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Investing in real estate for future resale is a popular strategy to gain a high profit when selling property. The essence of this approach is that an investor purchases property with the intention of selling it at a higher price in the near future. It’s worth noting that the term “near future” is quite relative, as this sale can happen in three months or several years.
The key is to assess the market wisely and find property that will appreciate over time. Like any other investment strategy, this approach has its advantages and disadvantages. Let’s delve into them in more detail.
Advantages of Buying Property for Resale:
Over the last 10 years, housing prices in the Czech Republic have shown some of the highest growth rates in the EU. In 2022–2023, property prices in the country increased on average by 5% per year.
Thus, buying property for future resale in the Czech Republic has several advantages:
High Profit Potential:
- The robust growth of the Czech real estate market over the past decade indicates a high potential for profit.
Variety of Properties:
- Investors can choose from various property types, including residential houses, commercial properties, apartments, land, and more.
Possibility of Quick Profit:
- Starting from 2010, the Czech real estate market has been growing at an active pace, offering the potential for quick returns.
The graph from the Czech Statistical Office shows the intensity of price growth for new apartments since 2016. Several factors contribute to this:
- Demand for new apartments consistently surpasses supply.
- Limited new construction compared to other European countries due to Czech building laws aimed at preserving natural and cultural monuments. It takes an average of 5.4 years to obtain construction or reconstruction permits.
- A 120% increase in the cost of construction materials since 2021.
- An increase in the central bank’s interest rate for developers.
When buying property for future resale, owners and legal obstacles are verified in the cadastre. Cadastre verification allows the buyer to ensure they are acquiring property from the legal owner without any encumbrances, such as a prohibition on alienation, arrest, or mortgage.
Challenges You Might Encounter:
It’s important to remember that any investment involves risk. In the case of buying property for future resale, there are several disadvantages:
Market Fluctuations:
- Real estate markets are not always stable, and prices may decrease, resulting in financial losses.
Inability to Quickly Assess the Market:
- Evaluating a profitable property is typically done quickly, often within 1–2 days, due to the buyer’s fear of missing a good deal. However, this might not be enough to thoroughly assess the property.
Readiness for Immediate Payment:
- It’s crucial to have a sufficient amount in the account to seize a profitable opportunity.
Risk of Losing a Potential Property:
- If the buyer is not ready to sign a purchase agreement immediately, there’s a risk of missing the opportunity to acquire the property on favorable terms.
Taxes and Expenses:
- When selling property, investors must pay taxes and cover various expenses, including real estate agency commissions.
Buying property for resale in the Czech Republic has its advantages and disadvantages. The viability of such an investment depends on the investor’s personal goals and risk profile. Effective market analysis, careful planning, and assistance from a specialist can contribute to success when using this strategy.
