Choosing your new apartment
Finding the apartment
CzechRoof provides you with a real estate agent service to choose an apartment. CzechRoof’s expert agents are fluent in English, among other languages, to help make your first steps in Prague as comfortable as possible. Your agent will take care of the whole process, including finding available apartments that meet your requirements, arranging and accompanying you to viewings, and communicating with owners/representatives. Real estate services are included in the price (see below). Alternatively, if you have an apartment in mind, just let CzechRoof know.
To ensure that the apartment’s price corresponds to the current market value and that you can expect a reasonable increase in price over time, CzechRoof reserves the right to complete a prepurchase approval process. This means that prior to you purchasing an apartment, CzechRoof internally assesses purchase terms and price–performance ratio and only gives you the green light if it reaches the criteria for a guaranteed investment opportunity. You can count on CzechRoof in this respect; it knows the market. The final decision to purchase the apartment is always yours—after all, you will be the one living there. What happens if the prepurchase approval is rejected? First, this means that you were saved from purchasing an overpriced property and that you have reason to believe it was not a good choice. Should you be willing to search for another apartment, your cooperation with CzechRoof would continue. The same prepurchase approval procedure may be repeated until we find a mutually acceptable option. However, should you insist on taking the rejected apartment, your cooperation with CzechRoof would reach an end, and the CzechRoof’s services has been hitherto provided for free.
Buying the apartment
Your allocated CzechRoof real estate agent helps you to purchase the apartment, including the contract negotiation and paperwork.
CzechRoof will offer you the option to enlist the services of a trusted law firm focused on the transfer of real estate at a very competitive price. Alternatively, you can utilize a firm of your choice.
The simplest process is when you have enough equity to buy the apartment, transfer the money, and become the owner. If willing to do so, utilizing a bank loan is usually connected with higher ROI on your own capital.
Should you prefer a bank loan, CzechRoof provides you with an expert financial advisor to arrange a mortgage for you. Doing so in a foreign country is not always easy, so CzechRoof ensures everything is straightforward for you.
Obtaining a mortgage in the Czech Republic requires minimum equity of 10–15% of the property’s value. Moreover, CzechRoof will need your employment agreement, credit history, and other information (likely the same as if you were getting a mortgage in your country of nationality). From an investor’s point of view, a mortgage significantly increases the equity yield.
You are the sole owner of the property. If bank funding is used, an encumbrance on the apartment in favor of the bank exists. CzechRoof has neither proprietary right to the apartment nor any pledge.
Apartment usage obligations
You are entitled to use the apartment as you wish. You have an obligation to pay the mortgage, if applicable. CzechRoof asks you to procure and maintain household insurance for the entire duration of the agreement to mitigate any risk. The house itself is usually subject to insurance procured by the association of unit owners (“společenství vlastníků jednotek”).
You are not entitled to encumber the apartment with any right of third parties other than the rights of the bank/other financing institution related to the mortgage arranged by CzechRoof.
Increasing the value: renovation
You are free to renovate your apartment. Should you believe it will significantly increase the market value of the apartment, CzechRoof is happy to renegotiate the agreement. This will require notifying CzechRoof prior to renovation, including the expected market value increase, and proposing a reasonable adjustment of the CzechRoof fee (see below). CzechRoof does not intend to make a profit at your expense and always prefers a satisfied customer.
You must notify CzechRoof in advance should any of the exit events triggering the CzechRoof fee payment apply.
Selling the apartment
You are entitled to sell the apartment whenever you want, be it while in Prague or after leaving. CzechRoof provides you with a real estate agent to sell the apartment, who takes charge of advertizing it, arranges all communication and negotiation with potential buyers, and organizes viewings to make as easy for you as terminating rent.
Alternatively, you are free to sell the apartment on your own. However, having a CzechRoof expert on your side is always an advantage since CzechRoof negotiates the best possible price given the fee structure (see below). Leaving Prague without the ideal sale price? You can postpone the sale and rent the apartment out while awaiting better market conditions. In the meantime, CzechRoof will provide you with tenancy services, helping you to find a tenant and taking care of all communication with them (tenancy service fee subject to agreement).
There is no need to await mortgage redemption. If you are selling the apartment prior to full redemption of the mortgage, the remaining part and all your duties related to the property will be repaid with the money from its sale.
If you intend to sell the apartment or any part thereof to any third party, CzechRoof has a preemption right, which means that you must notice CzechRoof prior to any transfer of the apartment, including the terms under which you intend to transfer the apartment (such as purchaser identification, price, and payment).
