Property Management Services in Budapest

Question to Ask about Budapest Property Management

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Reliable and transparent property management in Budapest is unique and strongly demanded, however, Budapest property investors know a little about residential service standards with price references and their description. What does a Budapest property management company actually do? What does utility management mean to both home owner and tenant? How meter readings are registered and invoiced by service providers? How regularly utility bills are to be arranged? How and Where apartments to let are marketed? How lease terms and conditions are agreed on? How does tenant move in and collect keys to Budapest apartment? How and When inventory list and apartment are inspected? How rent is collected and managed by Budapest property manager. What does day-to-day management means to both home owner and tenant? What does Tax Return in Budapest mean to Home Owner? What to do with tenant who is under financial pressure? What is the short overview of handing over the apartment from tenant when lease is expired? How to extend the lease in Budapest? What to do with illegal business behaviour and financial corruption by Budapest property manager? How to switch to a reliable and transparent property management company in Budapest?

Deeply comprehensive answers to questions from the reliable and transparent property management company in Budapest.

Budapest Property Management – Facts & Illusions

Certified property management is legally not obliged in Budapest. Like other property services in Hungary, property management was also born in early of 2000 when foreign investors focused on Budapest property market with massive demand for buy-to-let apartments. Without any real experience or professional educational background, the very first property managers were amateur estate agents who provided after sale services for investors’ satisfactory. Some agencies had seen an easy and soft money opportunity when naive investors asked them to refurbish and furnish properties in Budapest. They, therefore, set up a property management department/division that handled all issues from project management (refurbishment and furnishing) to rental and letting. Intransparent service model with renovation/furnishing package prices without official financial statements were widely accepted and used in Budapest against investors who were not really concerned with. Thousands of investors were pleased and happy to work with property managers on corrupted business manner. How could that happen?

First, unprofessional investors tried to trust in the first person who was helpful and co-operative with them. Second, these investors had no any idea about Budapest project charges in terms of re-decoration and furnishing. Third, they were blind due to sweet words said by ‘lovely’ agencies about irrational rental potentials and capital appreciation. Let us have a look at typical example from 2000-2005:

1.     Investor purchased a classic apartment (option for renovation) through 'reliable' agency over market price

2.     Renovation was promoted with smart added-value in both rental and re-sale potentials

3.     (Low-quality) renovation budget with hidden charges (20%-40%) accepted by investor

4.     (Fairly simple) furnishing budget (from IKEA, for example, usually without any inspiration) with hidden charges (30%-50%) accepted by investor

5.     Happy and satisfied investor when apartment was renovated and furnished

6.     One receipt received (if any) but breakdown list of financial statements were not available

Those people who renovated and furnished the apartment with one agency they overpaid with 2-3 millions of HUF (8K-12K Euro) at least (or even more). That corrupted model with corrupt agencies, who sold the apartments over the odds, made Budapest property investment unprofitable because both rent and capital appreciation was eaten by greedy agencies (thanks to package prices). But Budapest was energised with international property shows that helped investors to be confident in what they were told by elegant ladies and gentlemen with ‘honest’ smile.

The main point – capital growth – was fairly manipulative because agencies did not say a word about local market. The artificial appreciation on capital was generated by foreign investors who were happy to pay higher and higher price for Budapest properties. The gap between local and foreign market is Budapest was as wide as 10%-30%. Now, we can see what has happened when local and foreign market merged in 2008/2009:

-       overpriced purchasing price (dodgy prices)

-       unfair administration charges collected from buyers (2K Euro or 3% of purchasing price in some cases)

-       overpriced renovation (below basic standards)

-       overpriced furnishing (low quality and design service)

-       global economic changes met recession in Hungary (political and economic instability)

That was the environment where property management service had to be developed in Budapest. With very strong association with real-estate agencies, property managers set price standards such as

