The Czech Republic
Author Leaonne Hall is an expert on the overseas property market and has written extensively for a number of newsstand titles. She previously produced three editions of the Red Guide to Buying Property in Eastern Europe, and has been writing in detail on the individual markets since 2003.
Despite having only existed for 11 years following the dissolution of Czechoslovakia, the Czech Republic is one of the most established and stable of the Eastern European countries, both politically and economically. Consequently, it offers one of the safest investments for foreign buyers.
Why buy in the Czech Republic?
Well established in terms of tourism thanks to the allure of its capital, Prague, the Czech Republic has experienced something of a tourism glut in the last decade and could almost be labelled as overdeveloped by some. Nevertheless, the country still represents an attractive investment proposition, although many have already made their money and moved on to pastures new. However, for the less adventurous out there, the Czech Republic is a safe investment and an excellent buy-to-let proposition.
A member of the EU since 2004, the country is economically very healthy, with a hefty GDP growth rate of 6.1% and planned euro adoption in 2012, which is set to pave the way for increasing economic growth. Outside of Prague, property is priced at a mere 20% of that in many Western European countries, while the high standard of living and attractive countryside the country has to offer make it a good lifestyle choice as well.
The Czech Republic also has one of the most welcoming attitudes towards foreign investors and workers, with job opportunities among the best in Eastern Europe for foreigners, thanks to Prague’s expansive employment market. What’s more, it’s unlikely that the Czech government will clamp down on foreign ownership of property, a threat which could apply to some other Eastern European countries.
Ease of access into the Czech Republic, thanks to regular budget flights with easyJet and Ryanair, means that not only is it possible to jet off to your second home for a long weekend at very little expense, but it also maximises the rental income you can gain from letting your property.
The diverse landscape offers everything from the rolling hills and forests of lush Bohemia, with its medieval towns, to the central mountain regions, home to High Tatras and Spindleruv Mlyn, the Czech Republic’s foremost ski resort. These areas outside of Prague are becoming increasingly popular with second-home buyers.
Culturally, the country has no shortage of historical sites, the most notable being the city of Prague, but there are also 11 other UNESCO World Heritage sites to be explored. Peppered with fairytale castles and Renaissance chateaux, the Czech Republic is also the birthplace of beer, and there is no shortage of taverns at which to sample its yeasty goodness. The country is also a hotspot for walkers, a popular pastime with the locals as well, with the numerous forests and mountains making for fascinating treking.
Politics and economy
Foreign direct investment and EU exports have helped make the Czech Republic one of the most successful economies in Europe, despite experiencing recession in the late 1990s following independence in 1993. The Czech Republic has a growing economy driven largely by its industrial exports – particularly car production – and also its tourist market. GDP and economic growth have continued to increase, at a rate of 6% in 2006, and according to a survey carried out by financial experts Ernst & Young, the Czech Republic is the world’s seventh most attractive country for investors.
With the lowest interest rate in Europe –2.5% – low inflation and continually strong economic growth, you’re unlikely to find such favourable economic and investment conditions anywhere else in Europe. However, on 1st January 2008, VAT is set to rise from 5% to 19%. Consequently, investors will be keen to purchase before the 14% hike, but it is expected that this will lead to many developers cutting corners in an attempt to complete and sell property before the cut-off point.
The government is a parliamentary democracy headed by Vaclav Klaus, while each of the Czech Republic’s 13 regions has its own Regional Assembly and city council. In April 2003, the Czech Republic signed the Accession Treaty for the EU, and following a positive 80% vote from the population, the country became a fully-fledged member of the EU in 2004. The Czech Republic is now on course to assume usage of the euro currency. The government are keen to see this done by 2010, but the likelihood is that it will be nearer to 2012 before it is introduced.
Geography and climate
A landlocked country located more in central than Eastern Europe, the Czech Republic is bordered by Poland, Germany, Slovakia and Austria. Split into two regions, Bohmeia and Moravia, the country covers 78,866 square kilometres. This is a land of spectacular scenery, home to the Tatras Mountains and one of Europe’s finest cultural centres, Prague. You can choose to relocate to anywhere from ski resort to traditional village or cosmopolitan centre.
