Hi Antony ,

A couple of comments :

1. A 59m2 unit generating PLN 1700 pm equates to PLN 29 m2.
Rents in Warsaw have been getting stronger over the last 12 months & your property should be getting PLN 35-40 m2 in rent roll.
If you manage to achieve this rent then based on your figures above you will be cashflow positive .
( Rents are getting stronger as lending criteria has tightened resulting in less Poles being approved for mortgages & as a result they are forced into renting in the short term.)
You are probably on a 12 lease agreement , once this expires I recommend that you try to renegotiate your rent.

2. It takes 6 months to register a mortgage with the Courts in Warsaw. If you completed in end of '07 as you say , then your mortgage should be registered by now & you should no longer be paying the additional 1% premium. Again, this will improve your cashflow.

3. I own 3 properties in Warsaw & my accountancy charge is PLN 1,000 per annum in total .
I suspect you have more than 3 properties in Poland , so you may want to re-visit & renegotiate your accountancy deal.
( I live & work in Warsaw so this is a deal that you may not be able to match , but is probably worth exploring anyway )

4. Your above figures indicate that you are on a full capital & interest repayment .
If I was in your position I would be switching this to an interest only facility if possible.
Your CHF 99k loan today stands at PLN 293k versus your original loan of PLN 213k & purchase price of PLN 257k.
I cannot see any merit in chipping away at the capital amount when the FX movements are negating every payment that you make .

cc.

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Hi cc

I appreciate your comments and I agree with you but unfortunately it seems it is the difference between what should happen in theory and the reality.... see below for my responses...

1. I am aware that the rent could potentially increase a little, but I think only 200 to 1900, so would still be negative. Majolikova is on the outskirts of Warsaw so I think rents are lower than somewhere more central, purchase price (and mortgage) was also lower to reflect this. Although I see rents can be stronger for the reasons you said on the other side people cannot sell in the current market so perhaps there is more supply as well ?

2. Apparently it should only take 6 months but I have been chasing lawyers and brokers for more than 18 months now to try and get this finalised but although the register is created now for some of them the mortgages are still not registered in it, it is driving me mad !!

3. My accountancy works out about 400 PLN a year for each unit, already re-negotiated for a bulk deal (9 apartments) that is not much more than yours so probably not a bad deal.

4. Interest only, I completely agree, it is one of the added attractions of the 'mini %' deal it gives interest only for 2 years.

As you are living and working in Warsaw I'm sure you are able to negotiate slightly better terms on most things (more like a local - I'm presuming you are English ?) and able to judge the right rent levels etc and help to maximise the potential of your portfolio. As a foreigner (abroad) it is always a bit more difficult I have already renegotiated most things (on bulk deals) to cut down costs.

The cashflow situation is worse for units bought in 2007 as prices were higher but of course rents are the same regardless of what was paid for the apartments.

Antony

Thanks cc and Antony for some very useful and informative info.

Antony: Your service charge seems to be a high percentage of the rent. Is this normal for Warsaw?....although in the grand scheme of costs at even 50 percent lower it would be a small reduction in your costs.

Hi PalmTree

yes service charges are fairly high in warsaw, although I think this development suffers more because it is on the outskirts the rent is lower than a unit that is more central but the service charges are no cheaper, perhaps 400 for this rent level would be more of an average figure...

20% of your rent or c. PLN 8/9 m2 is a good guide for service charges in Warsaw

Hi Antony - emailed you last week but not sure if you got it from my Yahoo account?

If not, can you advise best way to contact you - if you don't mind a quick chat?

Cheers, Neil

I dunno - that seems like a REALLY good deal! Makes me wonder what the over all catch may be and I hope you don't get stuck in something.

I've decided to take the deal.

On balance it will cost an ongoing deferred fee to take advantage of it, but at redemption there should be a saving in the exchange rate margin of roughly the same amount.

In the meantime the payments will drop considerably...

Anyone else taken it?

Hi Neil,

I decided to take the deal for the same reasons as yourself - mainly to reduce payments in the short term... Let's hope there's a turnaround by the end of two years.

Hi

I have a Wroclaw unit just come empty and Rednet don't seem to be making any headway finding me a new tenant. Can you tell me who you switched to and what was your experience.

Thanks