The real estate market is now doing well in Budapest on the back of strong real wage growth and lowered interest rates. Additionally, Trump’s victory is Orban’s victory which should consolidate Hungary’s position within Europe after a few years of constant battles with, and withheld funds by, the EU.
Meanwhile, another battle is brewing. Orban signed a $5 billion deal with the UAE to completely redevelop an area of Budapest, which would include the building of Europe’s tallest skyscraper. The opposition, which controls the city of Budapest, is trying everything it can to block the project. It would rather build affordable housing.
If the project were to go ahead, I would expect the areas surrounding this “Mini Dubai” to surge. You can find out more in my analysis of the Budapest real estate market.
Meanwhile, there is still beautiful historical real estate for sale in Budapest. My buyer’s agent Benedek and I did a few ROI case studies of some beautiful apartments.
This is why I love Budapest real estate – because one can buy and own history.
To a World of Opportunities,
The Wandering Investor.
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Transcript of “Buying historic property in Budapest – full rental yield and ROI calculation”
LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from The Wandering Investor. Today, we’re in Budapest on a very sunny day, together with Benedek, who’s going to show us some apartments here in Budapest. And we’re going to be doing all the ROI numbers in detail. Benedek, tell us about the first apartment.
Budapest luxury apartment tour
BENEDEK: Hi, Ladislas. This first apartment is on the Andrássy Avenue, which is said to be the Champs-Élysées of Budapest. It is a high-end apartment. It is designed in a sort of classic Budapest way. And this is an apartment which is good for people who want to buy a piece of Budapest and either rent it or use it for themselves. And you will feel like you are in the middle of the city in a fantastic top floor apartment.
LADISLAS MAURICE: Cool. I think the comparative here is it’s a bit over €5,000 a square meter, which is not cheap-cheap for Budapest, for sure, but you want to compare it with prime in Western cities, and then you can see the difference in value that you get. When was this building built?
BENEDEK: As many Budapest buildings, these buildings also older than 100 years. It was built somewhere around the end of the 19th century.
LADISLAS MAURICE: Beautiful.
BENEDEK: Especially so in the Andrássy Avenue surroundings, buildings are well taken care of.
LADISLAS MAURICE: Yeah. And this is a typical Budapest elevator?
BENEDEK: It is, very much so.
LADISLAS MAURICE: It’s not the prettiest, but this is how most elevators look like in Budapest. All right, let’s go.
BENEDEK: Please, get inside. This is a two-bedroom apartment on 79 square meters. It has one bathroom, but it’s very spacious and comfortable.
LADISLAS MAURICE: And the price tag?
BENEDEK: The price tag, you can get this in Budapest right now for approximately €420,000, which seems a bit pricey compared to normal Budapest prices, but this is the top of the top of what Budapest can offer.
LADISLAS MAURICE: It’s hard to find nice renovations in Budapest, one, and two, this is Andrássy Avenue.
BENEDEK: Exactly. And it’s a top floor apartment in a nice building. It’s very rentable. We are in the diplomatic quarter here, so probably you will get a good tenant that works on one of the embassies around here.
Budapest long-term rental yield calculation
LADISLAS MAURICE: What would be the monthly rental price?
BENEDEK: The monthly rental is estimated to be somewhere around €1,800 per month. And the costs are approximately 10% of management fee and tenant finding commissions. All the costs come to, yearly, €5,000, which takes us to approximately 3.5%, 3.7% net yield pretax.
LADISLAS MAURICE: Yeah, okay. And property tax is how much?
BENEDEK: Property tax, US viewers will like it. [laughs] Property tax here for this unit is approximately €800 per year.
LADISLAS MAURICE: Per year. That’s if you rent it out. If you’re registered here?
BENEDEK: If you are able to get some kind of residency, even temporary in Hungary, then you can register your Hungarian address on this apartment, and then you will be exempt of property taxes.
LADISLAS MAURICE: Yeah, this is quite interesting.
BENEDEK: Here is the living room with a nice view on the Avenue.
LADISLAS MAURICE: Yeah, there’s a view of Andrássy. Again, €5,300 a square meter, not the cheapest. What do you think the negotiation ranges here?