-       management fee a month: 10% + VAT based on monthly rent

-       fixed management fee a month during vacancy period: HUF8,000 + VAT

-       finder’s fee: 1 month’s rent (+ VAT is also common)

-       initial charge: HUF20,000-HUF30,000 + VAT

-       expense buffer: €300-€600 (a kind of security deposit for maintenance and service charges)

-       assistance in maintenance: 10% + VAT based on service charge (overpriced services)

-       project management without transparent features: 10% + VAT based on project budget

From 2004 when the first new built residential properties were handed over, management companies introduced technical inspection and handover charges:

-       HUF50,000-60,000 + VAT

On behalf of investors, property management companies inspected the apartment before final handover taken place. Unfortunately, defects and snags were not in focus but furnishing packages immediately priced and forwarded to investors. Money making attitude without real consequences was (is still) what property managers has integrated into all type of residential property services.

From 2006, tax issues with tax return was a new element in property management. In general investors did not pay tax on rental in Hungary against double taxation agreement between Hungary and local countries. Unprofessional advices, different explanations and tax rate references were communicated to investors who were puzzled with how to pay tax on rental income in Hungary.

The first misinterpretation from 2005/2006:

-       25% of flat rate without any deductable charges

-       Payable on annual basis

-      That was absolutely not true but an easy way of collecting service charge without extra effort

-       Flat rate option was just only one of the three option of how to pay tax on rental income in Hungary

-       Income tax is payable on monthly basis or quarterly (special terms and conditions)

It is now more widely known of how to pay income tax among investors but misinterpretations are not gone:

-     NON-DEDUCTABLE CHARGES in Hungary: furnishing, re-decoration, mortgage interest, travel expenses

-       These charges are usually deductable (fully or partially) in the local countries such as Ireland and the UK, for instance

-     DEDUCTABLE CHARGES  in Hungary: management fee, finder’s fee, utility charges when apartment was standing empty, insurance, little maintenance, accountancy fee

Each management company has different business practice and price for tax management and tax return:

-       annual accountancy fee: HUF50,000 – HUF80,000 + VAT

Nowadays, property management companies are still part of real estate agencies and they still promote furnishing and renovation packages without fitout report and original invoices. What’s more, they still offer maintenance services with hidden charges. Independent and Hungarian owned property management company in Budapest is BPartner Plc only. BPartner has been on the Budapest property market since 2005 with transparent services and fair pricing. Is BPartner the market leader? Is BPartner the most well-known property management company? No, definitely not but growing as usually! Has BPartner been under pressure by negative campaign in Hungary and abroad with phone calls and unethical legal actions? Was BPartner kicked off from other management company’s office when provocative questions with hard talk were hot? Was BPartner discriminated by developer who was not appreciated with honest and fair technical inspection and handover? Yes, indeed! Oh dear, what a coincidence! Other agencies are

-       mostly with Irish, British and Israeli backgrounds

-       integrated into real-estate agencies as special feature for investors

Highlighted the fact is that foreign investors purchased Budapest properties through Irish, British and Israeli agencies and their (Irish, British, Israeli) business partners in Budapest. These buy-to-let properties are mostly managed by Irish, British and Israeli companies in Budapest. Back to the facts and illusions about Budapest, investors were orientated to the ‘right direction’ by these companies with their ‘tailor-made’ service model. What a shame! Where is corruption coming from? Why are Budapest property owners so desperate? Why is Budapest property market frozen? Hopefully, transparency in service will be as vital as property shows were before. Keep your fingers crossed!

Switch to Transparent & Reliable Property Manager

You do not believe in miracles! You do not understand financial statements and reports received from Budapest. You do not receive receipts when asked. You do not understand what is going with utilities. You do not understand why rental income is used up for bills even if the apartment was occupied. You do not understand service charges. WE do not understand why you do not intend to change! It is high time you took the first step unless you got as competitive offer as

-       monthly management charge: 8% + VAT

-       no management applicable when the apartment is standing empty

-       finder’s fee: 1 month’s rent (VAT incl.)

