Are you planning to buy a property and want to avoid unnecessary mistakes and complications? In our article we will guide you step by step through the whole process - from planning and choosing a suitable property to closing the deal. You will learn what to watch out for, how to arrange financing, and why it may be worth also considering the modern form of investing through crowd-owning with InvestBay.
Why buy a property in the first place?
Investing in real estate is one of the most popular forms of investing - and there are several compelling reasons for this:
- Real estate is considered a stable investment that grows in value over the long term.
- It can also often provide a steady income (for example from rent).
- Owning a property can bring a sense of stability and security.
- In the long term, it can save money - you stop paying regular rent.
However, as with everything, there are also disadvantages: The acquisition costs tend to be high, and maintaining the property is demanding and costly. Some properties may also have hidden defects that you only discover after buying.
Tip: Also read the article that will introduce you to the basics of investing in real estate.
If you want to avoid these disadvantages while still enjoying all the benefits mentioned, consider crowd-owning (co-ownership) with InvestBay. (Careful, not to be confused with crowdfunding!) Why?
- The acquisition costs of your share of a property start at just CZK 2,500 - but of course, the returns are percentage-based, so the higher the amount you invest, the more money you get back.
- You earn a return both from rent and from the sale.
- You don't have to worry about maintaining the property at all.
- No hidden fees - everything is transparent.
- You can go on holiday to this property - we always choose attractive locations.
And yet you have decided that you would like to buy a property the "old-fashioned way"? Then read the step-by-step procedure for buying a property and don't let yourself get caught out on anything.
First step: Planning and preparing for the property purchase
When deciding to buy a property, it is important to first set your goals. Do you want the property as an investment, to live in, or for (short-term or long-term) renting? Each of these goals has its own specific requirements and it is important to keep them in mind from the very beginning.
An apartment as an investment?
If you are considering buying an investment property, you have to think about it differently than about buying an apartment you plan to live in straight away. A property as an investment needs to be thought about more in a financial spirit (i.e. what return the property will have and so on), rather than about how it looks, which way the sun shines and so on. Even if you have already gone through buying your own property to live in, buying an apartment as an investment will be something completely different and it needs to be approached with a different mindset.
Devote enough time to this topic before buying - and start by reading our objective and comprehensive guide to investment apartments.
The next point is considering your financial possibilities. What is your budget? Are you able to finance the property purchase from your own resources, or will you need a mortgage loan? If you go down the mortgage route, it can be extremely useful at this stage to hire an independent financial advisor. They will help you better understand your options and plan a realistic budget. At the same time, they will help you make sense of mortgage loans at various banks and calculate for you whether and in what amount a loan will be provided to you. The services of financial advisors are free of charge, so there is nothing stopping you!
Once you are clear about your goals and finances, you can move on to the next steps in the complex process of buying a property.
Second step: How to choose a suitable property and what to watch out for?
Now comes the process of searching for a property that will be in line with your goals and ideas. You can use a real estate agency or all sorts of non-agency online platforms. The important thing is to be clear about what type of property you are looking for and in what location.
If you are looking for an investment property, you also need to answer a lot of additional questions. For example: What condition will the property be in in 10-15 years, won't it already be due for renovation? What is the property's potential for growth in value? What is currently in the surrounding area and what will be there? If I am buying an apartment for short-term rentals, will there still be tourist demand in the location? And many others that are oriented towards the future. We have, however, described everything in more detail in the previously mentioned article on this topic on our blog.
One way or another: Location always plays a crucial role. A good location can significantly increase the value of a property and ensure a better return on investment. Consider the availability of public transport, the proximity of schools and shops, and the overall safety of the area.
What to watch out for when buying a property
In other words: What is often overlooked at this stage and then causes frustration and further expenses?
- the energy performance of the building
- the technical condition of the property (if you are buying a property that you primarily want to renovate)
- the extract from the land registry - have it shown to you, because from it you will find out whether there are liens, easements or other legal defects on the property.
At this stage you should also compare prices so that you do not needlessly overpay for a property that is not worth that much.
Third step: Property viewings
Property viewings are an essential part of the buying process. A thorough inspection of the property can reveal hidden defects and legal obligations that could cause problems in the future.
It is important to know how the property has been approved for use - without proper approval, the bank may, for example, not even approve a mortgage for you. It is not unusual for an apartment to be approved for use as a studio or an attic, for which you will not get a mortgage. Are you planning to buy an apartment for short-term rentals to tourists? Then it is necessary to find out whether you might need a special licence for it, or whether any special rules apply to this type of rental.
Also don't forget about the surrounding land and access roads - who they belong to, how and whether you will even be able to use them
At this point it can be very useful to involve an expert (for example a property inspector). They will carry out a detailed inspection of the technical condition of the property and alert you to any problems that might require repairs or renovation.
An inadequate inspection of the property before buying can lead to serious problems. Hidden defects, bad terms in the contract or even fraud can cost you very dearly and cause more than one sleepless night. In the worst case, it may turn out that the property will be completely unsellable in the future and utterly useless as an investment. That is why it is important to devote enough time and resources to a careful inspection of every property you plan to buy.
Fourth step: I have chosen and inspected a property - what now?
Once you have chosen a property, it is time to move on to the next steps. These include several important phases, such as reserving the property, paying a deposit and concluding contracts.
Concluding a reservation agreement
With a reservation agreement, the owner of the property commits not to offer the property to other people for a set period. You and the owner of the property thereby also confirm your commitment to conclude a purchase contract (or a contract for a future contract) for the property during this period.
After signing the reservation agreement, you pay the owner a reservation deposit, which is deducted from the purchase price when the purchase contract is concluded. If in the end you do not conclude the purchase contract for reasons on your side, the owner of the property keeps the deposit. If the contract is not concluded for reasons on the owner's side, the deposit is returned to you.
That is why you should only conclude a reservation agreement if you are absolutely sure that you really want to buy the property and have financing secured in full.
Financing
You (on your own or in union with your financial advisor) will need to communicate with the bank about the mortgage, if you plan to use one. Different types of contracts have different legal frameworks, so it is important to understand what you are signing.
To buy the property without complications, have all the necessary documents ready. Here again, a financial advisor can help you best. Preparation and care can save a lot of time and stress.
Fifth step: Closing the deal
Closing the deal involves signing the purchase contract, which must contain all the important information and conditions, and the transfer of ownership.
The closing fees and taxes associated with buying a property can be significant, so it is important to factor them into your budget. These fees include, for example, the property acquisition tax, notary fees and any other administrative costs.
Accuracy and care when closing the deal are key to a successful property purchase. Make sure that all documents are filled in correctly and that you are fully informed about all the conditions.
All in all
Buying a property can be a demanding process. If you want to avoid it but would still like to invest in real estate, put your trust in InvestBay. This approach allows micro-investments in very attractive properties at home and abroad, which means you can own a part of a property without the need for large initial investments. What's more, you can easily diversify your portfolio and reduce risk.
Read about how it all works, or take a look straight away at our offer of investment properties.Wow, this article is so great that I just have to share it right away.
