Short-Term vs Long-Term Rentals in Budapest: Quick Guide

Short-Term vs Long-Term Rentals in Budapest: A Comparison Aspect Long-Term Rental Advantages Short-Term Rental Considerations Duration Stability Offers long-term stability with leases spanning months to years. Short stays mean constant turnover and uncertainty. Target Tenants Caters to residents seeking stable, long-term housing. Focused on temporary visitors with unpredictable demand. Rental Rates Consistency Consistent rental income with lower risk of vacancy. Higher rates but susceptible to seasonal fluctuations. Regulatory Ease Generally subject to standard, more predictable tenancy laws. Often faces stricter local laws and complex tax requirements. Management Efficiency Lower management intensity with less frequent tenant turnovers. Demands high management for guest changes and upkeep. Income Reliability Provides a steady, predictable income stream. Income potential is high but variable and less predictable. Furnishing and Maintenance Often requires minimal furnishing, reducing initial investment. Requires full furnishing and frequent maintenance. Utilities and Services Tenants typically handle most utilities and services, reducing costs. Includes utilities and services, increasing operational costs. Leasing Process Involves standard lease agreements and background checks. Relies on online platforms, subject to service fees and competition. Tenant Relationship Less frequent interaction post-leasing allows for passive management. Requires ongoing engagement with guests for each stay. Operational Costs Lower operational expenses with fewer maintenance and service needs. Higher due to frequent cleaning, maintenance, and service fees. Long-term Appreciation Properties can benefit from consistent upkeep and long-term value growth. Short-term use may lead to quicker wear and tear, affecting property value.

Investor Corner

Investor Corner Useful tool to assist real estate decisions The investor corner is an information centre where you can find general information about Budapest (or Hungary) property purchase, letting and management. These include basic legal advice, financial, procedural information that may help you in decision-making regarding your property or real estate. The information feed is continuous. For detailed, tailor-made information do not hesitate to contact our office. LEGALS of property acquisition in Budapest and Hungary Every sale and purchase agreement has to be countersigned by solicitor or notary public. There is a significant legal difference between solicior and notary countersigning EU citizens can freely buy property in Hungary except for agricultural land People from outside EU have to apply for the purchase through a public administration procedure taking 40-60 days Investors can buy property directly or through shareholds of the company (Special Purpose Vehicle – SPV) holding the property. Establishment of a company in Hungary has become very simple, the procedure can be very quick, your new company may be registered within hours if certain criteria are met Land Registry system in Hungary is transparent, public and title data are available on-line The fulfillment of the terms of the sale and purchase agreement does not automatically mean that you own the property. The registration of the Land Registry Office establishes ownership/title The SPV can take ownership of property without the requirement of registering with the Land Registry Office The managing director of the Hungarian company has to have a tax number in Hungary COSTS of property acquisition/direct or SPV The average applicable stamp duty when buying property in Hungary is 4% of the gross price. The legal fee ranges between 0.5-1% depending on the price of the property Land Registry administration fee is 6,600 HUF for each property In case property is bought through an SPV, monthly accountancy fee ranges between 15-30,000 HUF depending on the business activity of the company Company setup legal fee ranges between 40,000-100,000 HUF and administration fee is 100,000 HUF for a limited liability company COSTS of property letting and property management Letting agencies charge 8.3-12% for a 1-year lease of residential property in Budapest or Hungary and can go up to 16.6% in case of long-term lease of non-residential property Management fee is typically 10% of the rental income and furnishing is not included in basic management contracts LEGALS of property sales It is the buyer paying the solicitor Typical amount of deposit paid is 10% of the overall contracted price of the real estate In case the buyer breaches the contract he looses the deposit, if the seller breaches the contract he has to pay buyer the double of the amount of the deposit When selling price is not paid in one amount, the title is retained and held back until last payment and this is registered with the Land Registry Office The seller must make certain that the buyer can take possession and ownership of the real estate free and clear of any impediment (utility, house charges, mortgage, etc) In case SPV sold the property is loses its function but has ongoing costs therefore it can be deleted through a voluntery wind-up procedure, which can take 3-4 months. This requires legal advisory and accountancy work and eventually the Court of Company Registration will delete the company.