hungarycommercialproperty.com

We all understand the basic OPM approach for investment property: Get some investors together, pool their money, buy a property together, and get a piece of the action for selecting and managing the property. This is a time tested method for growing a portfolio of commercial properties and a (nearly) passive income stream.? But this is not the only aspect of OPM in commercial real estate.

I was contemplating the economy, increasing interest rates, slowing real estate sales, and the possibility of us being in a real estate market “top” when I thought about how to protect myself against a potential fall in prices.

Want to know more about this multi-cultural country? or are you even thinking of buying a property in hungary? This article is complete with all the information you need when in the process of acquiring a property in Hungary.

At best, Hungary is a paradox and hard to understand from the investment point of view! This landlocked country has some of the best tourist spots, yet tourism has not attained the peak it should have. Hungary is one of the fastest growing economies in the EU, yet the property stock in real estate has yet to expolde. We’ll try to understand the country a little better and hopefully, after reading this article, you will appreciate why property investment in Hungary is one of the best options in the EU.

Attractions of Hungary

Hungary is a multi-cultural destination, with a tinge of many cultures left behind from its former rulers. At different eras throughout history, the country was ruled by the Magyars (a Finno-Ugric tribe that arrived via Russia in the 9th Century), Arpad Dynasty, and Mongols. The multiculturalism is also attributed to the shared borders with countries like Ukraine, Slovakia, Romania, Croatia, Austria, Slovenia, and Serbia.

Since Hungary is a landlocked country, the Ocean tourism is a non-starter. However, this doesn’t mean that the country has dearth of tourism potential. In fact, one of the highlights of Hungary is the water-features dotting the country. Lake Balaton is known for its hot medicinal springs. The River Danube runs in the middle of the capital city of Budapest, and divides it into two parts – ‘Buda’ and ‘Pest’. The River Tisza is regarded as one of the finest rivers in Europe for fishing.

Hungarian vineyards, orchards and National Parks offer a special treat for the visitors in this country. Hungary is also known for being home to internationally acclaimed writers, artists and musicians due to its rich history and culture that promoted intelligentsia to the hilt. The modern Hungary, including the capital city of Budapest, will welcome you with trendy nightclubs, bars and discotheques.

The B

If you’re looking to invest in commercial property (shops, offices etc – not ‘buy to let’ residential) you currently have a couple of main options (apart from buying the whole property itself).

Perhaps the easiest option to consider is one of the 20 or so collective funds that invest in the sector. You really do need to do your research and understand exactly what you’re investing in. What you’ll find is that some funds invest directly in property whilst others invest in the shares of property companies (with the latter being more volatile).

On 1 January 2007 there will be another way to invest. Real Estate Investment Trusts will be launched and about 15 property companies (such as FTSE 100 company Land Securities) are expected to convert to REIT status. REITs will be similar to funds that currently invest directly in property, with sizeable portfolios of assets in the UK and, for some, worldwide.

But why are REITs being introduced?The main reason is that there will be generous tax breaks for the property companies. REITs will not have to pay income or capital gains tax on the returns produced by their property portfolios, so long as they distribute most of their profits to shareholders via dividends.

Investment Property Databank reports that property has produced average annual returns of 15% over the past 5 years, although Aberdeen Asset Management expects gains to fall back to 4-5% pa over the next few years.

So, should you consider investing in commercial property?The simple answer is yes, as long as you approach it the right way.

The first step is to pool together all your current investments, including pension funds, PEPs, ISAs and any other equity based holdings.

You then need to analyse where your money is currently being invested. What you’ll probably find, especially if you’ve purchased a number of investments over the years, is that your money is invested in a number of funds. You may even have money in a property fund already.

The next step is to organise your ‘asset alloaction’. What this basically entails is making sure your investments are split (percentage wise) in line with your risk tolerance and the potential return that you are trying to achieve.

The main asset classes are Property, Equities (Shares), Cash and Bonds.

So, for example, if you are happy to assume more risk with your investments you may have an asset allocation that looks something like this:

Bonds – 17% Property – 10% Equities – 70% Cash – 3%The equities would be spread across large and small capitalised shares, UK, International and Emerging Markets.

The final step would be to choose the appropriate tax wrappers (ISAs, pensions etc). If you already have a number of investments it IS possible to alter the underlying investments whilst maintaining the tax wrapper.

The Financial Tips Bottom LineSome investors totally ignore (or are not aware of) asset allocation. After all, wouldn’t it be strange if you were buying a new car but you weren’t allowed to know the size of engine, colour, features etc.

They forget to look ‘under the bonnet’ and make decisions without all the facts at hand.

When you’re next investing (which could be next week if you’re investing on a monthly basis) make sure you look at all the facts, set up your asset allocation and increase your chances of a successful ‘investment experience’.

Hungary Commercial Property.

