• Alexandra Kurbanova, real estate agent

Fix and flip in Prague

Who didn’t hear about the “easy money” from Fix and Flip? Step one: find and buy cheaply an old real estate. Step two: make a reconstruction. Step 3: sell it more expensively. Several hundred thousand Czech crowns are earned fast. Promising deal, right? Check my video or read the article below to see how it works in Prague.

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Step 1: Buy cheaply an old real estate.

If you think that any property in a bad state automatically means a good deal, you may be wrong. First of all the price of a property depends a lot on its location. It’s obvious that a flat on Staromestska would cost more than a similar flat on Chodov.

Secondly it depends on how fast the seller wants to sell. Imagine two similar flats located on the same street. The first one is being offered by a divorcing couple who cannot live together and have to sell it as soon as possible to move on with their lives. Another one is being offered by three siblings as their only heritage left from their parents. Where do you think you could negotiate a better deal? Of course, in the first case.

So the price of an old real estate mainly depends on the motivation of the seller and not on a state of the property.

Step 2: Make reconstruction

You can decide to make reconstruction on your own or hire a company to do so. The first option is normally less expensive but more engaging. In both cases it;s better if you speak Czech or have someone helping you to communicate during the process.

Would definitely help if you have an experience with a house reconstruction. Or at least if you have a professional whom you can trust who would be leading the process.

Without an experience, person of trust or Czech language the reconstruction may turn into a very stressful and expensive thing.

Step 3: Sell the property more expensive

Here comes the point of all the above processes - sell the property and enjoy the margin.

Every investor decides for himself what net margin would make sense for him to start the venture. Few would bother to start if the potential net return on investment or ROI would be less than 10%. To calculate the return divide the planned net profit to the total amount of the expenses and multiply by 100%. Later I’ll give you a real example.

Anyway it’s important to remember the following:

  • You need to consider additional expenses that you will have with the sale of the property, for example a real estate agency’s commission which already includes all the closing costs for the transaction

  • If you sell a property within 10 years after you bought it, you’ll have to pay the sales tax which is 15% from the net margin.

  • The flipping process would take in the best case scenario between 4 and 6 months, where you’ll need at least 1,5 months to buy the chosen property, at least 1 month to make reconstruction, one more month to find a buyer and again up to 2 months to close the transaction. If the market grows - the time is on your side, if there is a crisis, it may reduce or even eat your margin completely.

There are quite a few people interested in flipping the houses in Prague who reach out to me. When we talk through the process and get to real numbers, they get upset.

Let’s have a look at the example: let’s imagine you’re interested to buy this one bedroom flat. The listed price is 4.370.000. You manage to negotiate 70.000 czk discount and got it for 4.3 mln. No closing costs and no taxes for you to pay. Now you hire a company to make a renovation - nothing fancy, just to refresh it: you throw away all the furniture, change the carpet to the good quality linoleum, remove the old wallpapers from two rooms, repaint the walls, make a deep cleaning of the balcony, bathroom and kitchen. Total renovation costs are 90 000 czk.

You list and sell the apartment at 4.8 mln. The agency commission is 240.000 czk.

So initial investment was 4.300.000, renovation costs 90.000, agency fee 240.000 and the income tax which makes 25 500. The whole transaction took you 6 months and brought the net profit of 144 500 czk which is 3% return on investment. Nothing special, right?

So at the moment Fix and Flip strategy doesn’t make much sense in Prague.

If you think about an investment in real estate in Prague, reach out to me and we’ll choose together the most profitable scenario for you.

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My contacts

+420 606 171 876


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