Investment property in the post-coronavirus era
Last year saw short-term rentals thrive, used not only by tourists but also by business travellers. Accordingly, demand for investment flats grew, and many people committed to this venture with the prospect of a substantial, regular income. However, the spring coronavirus pandemic disrupted the plans of owners of these properties, leaving thousands of flats virtually empty overnight for a prolonged period.
The main issue is that investment properties are often financed with a mortgage. The expectation is that the property itself will generate enough income to repay it. “Given the preceding years, this assumption was entirely logical. The Czech economy, and tourism in particular, had simply been flourishing, and there was enormous demand for short-term rentals. No one could have predicted what would happen or exactly what consequences the coronavirus would have,” says David Novotný, owner and managing director of the independent real estate agency Bohemian Estates International.
What should owners of investment properties do now when their flats continue to stand empty? “It could be said that most Czech regions are through the worst of it. The vast majority of Czechs plan to travel within the country this year, and we are already seeing interest in private accommodation. However, Prague and the surrounding towns still face the most difficult period. In this area, far from all accommodation facilities have reopened, and those that have are offering highly competitive prices and a wide range of bonuses. Demand for short-term rentals in Prague is therefore not particularly high, and the handful of foreign tourists coming here prefer hotels or guesthouses,” explains Novotný.
According to him, no significant improvement can be expected until at least the autumn, and only provided that there is no second wave of the pandemic. Yet many experts consider this inevitable. “Property owners are already counting losses amounting to tens of thousands of Czech crowns, and if they also have a mortgage to repay, they can find themselves in considerable financial difficulty within a very short time. Their options are now very limited, with few steps they can take.”
The obvious option is to continue letting the property, but on terms competitive with other flats intended for long-term rental. Although the rental income will help with monthly loan repayments, this type of letting is somewhat inflexible and does not allow the property owner to respond to current developments. “What flat owners need now is at least some income, while also being able to switch flexibly back to short-term rental as soon as conditions are suitable again. That is why we have introduced a mid-term rental solution. It keeps the property occupied while the agreement is structured to give the property owner sufficient flexibility. This type of rental is ideal, for example, for businesspeople seeking accommodation for a few months. Simply get in touch, and we will arrange all the details with the flat owner and take care of everything,” concludes David Novotný of Bohemian Estates International.