A Commercial Lender is Not a Commercial Lender When it is a Bank
A commercial lender offers loans backed by hard collateral, usually real estate. Usually a commercial lender’s lending criteria will be less stringent than at the local bank. This is because most banks focus on providing private residential financing for individuals of the local community, not large amount loans for real estate or commercial property acquisition. Most commercial lenders are not so much concerned with the borrower’s financial record and qualifications as they are about the mortgage property value.

Unlike most banks, commercial lenders are able to provide a loan in a short amount of time-usually within several weeks depending on the mortgage terms. Commercial lenders also offer a wide variety of loan products. Perhaps the most popular of these products is the bridge loan. Bridge loans are most often used to take advantage of time sensitive real estate opportunities or to avoid foreclosure.

A Commercial Lender is Not a Commercial Lender When it is a Commercial Broker
Sometimes a commercial broker will pose as a commercial lender. The difference between the two is that a commercial lender actually provides money, while a commercial broker provides a convenient way for borrowers to find lenders. In most cases where a broker is used, there is no direct contact between the borrower and commercial lender. Indeed, from the broker’s perspective, this would be a bad thing since they profit considerably from middleman fees charged to the borrower. So why are commercial brokers in business? By and large they are much more effective at advertising to potential borrowers than commercial lenders. Commercial brokers also provide the infrastructure necessary to carry out loan transactions. However, with more and more business being done over the internet, their chief value-add is their knowledge of, and access to, a long list of commercial lenders.

With more commercial lenders marketing themselves all the time, the value of brokers may diminish significantly in the near future. There are several significant advantages to having direct access to a commercial lender: 1) No broker fees. ‘Nuf said. 2) Timely answers. Direct communication equals direct answers to your questions. A commercial lender either can, or cannot provide you with a loan-there’s no incentive for them to waste time trying to figure out if you qualify or not. A broker, on the other hand, will often times spend considerable time finding what deal is best for them by going from direct lender to direct lender. If a commercial lender can’t help you, they will be able to tell you what other lender can. 3) Timely closings. By working directly with your lender, issues can be resolved, questions answered, and loans closed. Loans options not offered through a broker may be available by going directly to a commercial lender.

What’s the Trade-Off of Using a Commercial Lender?
Because of the quick turn around and conveyance provided by bridge loans and other high-risk commercial lender loan products, rates can be higher than at a bank. If you have the time and the financial qualifications, you might be best served at your local bank. However, commercial lenders are a great option for people with ‘near-bank’ loans, in other words, loans that were almost approved by the bank. With so many potential lenders available, it may seem a little daunting to find an option that works for you. Many times the only significant factor that sets two commercial lenders apart is the quality of their customer service. Traditionally, the commercial loan market is notorious for being short on professionalism. Find a lender who is willing to take the time you need to understand the details of your loan.

Hungary Commercial Property.

Thinking of buying a property in Hungary? Then you need to read our useful guide to buying a property in Hungary. Complete with useful country information and links to estate agents website and an insight in to the buying process of acquiring a property in Hungary.

Overview

Of the ten newest members of the European Union, Hungary has the fastest growing economy. As a result, those foreign nationals that took advantage of the liberalization that has begun to occur in the real estate laws of that country have enjoyed a profitable status over the course of the past three years.

Interestingly, the largest block of foreign nationals that are purchasing real estate in Hungary are from Ireland. The remaining groupings of foreign nationals tend to come from some of the other European Union nations.

The Hungarian national government has made a consistent and concerted effort to attract foreign investment into that country. In this regard, the government of Hungary has worked deliberately to liberalize the real estate laws in that country to make real estate investment and other types of economic involvement in Hungary more attractive to foreign nationals.

Investment Property in Hungary

Many foreign nationals have joined together with Hungarians in a whole host of different types of real estate investment enterprises. These trans-national joint ventures have been found in a wide array of different types of real estate holdings. For example, multi-national partnerships have been formed in the industrial, commercial and even residential real estate arenas.

Most real estate analysts that are familiar with Hungarian real estate market recommend that a foreign national interested in investing in real estate in Hungary should look to older properties in more established neighborhoods or zones. This recommendation holds true whether a foreign national is seeking to invest in commercial or residential real estate.

These real estate experts and analysts are reporting that the appreciation of these older properties are appreciating significantly, after undergoing a modest amount of rehabilitation after being purchased. Indeed, these analysts report that the value of these older properties — both commercial and residential — are appreciating upwards to 30% annually … an incredible return.

The Hungarian capital of Budapest has derived the greatest amount of foreign investment in real estate in the past decade. Because the Danube River runs right through the city, a river that is an important European waterway, the capital is a natural for real estate and related types of investment.

Residential Property in Hungary

When it comes to single family homes, as has been touched on previously, those homes in more established neighborhoods — older properties — generally are more solid investments for a foreign national. The value of these properties — following even only a modest amount of remodeling work — rises a substantial amount each and every year. Currently, the value of these types of house is increasing in value at the rate of 27 to 30% each year.