-       no extra finder’s fee when lease terminated within lease period

-       no service charge when lease extended

-       no service charge added on top of maintenance bills

-       initial charge for utility management and handover: HUF25,000 + VAT

-       tax management and tax return: HUF50,000 + VAT

-       utility, tenant and apartment management with original receipts

-       project management with transparent reports and original receipts

Why should you pay more or accept service without professional paperwork?  Why should you be served by illegal business deals and financial corruption? Why should you let your tenant pay rent and utilities without statements and invoices? Why should you miss an opportunity to change? You can make property investment profitable in Budapest. It is not a miracle but honest and proactive attitude with transparency.

Financial corruption in Budapest is more common than you can imagine. Property Management companies usually do not provide professional paperwork with utility and tax statements, that is why, the issues can be addressed as follows,

-       outstanding payments on utility accounts

-       lost security deposit paid by tenant

-       lost rent collected by property manager

-       tax and stamp duty shortfalls

Reliable and Transparent Property Manager is ready for action with immediate effect. It is possible to find out the true figures and get financial issues arranged with managing agent. Recently, as high as 15K Euro negotiated with property management company which ‘accidently forgot’ to update home owner’s account for years. Home Owner was not aware of the real figure but BPartner made things clear for his satisfactory (he is ready to share his experience with whom to is concerned with) Are you in the same shoes? You need us as soon as possible because you have got money to lose every day in Budapest!

Utility and Apartment & Tenant Management in Budapest

Weak point of property management companies that they do not deal with is utility management day-to-day. How professionals do:

-       agreements are made with service providers(electricity, water, gas)

-       administration time: 1-2 months

-       incorrect bills is to be discussed with service providers

-       closing utility bills in case of change in management: within 30 days

-       new meter readings provided to service providers on monthly basis (or when needed)

-       bills are posted to property manager’s office

-       billing on just average usage (appreciated by management companies) are not acceptable neither for home owners nor tenants

-       bills photo copied and recorded in apartment file (for tax and administration reason)

-       original bills are accounted in company in-house accounting system

-       tenant/home owner is invoiced with original bill (posted or emailed)

-       funds collected and then bills arranged with service providers

-       condominium charge and building management in accordance with community rules

-       building management can invoice heating/air-conditioning ,hot/cold water supply charges on monthly basis

-       building management is to be required to provide clear and up-to-dated statements on monthly basis or quarterly at least

-       condominium charge (community charge for basic services and building management) is payable by home owner when the apartment is standing empty

Utility management is a complex and time consuming task which challenges property managers. Professional utility management can save thousands of Euros for home owners in Budapest. Unprofessional property managers like to collect unfair utilities from home owners or ask home owners to arrange tenants’ bills even if they collected funds from them. It is a best practice when re-connection charges/penalty interest (when bills were not paid and electricity/gas company, for instance, cut off services) are collected from home owners. Why should you pay bills when property manager is in charge? Utility management is the key issue in Budapest property management.

Apartment management is part of rental procedure when apartment to let needs to be ready for occupation at any time (or keep apartment’s condition outstanding during rental). Regular inspections and small maintenance needed for success.  Tidy and organised apartment with cleaned interior are offered to potential tenants. Ground rent (utility charges when apartment is standing empty) might be increased with regular cleaning charges as well. Inventory list as well as the apartment condition is carefully and double checked when the apartment handed over to/from tenant. None of tenants can collect keys from a reliable and transparent property manager unless inventory list and meter readings inspected. Keys are handed in to tenant only, alternative options are not available for security reason.

