Advice on purchase of 2nd Budapest property

[rekhib]

Hi there,

I've just discovered this resource, it's absolutely fantastic, wish I'd found it sooner.

So, a few years back I purchased a classical apartment in Budapest (District V.). All is well with the investment; management company are reasonably competent, ROI is adequate, building hasn't fallen down &c. As a result, I wanted to invest in a second property in Budapest but I've come across a number of different sources that offer conflicting information on the subject which I was hoping people here might be able to clarify. I'll just throw out a few questions and if anyone can answer any/all, I'd be very grateful:

Firstly, is it true that a foreign private individual (I'm Irish) can only own 1 property in Hungary? I've seen this in many different places but the Hungarian government website doesn't seem to actually say that; in fact, it mentions the phrase "...foreign private or legal persons may acquire the ownership of any real properties except arable lands..." without many caveats. I wonder is refusing permission on owning more than one property maybe a de facto practice that isn't actually written down anywhere.

Secondly, if it is true that foreign private individuals can only own 1 property, I presume the other way is to establish a Hungarian company (as, again, please correct me if I'm wrong, an Irish company can't hold Hungarian assets?). If that's the case, how does one attain financing for the purchase of the second property as I've been told, from about 5 separate sources, that Hungarian banks will not lend to Hungarian companies whose sole purpose is to acquire property.

Based on the information that I have (which is limited ;-) ), the only way I can see forward is to raise the capital in Ireland as an individual and purchase through a Hungarian company but then all my equity is really tied up because 1) the Hungarian banks won't lend money to the company and 2) I doubt AIB, BOI, NIB would feel any different! That wouldn't leave me in a very positive position for potentially buying a third property.

Apologies for all the 'ifs' and 'buts', I'm finding it very hard to get my head around! If anyone has anything to offer up, as I say, I'd be very grateful.

 

[budapest]

You can purchase two apartments in Budapest as a private individual. I know of many people who have done this. Three properties might be pushing it, but I also know some investors who managed this.

Alternatively, you could set up a Hungarian company to purchase further apartments here. You should be able to secure financing in Hungary. There are much fewer restrictions now than in the past in relation to this.

 

[rekhib]

Hi Budapest,

Thanks for the information, very encouraging altogether. Apologies for the continued barrage of questions; is there anything I can do, in your experience, to increase the likelihood of getting approved for a second property purchase as an individual? For example, are they more likely to approve the purchase if it is in a different district? I haven't been able to find any formal information on why the authorities would reject or approve a specific purchase. Given that, I think it would be appropriate to purchase the second apartment as an individual and then move both apartments into a company if I was to purchase a 3rd.

Thanks again for your help, very much appreciated.

 

[UrbanDev]

I never heard about a 2nd property being refused, and also a 3rd is not a problem.

I've purchased 2 apartments in Budapest last year (in the same month, in the same district) and I did not have any trouble doing so.
Now I prepare to buy a 3rd, and following my lawyer who has a lot of experience with the matter, this will be no problem either. Different of his clients did so, without the least of problems.

As Hungary is part of the European Union since 2004, there will be no limitation of "free movement of capital". The current restrictions are part of the transitional exemptions granted to Hungary for 5 years (until May 2009).

[broken link removed]

Here you can find some more background info on the transition period.
http://www.fao.org/docrep/009/a0464e/A0464E05.htm

Here you can find a fact sheet Hungary published when they entered the EU.
[broken link removed]

 

[plotman]

Hi Budapest,

Thanks for the information, very encouraging altogether. Apologies for the continued barrage of questions; is there anything I can do, in your experience, to increase the likelihood of getting approved for a second property purchase as an individual? For example, are they more likely to approve the purchase if it is in a different district? I haven't been able to find any formal information on why the authorities would reject or approve a specific purchase. Given that, I think it would be appropriate to purchase the second apartment as an individual and then move both apartments into a company if I was to purchase a 3rd.

Thanks again for your help, very much appreciated.

 

[plotman]

I have 3 properties in my name ,and have been told by my brief that there is now no limit?

 

[budapest]

rekhib, you should talk to your accountant about what the best option might be for you financially. If you plan to own several apartments, you might find a company to be more efficient. If you sell your apartments to your company later, you may have to pay stamp duty twice.

Urbandev, those figures are interesting! I hadn't seen them before.

 

[rekhib]

That's a wealth of information folks, thank you so much. It's amazing the conflicting information you can find out there, probably as a result of people creating "half-information" websites.

I agree that in the medium/long term, it would probably be more efficient to purchase using a company, however, that's another area where I have found it very difficult to attain any reliable information (maybe I'm just really bad at finding information ;-)). I have received professional advice to the tune of "the banks won't loan money to a company for the purpose of real estate investments" simply because the banks don't have first dibs on the property if the company goes belly up. I assume of course this is different if you have a diversified trading history, i.e. if you are a manufacturing company which wants to buy its warehouse.

Has anyone been able to attain financing from the Hungarian banks for their company to purchase real estate? The company is a bit more of a moot point now that I know it's possible to own more than 1 property as an individual. Thanks again folks, you've been a great help.