There are some newer housing developments on the drawing board and under construction in different parts of the country. While there are some attractive points to these properties, as a rule, these homes — once completed — simply are not appreciating in value as are the older residences .

Residential Real Estate – Apartments in Hungary

The demand for apartments in Hungary is very strong in this day and age. Foreign nationals make up a considerable portion of the number of people who can be found purchasing apartments in Hungary during the course of a given year. Additionally, and interestingly, the Irish make up the most significant block of foreign nationals who are buying apartments in Hungary.

For the most part, foreign nationals have be found investing and purchasing apartments in the more major cities and urban areas in the country. With the entry of Hungary into the EU, coupled with the strong economy of the country in recent times, a growing number of foreign nationals are drawn to the company for economic and business reasons and purposes.

In this regard, when foreign nationals are found to be entering Hungary for business purposes, these men and women are taking to purchasing apartments for their housing needs. In the brisk apartment market in Hungary, the costs associated with these units is moderate when contrasted with similar apartments in other cities in Europe. Indeed, apartments throughout Hungary generally are classified as affordable when contrasted with the overall residential real estate market in the European Union in the 21st century

Holiday Property in Hungarian Holiday Resorts

In many ways, the 21st century has represented the true dawn of the tourism industry in Hungary. During the 20th century, tourism really was not a top industry in Hungary. Indeed, not that many people around the world included Hungary on their list of must-visit countries.

Since Hungary’s passage from communist control, since Hungary broke free of the Soviet yolk, there has been a significant increase in the number of people who now are making Hungary a destination point for holiday travel. Many people are beginning to appreciate the true historic splendor that is Hungary.

A number of foreign investors have come together in the development of resort properties for travelers to the country. In addition, a growing number of foreign nationals (again, with the Irish coming in at first place) have taken to buying apartments which are being rented to travelers who intend to spend an extended period of time in Hungary.

Not only are these apartments being developed in the urban areas of the country, but a number of such developments have been undertaken in some of the more rural areas of Hungary. Many foreign nationals have found themselves attracted to the placid lifestyle and serene beauty of these more rural regions in the country.

Specific Steps to Buying a Property in Hungary

Hungary left the Soviet and communist era behind with a much stronger economy that had other nations that formerly were kept behind the Iron Curtain. As a result, Hungary has continued to enjoy an economic advantage over many countries in Europe in recent years. Most financial analysts and economic experts maintain that Hungary will enjoy a GDP that will exceed by 50% annually over what is being experienced in other EU nations over the coming few years.

One sector of the overall Hungarian economy that has been experience significant growth and activity is the real estate market. Thanks to efforts made by the Hungarian government to liberalize and streamline its real estate laws, including those laws that pertain to foreign ownership of real estate, more and more foreign nationals are investing in Hungary.

Historically, foreign nationals could not invest in real estate in Hungary. However, at this juncture, a foreign national can invest as an individual in real estate in Hungary. With that said, prior to making the purchase of real estate as an individual, a foreign national must obtain permission from the Hungarian Land Registry to purchase real estate in that country. Again, this step must be taken only if a foreign national intends to hold title to real estate in Hungary in his or her individual capacity.

The process of preparing an application for the Land Registry is a simple matter. With that said, there can be up to a month’s wait before the Land Registry will act on an application to purchase real estate.

Some foreign nationals forgo the Land Registry application process by establishing a limited liability company in Hungary that can take ownership of real estate without the requirement of registering with the Land Registry Office. A competent lawyer in Hungary can complete the documents necessary to create a limited liability company within a day — and can have them filed immediately with the appropriate governmental authorities.

Once a foreign national determines which route he or she will take in regard to the purchase of real estate in Hungary — with as an individual or through a limited liability company — the next step in the real estate sales transaction process is the execution of a preliminary sales agreement. Generally the buyer is obliged to post a deposit at this juncture, usually in the amount of about 10% of the overall purchase price of the real estate. After the initial agreement is signed, the buyer embarks on obtaining his or her financing while the seller makes certain that the property is capable to being legally conveyed to the buyer, makes certain that there are no legal encumbrances attached to the real estate. The seller must make certain that the buyer can take possession and ownership of the real estate free and clear of any impediment.

The last step in the real estate sales process is the execution of the final sales agreement and the conveyance of the deed from the seller to the buyer. The deed will then be registered with the Land Registry Office which will make necessary changes in the legal records pertaining to the property to reflect the new ownership of the real estate.

Overall, the real estate sales process in Hungary has become significantly easier to undertake in the course of recent years. Whether one is proceeding as an individual or through a limited liability company, a foreign national can purchase a wide range of different types of real estate in the country in the 21st century.

Property Abroad always recommends using a Solicitor or Lawyer.

Hungary Commercial Property.