What to consider when investing in property
In the (post-)coronavirus era, topics such as health and safety have been replaced by questions about the economic impact and effects on public and social life. The damage is being assessed in the business world too, while forecasts for future developments are being prepared with the anticipated arrival of another wave of infection in mind. How will coronavirus transform property investment, and what should you bear in mind if you decide to invest in real estate? We asked David Novotný, an expert at Bohemian Estates.
The arrival of the coronavirus pandemic fundamentally changed everything we had been used to. Health and keeping ourselves and those closest to us safe became the number one priority. As people adapted to the new situation, attention also turned to companies and business in general, which inevitably changed in nature and had to adapt to the circumstances. Some time has passed since the government introduced its drastic measures, and it is now possible to take a more considered view of investments, particularly in property.
“Property still represents a sensible and safe way to preserve and grow money. In other words, it is still possible to buy a good investment flat and make money from it. Demand for property to rent or buy remains high in Prague and other major cities, and given the housing situation, we do not expect it to decline radically in the future. What is more, this means that liquidity in metropolitan areas is almost immediate, which significantly reduces investment risk. However, in the new normal, other criteria must also be taken into account,” advises David Novotný, owner and managing director of Bohemian Estates, a real estate company specialising in comprehensive services for purchasing, managing and selling property.
Calculate your investment
Do not embark on a property purchase without a specific plan and a calculated investment. “Ideally, you should have your own funds available to purchase an investment property. If you are buying it with the help of a loan, we recommend financing at least 50 % of the purchase from your own resources. Also allow for a cash reserve – a tenant may leave at any time, and you will need to cover loan repayments, repairs or energy costs,” advises David Novotný from Bohemian Estates.
“We recommend seeking the help of a real estate professional, who will help you calculate your investment and, above all, its return. For an investment to be worthwhile, we recommend aiming for a payback period of no more than fifteen years. All of this must be taken into account when calculating the actual return in relation to the given location and the qualities of the specific property, as well as when setting the rent with regard to market conditions. Generally speaking, a return of around 7 % is a very good benchmark. How the investment property itself will be used is another matter. Long-term rental is a common way to generate returns from a property, but it is not the only one. An experienced professional with many years of practice will be best placed to discuss the most suitable option with you,” concludes David Novotný. Emotions should be set aside with every investment, including the purchase of an investment property.