BENEDEK: For an apartment that is completely turnkey like this, I would say no more than 5% usually, because people are moving on apartments like this.
LADISLAS MAURICE: Yeah, so it covers essentially the transfer tax and the legal costs.
BENEDEK: Yes. Long story short, you can calculate with the asking price and the negotiated part offsets the connecting cost to the purchase.
LADISLAS MAURICE: Okay. In the numbers, you put that the average tenant turnover is about 18 months?
BENEDEK: Yes, the average tenant turnover is 18 months, but like I mentioned, here, you probably will get a diplomat tenant, so they will probably stay longer, so your yield can be even higher than that.
LADISLAS MAURICE: Yeah, typically, diplomats, you’re looking at three to four years on average that they stay somewhere on assignment. I mean, we’re very close to the Russian embassy, [laughs] for people who want Russian tenants.
BENEDEK: We are close to all the embassies. There are like eight embassies around here, so not only the Russian. [laughs]
LADISLAS MAURICE: Yeah, there’s a lot of embassies, so yeah, embassy tenant for sure. And then again, it’s one of those streets where, when you have Andrássy Avenue, which, again, is the Champs- Élysées of Budapest, prices automatically are more expensive for sales, for rentals, etc. So if you had the same apartment one street behind?
BENEDEK: It takes away like 20% of the price.
LADISLAS MAURICE: Yeah, easily, for sure. Especially that this one has a little view, a side view, actually, when you’re on the couch you can see a view of Andrássy Avenue, so things like this in the Budapest context are really important. Cool. All right.
Budapest real estate for capital appreciation
LADISLAS MAURICE: This, ultimately, is not really a yield play, it’s more of a capital preservation or capital gains play because of how prime it is. Do you have a lot of clients that just buy such apartments just to keep them, not even rent them out?
BENEDEK: For me, surprisingly, yes. So I see an increasing demand for such places, where your practical buyer, sort of based in Europe or Plan B apartment for yourself, with the option to rent it out if you don’t use it. And especially my overseas clients, they really see the value in such places, because this is, compared to US prices in city center locations, these are bargains, practically speaking, and you still get an endless piece of property.
LADISLAS MAURICE: And if you go into Paris, the cheapest areas of Paris, where you really feel like you’re in Kinshasa, are about €8,000 a square meter, and here you’re getting something like this for €5,300. So you can compare like that a little bit.
Restrictions on Airbnb in Budapest
LADISLAS MAURICE: And how about doing Airbnb in this apartment?
BENEDEK: Well, as of now, it’s still possible, but since we are in the Sixth District, it will no longer be possible after 2026, January 1. So if you are looking an Airbnb investment, like you mentioned in the previous video as well, I don’t recommend to look, especially in the Sixth District, but Budapest as a whole is very anti-Airbnb right now in sentiment.
LADISLAS MAURICE: Yeah, it would be risky to come here and just invest with Airbnb in thought, you’ll likely be disappointed, yeah.
BENEDEK: I don’t say don’t invest in Airbnb but always have a contingency plan. You need to get a place that is rentable for long-term as well or can be used otherwise.
LADISLAS MAURICE: Cool, fantastic. And now we’re going to go check out another apartment in which district?
BENEDEK: In the Fifth District, the center of Budapest.
LADISLAS MAURICE: Okay, and that one is really big, is that right?
BENEDEK: Really big, yeah.
LADISLAS MAURICE: Cool. And with a bit of work needed?
Overview of Budapest’s District 5.
BENEDEK: Yes, exactly. All right, so we are here in the heart of the Fifth District in Budapest, the very, very center. Behind us, a literature museum named after one of our most famous historic figure, and around us, just nice trees, a fountain.
LADISLAS MAURICE: Yeah, so Budapest has a bunch of little parks like this all over with little playgrounds and green areas, very safe, very nice, and it’s one of the reasons why a lot of Westerners are moving to Budapest. So specifically a lot of Western Europeans are moving to Budapest, because when you are European you can just move here, it’s easy, you get a residency permit like this, you’re entitled to it. And they come for this, essentially. It’s beautiful, it’s relatively affordable, there’s some decent schools, it’s very safe, there’s barely any crime, which is very unlike the situation in Western Europe these days. This really is a key selling point for Budapest real estate. The apartment is?