When tenant is in situation, paperwork and financial issues are to be arranged first. None of tenants can move in unless lease agreement and security deposit with one months’ full rent arranged with property manager:

-       security deposit: 2 months’ rent + one month’s utility deposit (because utility is the first thing that needs to be deducted when tenant is gone)

-       the first month’s rent is the finder’s fee in general

-       refundable security deposit when apartment is handed over from tenant without damages and financial obligation

-       security deposit non-refundable when lease agreement is terminated within lease period (12 months in general)

-       security deposit is not ready for rent and utility payment unless lease terms and conditions give property manager right to do so

-       security deposit can become rent and utility payment when lease agreement terminated within lease period

Tenants are obliged to arrange rent and utility payments on monthly basis:

-       rent and utility statement provided to tenant on time (end of each month with 7-10 days transfer time)

-       deadline for payments: 10^th of each month

-       15 day delay in rent and utility payment can cause termination in lease agreement with immediate effect due to fixed period lease type (notice time not applicable)

-       unless property manager is able to get financial issue sorted out with tenant, change in lock and move tenant out from the apartment with immediate effect

Professional property manager does not let rent and utility bills unpaid. Why should you pay tenant’s bills? Change in management unless property manager gives you a rent guarantee such as

If outstanding utility payments are higher than 110% of Rent, BPartner is liable for extra expenses. In other words, one month’s rent is to be paid to home owner at least even if collected security deposit was not enough for rent and utility payments.

Is your managing agent responsible for extra charges? When does your agent pay rent less charges?

-       rent less charges are transferred to home owners by 20^th of each month

-       rent payable when tax issue arranged (tax card and tax number)

-       rent payable to Hungarian bank account in general

-       rent payable to local bank account when bank transfer charges are beard by beneficiary

-       transfers abroad taken place in every 2-3 months (cost effective for home owners)

When lease expired property manager meets tenant in the apartment where

-       inventory list inspected

-       meter readings inspected and registered

-       utility bills calculated on the spot (price reference from utility companies)

-       tenant must arrange utility bills up-to-dated before moving out

-       the apartment is to be cleaned and organised

-       security deposit refundable to tenant unless damage on furnishings and property itself occurred

-       keys collected from tenant when financial issues and paperwork arranged with tenant

None of managed apartments handed over from tenants with outstanding utility and rent payment unless tenant was gone. Did you have bad experience with your property manager when lease expired? Do you pay thousand of Euros for utilities in Budapest for nothing? Do you feel yourself ripped off in Budapest? Are you confident in actual property manager is the one you need? Stop lying to yourself! Please make things better...with us!

Letting and Property Rental in Budapest

Budapest rental market is actually small and place where apartments to let advertised is also very limited:

-       agency’s website

-       advertising website

-       newspaper

-       leaflet

-       on the spot

What do agencies do to introroduce a tenant? Which is the most productive way of advertising the apartment? No more illusions please:

-       90% of tenants get in touch with agencies through internet (online marketing)

-       10% of tenants comes to agencies via alternative routes (offline marketing)

Online marketing is the way of finding a tenant in Budapest. Agencies’ website are also important but Budapest property market has only one advertising site where all apartments to let available. Those apartments are marketed online only that are classified at www.ingatlan.com or www.realestatehungary.hu (in English). Those agencies are able to find tenants who have classifieds at this website. Thanks to this, almost all agencies are listed in this website where tenants can easily find apartments to let with photos and detailed description. Free of charge advertising websites are also helpful and able to improve rental potentials but they are less productive than ingatlan.com/realestatehungary.com.

Despite power of online marketing, home owners still believe in the urban legend of the more agency the higher chance for new tenant in a certain period of time. Can you tell us how it is possible on the small market like Budapest where all agencies advertise apartments to let at the same place? Thanks to this attitude, we can find the same apartment with different pricing and rental terms and conditions with very different images advertised by different agencies. How do you know tenants' impressions about this? Do you still believe in miracles? Please mind that some online marketing tools can be more productive than others:

-       classifieds with good quality and realistic images

-       classifieds with relevant number of images (the more the better)

-       classifieds with realistic apartment description and clear rental terms and conditions

If your agent does not care about picture quality and number of pictures and well-designed and easily understandable terms and conditions, your apartment might have longer vacancy period. What else needed?

