3 real estate investment options in Budapest

18 April 2019

You are ready to make a step ahead and invest in real estate in Hungary. What are your options? What investment model to choose? Here we share our opinion on current market trends that might be of an interest to you.

1. Real Estate Flipping (Fix & Flip)

If you’re considering house flipping as an investment strategy, there are certain parameters you should consider when searching for the right property. When it comes to finding the right one, we find the following parameters to be necessary.
Apartment condition. In case you chose to make an apartment flip, then we hunt for demolished, old, non-renovated apartments, that have potential to increase in value with the right repairs and updates. Be ready to remove and break walls, install doors for separate entrances, change floors, windows, AC, heating system, electricity, water pipes, building galleries, separating or uniting rooms and much more, depending on your budget and return expectations.
Location. Even though the value of investment properties can change, it’s safe to say that a good rental property located in a good location will always go up in value over a long period of time. If you plan your project for selling to investors, locals or businesses – your location changes significantly. Today we suggest to aim for selling your flip to investors – as there is a big demand on properties, that are ready, or almost ready to be rented for tourists or students. As an example, your search filter should point out that you are looking for districts IX and XIII (if you aimed for a long-term project, you are likely to expand to other districts, too), bad condition, 50-80 m2, with an ability to create either separate units for AirBnB or separate rooms for students. In the end, an average price per m2 for such a property should be around €1300-€1500 in Pest, fortunately it is pretty possible to find such properties under the market price.

2. Short term rentals (Airbnb)

Despite expanding local rental restrictions in Budapest, Airbnb is still considered to be an attractive investment model. What are we looking for here?

Location. Budapest is a popular destination for tourism, so there is a real need for the Airbnb apartments. However, obtaining licenses is causing more and more puzzles for owners, as many districts have introduced measures specifically targeting Airbnb solutions. We advise, that today the fastest way to get into the short-term market rentals is to choose your property in districts IX (Ferencváros) and XIII (Újlipótváros) central areas. The closer your place to touristic attractions, the more value it has.
Size. The size of your Airbnb property is only limited by your budget.
In practice, the following sizes tend to show progressive results: central studios (around 302), family units (50-60 m2 with separate rooms, or ability to separate them), group units (80 + m2 for creating individual space with their own kitchenettes, bathrooms, and other necessary facilities). Group units are known for their best financial returns.
Condition of your future property will only depend on your expectations. Many prefer to enter the market fast – this would be the case when we are seeking for ready-made products in perfect condition that require minimum or even zero investment for upgrade. For those who are looking forward to creating a place to their liking, market has non renovated apartments to offer. In such a case, we offer professional and functional renovation and décor that will appeal to the largest number of potential guests and stay within your furniture budget.
Pricing of potential Airbnb properties depends on such factors, as district location, floor, building condition, apartment condition. When it comes to the floor level, generally the ground floor apartments would be cheaper than the ones on higher levels, especially if there is an elevator. Building condition will be reflected on your monthly common costs payment, however, this is definitely not a crucial parameter – your tenants will certainly appreciate the atmosphere you create inside your place.

3. Classic long term investments

One of the main benefits of traditional investment properties is the monthly rental income the property generates. Typically, the best rental properties are located in solid working-class and middle-income neighborhoods. To find these neighborhoods, investors look for good schools, available shopping centers, good transportation, and communities where people care about where they live. In these locations, you’ll find strong demand for long term rentals. Our search for long term investment properties in Budapest is not limited by the municipal regulations, this means that we have great choice of properties in favorable districts VI, VII, VIII, IX, XIII, not necessarily in the noisy city area, but also quiet living areas appreciated.
For higher ROI, target your search for apartments 60-80 m2, where you possibly can make 3-4 separate rooms (about 10-12m2 each room) with common kitchen and living area. Non renovated apartments in this category start from 1500€ per m2 and higher.

After acquiring your long term rental property, you need to learn how to market it, how to find the best tenants, and how to manage and maintain it. How much should I charge for rent? How to deal with utilities? What if it needs technical maintenance? Dnest manages these rental related tasks in order to maximize its investor’s benefits.

by Dina Iarenchuk / Product Manager