BENEDEK: If we just come out of the tree shade, that’s on the corner.
LADISLAS MAURICE: Cool. Yeah, and there are partial views on the park from the apartment. Let’s go check it out.
BENEDEK: The surroundings has a lot of cafes, and here, just next to the entrance of the building, there is a very famous and historically longstanding restaurant with a lot of nice Hungarian wines around.
Apartment tour in Budapest’s District 5.
LADISLAS MAURICE: Nice. Yeah, the white wine in Hungary is particularly good. I’m more of a beer guy, and I’m very satisfied with the beer here, but the– Interesting, they’re giving out books on Orbán here.
BENEDEK: [laughs]
LADISLAS MAURICE: All right, cool.
BENEDEK: All right, so this building is only two stories high, and the apartment that we are going to see is on the second floor, but unluckily, we don’t have an elevator here, but the stairs are also nice.
LADISLAS MAURICE: Yeah. So nice stairs. They’re not like circular and tiny, which can be an issue. These are big. But then again, the apartment is huge. How many square meters?
BENEDEK: It’s 144 square meters.
LADISLAS MAURICE: Cool. That’s always a bit of an issue, when you have smaller units, no elevator, I find, is not too much of an issue, especially because there are a lot of universities around here, it’s students, whatever. But when you start going into bigger surfaces like this, typically, you’d be targeting families, and if they’re young children, then it can be a little bit complicated, and that can cause issues. Let’s go check it out. Benedek, why is there a gate and a door? Because it’s not like it’s dangerous here.
BENEDEK: No, but this is how most of the buildings were designed back when they were built, and people just kept it. They look nice in some places, and at some other points, if you just remove this, then you will have a wide door frame and it looks silly without it.
LADISLAS MAURICE: All right, cool.
BENEDEK: Come inside.
LADISLAS MAURICE: Yeah, this apartment is huge.
BENEDEK: It has nice spaces, for sure. Here, the special thing is that we have a little private terrace that is accessible only from this kitchen and from the corridor as well, but there is a lockable door there, so it’s really private.
LADISLAS MAURICE: It’s probably not on the title deed. This is probably officially common area, but everyone agrees in the building that everyone can have their own little private space.
BENEDEK: Exactly.
LADISLAS MAURICE: I’m pretty sure that’s how it’s done, right?
BENEDEK: Yeah.
LADISLAS MAURICE: Cool.
Heritage protections on Budapest real estate
BENEDEK: And the piece of history, wherever you go in Budapest, you will find these little Easter eggs, so called. This is part of the original city walls of Pest that’s surrounding the inner city center.
LADISLAS MAURICE: This wall here?
BENEDEK: This wall here, exactly.
LADISLAS MAURICE: Interesting. It’s, what, like some heritage stuff, can you destroy it?
BENEDEK: Definitely can’t.
LADISLAS MAURICE: You can’t?
BENEDEK: You definitely can’t destroy it, and most probably the building is also falls under some serious heritage protection category.
LADISLAS MAURICE: It means, for example, if I were to buy this apartment, I put you in charge of renovations, you have to get a permit for that?
BENEDEK: It depends on the exact category, because only the most protected building needs a certain permit to do interior renovation, because, otherwise, the protection only protects the outside facade of the building and the inside facade, but not the apartment itself.
Doing renovations on Budapest apartments
LADISLAS MAURICE: Okay, cool. All right, so 144 square meters. How much is this apartment being sold?
BENEDEK: The asking price is to Ft 220 million, which is roughly €550,000. But I’m sure that this is negotiable. I know for a fact that it has been on the market for some time, so if they want to sell it, they must be flexible with the price.
LADISLAS MAURICE: Yeah. Cool. When I go into a place like this, what I see here, I see a bit of a red flag in terms of the mentality of the sellers, in the sense that they put a relatively nice new fridge here, some Samsung. In their mind, this apartment is ready to move in, right? And in their mind, they’re pricing it accordingly. However, I find that anyone that has a bit over half a million to spare will not want to live in such a kitchen. So they’re selling it ready to move in, in their minds, but the market sees it as, actually, this needs a bit of a gut job here in the kitchen.
