INVESTOR CENTER A Sample Purchase
A Sample Purchase
Take a minute and read through this page following John and Mary, who have purchased a 100 m² apartment in district 6. in the downtown area of Budapest. Thomas – a consultant for Capital Real Estate – was helping them with the arrangements.
1. Capital: What motivated you to invest in Budapest?
John: We not only heard about Budapest’s property market in the news and various TV programs but some of our friends already own apartments in Budapest. We wanted to diversify our investments and put our savings into a safe investment with good returns.
Mary: Having talked to friends, I started to look around on the internet to see what John wanted to buy into. Frankly, I was impressed by the architecture of Budapest. The classical downtown, the beautiful parks and avenues have made a good impression so we decided to take a closer look…
2. Capital: What type of property did you look for?
Mary: I always wanted to have a turn of the century classic property. It finally became real when we contacted Thomas at Capital Real Estate, who has impressed us with a selection of these types of buildings. He also helped us look into all available offers and by the time we boarded the plane – we had already selected 6-8 properties from Capital Real Estate's listings that we definitely wanted to look at.
John: Since our goal was to have the property rented out and resell it in 5-10 years we eventually decided to look for a property in a landmark building. The ideal property had at least two bedrooms and had good access to transport. Tom was really a great help in setting the path to make the right choice.
3. Capital: How did the property viewing go?
John: Very well. Having arrived to the hotel, we took a rest and prepared for the viewing. The organization was excellent. Thomas picked us up the next day and we went to pre-arranged meetings to see the properties. We received all information that was valuable to us. At the end of the day we have visited 5 properties and were ready to limit the selection and make the decision the next day.
Mary: It was great to have had some time to relax before the viewings. We went to a nice restaurant in the evening, had a walk in the downtown area so we can have a close look on our “new neighbourhood”. The friendly weather has granted us a beautiful time in the capital.
4. Capital: Did you buy as an individual or as a company?
John: After giving it some thought and doing some calculations we decided to form a company – which was relatively easy and fast to set up. One of the reasons why we bought as a corporation is because we didn’t have to wait for approval and by the way this way we will be able to deduct expenses from our tax.
Mary: It was an easy decision. Thomas assisted us during the whole process and facilitated making the right choice. I was happy we did have someone who was really knowledgeable about local regulations…
5. Capital: What about the purchase process?
John: First we figured out a company name and formed a “Bt” (limited partnership) corporation with my wife. We went to the notary’s office and had our company signature evaluated. Later that day we opened a bank account. As soon as the company was registered at the Court of Registry we headed back to the law office and finalized the purchase contract.
Mary: Though we were not very much in favour of the administrative tasks, I told John it was necessary to get our new property. And it was worth it! We were heading to become the owners of a classic flat!!
6. Capital: How did you schedule payment?
John: We put a deposit on the property when finalizing the purchase contract. After our return from Hungary we wire transferred the remaining funds in 7 days.
7. Capital: What happened after the purchase and who is looking after your apartment?
Mary: Though we haven’t really thought about this before we got to Budapest, it wasn’t a problem at all. Capital Real Estate had all the services at hand. We have soon rented out the apartment and started to reap the immediate benefits of the purchase.
John: We received the official title deed from the law office. We are now starting the process of renovating the property as it is to add more value to capital invested before. Capital Real Estate and their partners are helping us all along the way and we have already received an acceptable offer from them.
• The process begins by viewing usually 6-8 properties that are in accordance with any criteria you have given.
• After a day of viewing's we would sit down and go through the entire list of properties eliminating those that would not be of interest and narrowing it down to 2-3 properties that you would consider purchasing. I would then give my professional opinion on those properties, weighing the pros and cons, until we have picked one that you are 100% sure is right for you and with which you would have no reservations in purchasing.
• We would then put in an offer that is realistic and within reason and we would do our part to negotiate on your behalf, trying to take as much off the initial asking price of the property as possible. We would fill out a Declaration of Purchase Intent form as well as leave 1% non-refundable reservation fee at our main office to secure the property and insure it is not sold to anybody else. This 1% has to be in cash and will also be used towards the total purchase price of the property. In the event that the seller does sell to somebody else (I can assure you this has never happened to any of our clients) then your 1% deposit would be refunded to you.
• The next step would be to visit the law office and begin the process of forming your company or applying for private permit, which can all be done within a day. I would also suggest giving the lawyer Power of Attorney to sign the contracts in your name, as there is a good chance that there will not be time to draw up the contracts and sign them prior to your departure back to your own country. Once the contracts have been drawn up the solicitor would send them to you via e-mail to read through and OK before they would sign on your behalf.
• Contracts are usually finalized in 21-30 days from visiting Budapest although I have had many clients in the past who have had the funds ready to go and chose to finalize contracts much sooner then that. In case of the private purchase the closing date is usually within 8 days after the receipt of the permit (6-8 weeks) It would also depend on the circumstance of the seller if they occupy the property they are selling, as they may need a certain amount of time to move out.
• Within 8 days of leaving Budapest 15% (minus the 1% you had left here) of the property price along with Capital Real Estate's commission and the legal fee would be sent to the legal firms escrow bank account and would only be payable once the sales contracts have been signed. Once sales contracts have been signed both parties are protected. If for whatever reason you should decide not to proceed with the purchase then you would forfeit your 15% deposit and the same applies to the seller who would pay you double your deposit if they chose to not go ahead with the sale.
• Within another 14-21 days (or sooner) the remaining 85% of the purchase price would be sent thereby concluding the transaction. You would then retain full title and deed of the property and maintain exclusive ownership. In case of private purchase this is 6-8 weeks from the signing, because of the permit.
A more detailed description of the purchase process.
1. The first thing that a client must decide upon when thinking about investing in property is how much money they want to allocate to this business enterprise. The relevant properties can be found in the “Property Guide” section on this web site.
2. For clients who do not wish to fly over to Budapest and would like to complete the buying process from their home country we ask the following: Due to the overwhelming demand for prime property by astute investors, Capital Real Estate requires clients to make a €1000 deposit to secure their place in the queue.
IMPORTANT: If the client decides for whatever reason to withdraw from the buying process then the €1000 deposit will be considered a non-refundable fee to cover Capital Real Estate expenses.
3. Capital Real Estate will recommend the choicest properties available in the clients' price range. Since all boats rise with the tide, the appreciation is similar among all properties in the same category, giving the purchaser an opportunity to acquire real estate without the undue delay of having to select a very specific property.
4. A 15% deposit must be made within 8 days into Dessewffy and Partners ' escrow account held in Budapest .
5. The outstanding 85% of the purchase price must be transferred within 21 - 31 days.
6. The acquisition of the property by the buyer is final when the full amount of the purchase price is transferred to the seller. The seller then transfers the keys to the property and the deeds are then translated from Hungarian to English and forwarded to the buyer.
7. Capital Real Estate charges 3% plus VAT for the service it provides the buyer in regards to the purchase of the property minus the amount that the client has sent as a deposit if purchasing from abroad. A further 1.5% plus VAT for properties up to 160k euros and 1% plus VAT for properties above 160k euros is charged by the legal firm Dessewffy and Partners' to draw up the contracts. If the client wishes Capital Real Estate to provide supplementary services such as renting, renovating, managing and eventually selling the property, then additional costs will apply. (Please refer to the “Services” page on our site for more information.)
* V.A.T. is equal to 27% in Hungary (2012)