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July 29th, 2016

Planning on purchasing a flat? If you make the right moves, you can hit big bucks – Part two

Downtown locations are also popular amongst the youth, from where educational centres are easily accessible because of the availability of transport, and also are close to recreational places and sources for entertainment. On the other hand, these are less and less available for university students because of their expensive pricings, but students from abroad can still afford them and still make them popular.

Families or those who move to the capital from the countryside are insisting less on living in the city centre, where the high prices can make renting flats unavailable for many. The aforementioned groups are also seeking panel flats because of their cheap rentals, and they don’t insist on living in brick-built housing either.  Almost every property can find its lessee in these times of overly high demands on the leasing market, but for the sake of return maximisation, it’s useful to make calculations for the property in question before actually purchasing it.

 

The big question: short-term or long term?

To decide which method we prefer, it’s important to think through the amount of returns we are expecting from the business, and the amount of actual work we are ready to do for this amount of money. Generally, short-term accommodations and leases grant a higher return compared to long-term ones, but these acquire many more sacrifices and can only be classified as a second job or occupation – it’s not sufficient to collect the rent once a month and check if the monthly bills had been paid. You have to take care of occupancy rates, accepting your guests, solving problems that might emerge, organising cleaning duties. In addition, to get positive feedback and ratings, you might even have to prepare programs and pastimes for your guests.

 home_in_budapest

Moreover, incomes are much less secure: currently, 7000 flats in Budapest are listed in Airbnb’s database, which means the competition is big, and the acquisition of money might be hectic – summer usually comes with more inquiries, while it’s more difficult to have guests between the months of November and February. Because of the aforementioned reasons, short-term leasing is a much more risky business.

Incomes are generally much greater in case of accommodation-type leasing, but expenses are also higher because of tourist and municipal taxes and referral fees. In addition, overhead expenses also have to be taken into account, as in case of hotel flats, these are a responsibility of the owner, but we shouldn’t forget about the costs of cleaning and various other services either. In comparison, long-term leases only cost the owner if there’s something to be fixed, which means only amortisation can be a possible problem.

The last part of the article will be about the causes of the differences between short-term and long-term leasing, and it will also contain the details of the model used for this analysis.

 

Source:  http://www.portfolio.hu/)

 

Interested in buying a property in Budapest?

Interested in buying a property in Budapest?

Contact us to get a tailor made investment advice from the Budapest market specialist.

 

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