BENEDEK: Yes. This is unfortunate because they are selling at a sort of renovated price, but it still needs renovation. Hence, it’s negotiable. I think it would be definitely possible to bring it down to €500,000.
LADISLAS MAURICE: Cool, so from Ft 220 million to Ft 200 million, so €550,000 to €500,000.
BENEDEK: Yeah, so it’s a 10%.
LADISLAS MAURICE: Yeah, 10%, yeah. Compared to the previous apartment that was more like 5% off, something like that, here you can definitely get 10%.
BENEDEK: Definitely. It’s bigger as well. It has more floors as well.
LADISLAS MAURICE: It’s huge.
BENEDEK: It’s huge. But it has nice parts as well. The original wooden parquet is a nice touch. The original doubles wing doors, also nice, but there is definitely a lot to do here.
LADISLAS MAURICE: Yeah. Look, we’re not even using a wide angle. Usually, we use wide angle for videos in apartments, but not for this one, because it’s so big. Cool.
BENEDEK: And here is the corner room from which you can see the park.
LADISLAS MAURICE: Cool. So partial park views.
BENEDEK: Yes, exactly.
LADISLAS MAURICE: Yeah. Nice. So you see all the trees. Cool. Cool, cool. All right, so what would you recommend people do here? Is it an investment? Is it lifestyle?
BENEDEK: As financial investment, I would not really recommend it. You will get low returns on this. It’s hard to rent because it’s a huge unit, it costs a lot, and you need to rent it for a lot of money to be worth it. I think the best return you can get is a net 3%. This could be rented around €2,300, €2,400 a month.
LADISLAS MAURICE: After renovations.
BENEDEK: After renovations, yes.
LADISLAS MAURICE: Full renovations or partial renovations?
BENEDEK: In my mind, what’s definitely need to be done here is the kitchen. I would re-tile both of the bathrooms as well. And the walls need to be, not only painted, but I would also need, I think, some kind of decoration on it and furnishing. That’s the minimum that we need to do here. And the minimum can be done from approximately €50,000 to €70,000. But if you want to do an exquisite renovation or a luxury one, then, of course, this figure can go higher.
Budapest District V. rental yield calculation
BENEDEK: So as return on the investment calculation, I would go with the minimum needed renovation and then try to rent it for €2,300, €2,400. Management, tenant-finding commission, property taxes, etc., you will arrive approximately at 3% net yield.
LADISLAS MAURICE: Yeah, before income tax. In many ways, it’s a bit hard to see this really as a pure investment, like you say. I see this more as a lifestyle play.
BENEDEK: Definitely.
LADISLAS MAURICE: So for people who want something that’s in a great location of town, that are still pretty fit, they don’t care about going up to two flights of stairs, that want a nice little park nearby, maybe they have one or two kids. So maybe some local family or people that come from the US or from Western Europe and want to spend a few months per year here. Airbnb?
BENEDEK: Not likely on Fifth District.
LADISLAS MAURICE: Unlikely. And it’s maximum two licenses per building, correct?
BENEDEK: Five percent of all the units within the building. So if it’s there is 20 units in the building, only one can hold the license.
LADISLAS MAURICE: Okay. So essentially, if there is a license here, someone already has it. So Airbnb not possible. I would just see this as a pure lifestyle play if you want a big place in central Budapest.
BENEDEK: Well, the more I interact with foreign clients, the more I see that many of them doesn’t only come here solely only for the financial part. They see Budapest as a nice city, as a nice place to be. Especially overseas clients, so from Canada and the US, they are used to bigger spaces than what we typically have. And so this is an apartment that would sort of satisfy their usual need for space, and at the same time, it’s in the center of the city. And for them, it’s probably more fitting of a budget than for a local investor or whoever.
Get in touch with Benedek
LADISLAS MAURICE: I wrote a whole article on the real estate market here in Budapest, the neighborhoods to look into, the neighborhoods to avoid, some things you should be aware of before investing here. There’s a link below. Benedek also has a newsletter where he sends regular updates on the market and specific opportunities. There’s also a link below. And if you want to get in touch with Benedek to invest in Budapest real estate, either for lifestyle or for investment, there is a link below to get in touch with him. Benedek, thank you very much. Always a pleasure.
BENEDEK: Pleasure as always.