-       flexible meeting conditions with potential viewers (early morning, late afternoon/evening, at the weekend)

-       professional presentation with cleaned and organised apartment

-       agent who can find out what tenant needs

-       agent who is able to negotiate about price and rental terms and conditions

-       agent who is able to prepare professional lease agreements in Hungarian and English

-       agent who is able to act on behalf of you to maximise your rental potentials in Budapest

-       agent who is confident in communication and negotiation under pressure with students as well as multinational companies

Despite having said that, Property Managers prefer their insider letting agents because Property Mangers are responsible for apartment and tenant opposed to outsider agencies that have no any liability for tenant's behaviour during lease period. Letting agencies just collect the finders' fee and never look back. This real risk is never elliminated when outsider agent involved in introduction to new tenant. When it is possible, BPartner screen tenants and do not accept any offer for quick success. Good and Reliable long term tenant much appreciated eventually.

These are the classic mistakes when apartments are advertised with:

-       images of untidy apartment

-       images of irrelevant places (such as toilet)

-       images of irrelevant parts of rooms (you do not see how the apartment looks like)

-       low quality images

-       small images

-       not recently taken photos because the apartment looks worse than before

If you let your agent do marketing in the way above, vacancy can be extremely long. It is very important to have new photos of property even if it looks worse. Tenants will be concerned with fake photos and they do not rent anything from property manager. Because online marketing is just the way to get viewers while the apartment and agent can generate cash for you through luck with tenant. Again, do not believe in miracles if your apartment

-       looks ugly

-       is under today’s standards in interior design and furnishing

-       is dusty and disorganised

None of agent will have any luck with tenant unless the apartment itself is desired by tenants in Budapest.

Pricing, of course, is a crucial point of property marketing:

-       realistic and achievable rent

-       do not believe in rent review when achievable rent has been decreasing in Budapest

-       encourage your agent to be honest with you when asking rent discussed

It is a classical attitude that agencies are talking about sweet rental potentials because they feel themselves under pressure

-       home owners usually chose the agency which sets higher rent

-       home owners usually do not want to hear anything about decrease in rent

-       home owners usually blame to agent when the apartment is standing empty

Please open your eyes and listen to honest and reliable agencies as well. Otherwise, you will chose the agency which is more optimistic (or unrealistic) because you prefer to hear positive news. It is a best practice in Budapest when agencies easily set optimistic rent for home owners’ satisfactory just because get their apartments listed. A couple of weeks/months later they will decrease the rent to get the apartment rented. People prefer to hear  bed news and good news separately.

You should understand that sweet words will become salty very soon in Budapest. There is no rosy world in Budapest when vacancy period can be more than 3 months. Rental market is suffering from oversupply in furnished apartments where unrealistic rent is no way to be achieved. Please do not believe in miracles anymore! Market will punish you rather sooner than later.

Tax Management with Tax Return in Budapest

This is definitely a controversial topic in Budapest. Clear and short overview in public from the professional for investors who are concerned with

-       Tax registration for tax card and tax number: within 2 weeks

-       Tax Office particularly for foreigners opens on Monday and Wednesday

-       Tax card is posted to BPartner’s office (tax number for property rental in given at the first meeting with Tax Office)

-       Home Owner is invoiced with rent (tax incl.) by BPartner

-       BPartner collects tax deposit of 18% on monthly basis

-       BPartner pays tax deposit to Tax Office on monthly basis( APEH )

-    Tax deposit is to be higher than actual income tax (that we do not know in advance due to deductable charges)

-       Refund available from Tax Office in Hungary

-       Tax Office makes a transfer to Hungarian bank account once a year

Tax Return is to be submitted by 20^th of May in each year:

-       Taxable Base = Total of gross rent less Total of Deductable charges

-       Income Tax Deposit= 18% of Income