property. If you buy a house you are responsible for your own utilities. If you buy an apartment, some will be your responsibility and others will be split with others in the building. These shared costs will also include a fund for repairs to the building as well. We will look at this in more detail in a later post.
Utilities and other housing costs
The average utility costs for a one-bedroom apartment (with two occupants) are about 4.000CZK per month. Property taxes and insurance are in the region of a couple of hundred and we can include them in this rough estimate. That would leave our pretend budget with 16.000CZK per month remaining for mortgage payments. If our buyers are under 40, then this mortgage can be taken over 30 years. With an interest rate of 2.5% (just as an example), 16.000CZK per month becomes 4.000.000CZK that you can put towards a purchase.
You will probably need to put in 10-20% yourself, so your overall budget is going to be around 4.400.000 – 4.800.000CZK – assuming you have 400.000 – 800.000CZK of cash available. It can be higher if you were to decide to put in more cash, but it is unlikely you could borrow more.
If you are a cash buyer, this may not be useful information, aside from the utilities information. Budgets will be more likely based simply how much cash that you have.
Don’t spend it all
In both cases it is good to always build in some reserve. It is highly unlikely you will buy a house that needs no further money spent on it. Although there are not large compulsory additional costs (not any legal or notary costs and at the time of writing no sales taxes), there will always be a need to spend some money to get the property 100% liveable.
If you are looking at a buy-to-let purchase most of the utilities will be passed to the tenant. Why not all? Because under Czech law you cannot charge a tenant for upkeep to apartment buildings (the repair fund). The theory is that they will not benefit from this.