CzechRoof has the right to make an offer to buy the apartment under the same or better terms and conditions as proposed by the intended purchaser. Should CzechRoof not exercise its preemption right, you are free to transfer the apartment to the intended purchaser, provided that the apartment will be sold within a specific time period.
CzechRoof takes its fees at very end of our relationship. When you sell the apartment, you share 25% of the increase of the apartment’s value with CzechRoof; your yield is calculated at the sale price minus the purchase price.
Therefore, CzechRoof only makes a profit when you do. That is why you and CzechRoof are partners with the same goal-no prior or hidden payments apply.
Moreover, to prove CzechRoof truly believes in its expertise, CzechRoof also participates in potential losses; if the sale price is lower than the purchase price, which means the investment was unprofitable to you, CzechRoof pays you back 25% of the loss.
Other ownership modifications
The apartment’s ownership circumstances may change without a sale in certain exit events, such as a donation, investment, succession, divorce, or inheritance. In this case, you will be obliged to pay CzechRoof a fee corresponding to 25% of the apartment value’s increase (compared to the time of your purchase) at the time the ownership is modified. CzechRoof may, at its own expense, arrange for an expert valuation of the apartment to calculate the fee (see below).
Ownership modification in detail (exit events):
- Should your property be inherited, your obligations toward CzechRoof are part of the process; there is an obligation for any heirs to pay CzechRoof a fee, as any change of ownership triggers the payment obligation.
- Divorce always triggers your obligation to pay the fee and terminates the agreement with CzechRoof.
- Donation and succession of the apartment always trigger your obligation to pay the fee and terminate the agreement with CzechRoof.
- Using the apartment as a contribution property or other type of investment always triggers your obligation to pay the fee and terminates the agreement with CzechRoof.
Please note that CzechRoof is always open to discussion and encourages you to ask for individualized terms.
Long stop date
No time limit applies to your apartment’s ownership. CzechRoof will never ask you to sell the apartment. However, ten years on from the date of acquisition, CzechRoof may at its sole discretion terminate the agreement with three months’ notice. This means that the expert valuation procedure (see below) applies and you shall pay a fee.
In scenarios when exit events occur but there is no sale price (such as long stop date, donation, investment, succession, divorce, or inheritance), you will be obliged to pay CzechRoof a fee corresponding to 25% of the apartment value’s increase (compared to the time of your purchase) at the time the ownership is modified. CzechRoof may at its own expense arrange for an expert valuation of the apartment to calculate the fee if your initial offer is not accepted. In this case, CzechRoof´s fee is 25% of the difference between the purchase price and the price of the apartment determined by the expert valuation.
Should you have any doubts, you are entitled to arrange a counter-valuation at any of the “Big Four” accounting firms. Revision to the expert valuation will be decisive, and CzechRoof’s fee will be calculated based on it.
CzechRoof fee payment
CzechRoof’s fee is payable once the sale of the apartment is complete, and you have taken the funds. Should the expert valuation procedure apply, the fee is due after the delivery of the final expert valuation or revised expert valuation, if applicable.
In 2021, an expat bought an apartment using CzechRoof’s services, including mortgage arrangement:
- Purchase price of 9,718,000 (approx. 448,000 USD)
- Approximately 84 m2 (approx. 904 square ft) of living space + garage
- Located in the Prague 3 district
- Mortgage of 8,746,200 CZK (approx. 403,000 USD)
- Collateral of 971,800 CZK (approx. 44,800 USD)
- Interest at 2.01%, fixed for three years
- Monthly mortgage repayment of 32,238 CZK (approx. 1,485 USD)
- Rent of the same apartment was 25,110 CZK (approx. 1,157 USD)
Should the expat leave in five years, the expected selling price will be at least CZK 13,004,876 (600,000 USD). This represents 21.75% annual ROI (considering a lost profit on collateral and discrepancy between the mortgage and rent of the same apartment). See below.
|Monthly repayment (2% interest, annuity payment)
|Progress of property value per year
|Progress of property value after five years
|The rest of expat´s mortgage after five years
|The new selling price
|Difference after repayment of the mortgage = A
|The difference between the buying and selling price
|Contingent fee of 25% for CzechRoof = CR
|A − CR = MONEY FOR EXPAT
|Own capital used at the beginning = OC
|“Lost profit” on collateral if used conservatively (3% p.a.) = LP
|Mortgage repayments for five years = MR
|Implicit costs “if rent and no mortgage is used” = IC
|Cashflow (A – CR – OC – LP – MR – IC)
|Annualized ROI with CzechRoof