As with most of Western Europe, in the Czech Republic the coldest month is January and the warmest, July. The climate is diverse, although generally it can be called continental, with hot summers and cold, cloudy winters in which it generally snows. Summers are when the rains are at their worst and temperatures vary depending on your altitude. In Prague, the average temperature is 10°C, while at Snezka, the country’s highest peak, the average sits at –0.4°C; in Brno it is 8°C.
History and culture
Ruled by its larger neighbours until gaining independence in 1993, the Republic of Czechoslovakia was created in 1918 after the collapse of the Austro-Hungarian Empire following WWI. In 1945, after six years of Nazi rule, Czechoslovakia fell under the communist sphere of influence. Communism collapsed in January 1992 when the ‘Velvet Divorce’ saw the political union between the Czech Republic and Slovakia come to an end.
Culturally, the Czech Republic’s hotspot is Prague, which boasts six centuries of architecture. Despite the hardships the country has suffered over the years and the numerous occupations – by the Hapsburgs and Nazi Germany to name only two – the country has remained virtually unblemished, with many cultural centres as pristine as ever. Prague manages to blend the country’s mix of German, Austrian and Bohemian culture with contemporary life, and is now one of the leading centres for stag and hen parties. Outside of the capital, the country is dotted with towering stone-built castles and wooden churches, most of which are tucked away in small villages.
As a nation, the Czechs are massively uninterested in the church and religion. A survey carried out in 2001 cited 27% of Czechs as being Catholic and 59% as atheist, while 2% are of Protestant denominations. The second largest religious group –12% – is that of the Hussite church.
Tourism and getting there
The best-established tourist industry in Eastern Europe, the Czech economy relies heavily on tourism to bolster its economy. In 2001, the total earnings from tourism reached 118.13 billion CZK (£2.86 billion) making up 5.5% of GNP and 9.3% of overall export earnings. The industry employs more than 110,000 people – 1% of the population – with Prague being the main tourist centre. In the third quarter of 2006 alone, 2.2 million foreigners visited the country, an increase of 4.3% on the same quarter for 2005, while annually, 17 million tourists stay in the Czech Republic.
There are many other tourist centres in the country, but after Prague it is the spa towns that attract significant numbers. These include Karlovy Vary and Mariánské Lázně. Other popular tourist sites are the many castles and chateaux, such as those at Karlštejn, Konopiště and Český Krumlov. Away from the towns, areas such as Český Ráj, šumava and the Krkonoše Mountains attract visitors seeking outdoor pursuits.
In terms of reaching the Czech Republic, it is quick and cheap to fly, with British Airways, Czech Airways, easyJet, Air Lingus, Ryanair and SkyEurope all flying into the country. The increase in budget airlines has, as with most Eastern European destinations, helped open the country up to increasing numbers of tourists and second-home buyers, as well as helping to fuel the investment market.
Cost of living
The cost of living in the Czech Republic is significantly lower than elsewhere in Europe, but is relatively high and continuing to rise when compared with much of Eastern Europe. Despite the fact that Prague is the most expensive place to live in the country, the cost of living is still significantly lower than in most European cities. Outside of Prague prices decrease dramatically.
If you consider a meal for two with wine in Italy would set you back an average of €80, in Prague you would be looking at €40, while outside of the capital, the average would be €25. On average, the cost of renting a two-bedroomed apartment in Prague would be around €500 a month, including the cost of utilities. Outside of Prague, this would fall to €350. In contrast, across the border in Germany, you would be looking at €900.
Food and drink
It is a well-known fact – and a major tourist draw – that the Czech Republic is the birthplace of beer, or pivo as it is called in Czech. Home to both Pilsner and Budweiser, the Czechs consume the most beer per capita in the world; surprising when you consider that most Moravians prefer wine. The majority of Czech wine is produced in the South Moravia vineyards, and while it costs less than £1 a bottle, it is drinkable. For the best tipple, go for the whites – thanks to the cool climate, the grapes are harvested late and produce an excellent and affordable vintage.
Food and drink in the Czech Republic is cheap, although prices tend to be twice as high in Prague when compared to the rest of the country.
While the diet may lack imagination, there is plenty of international fare on offer in the larger cities. Meals are generally quite heavy, consisting of meat (generally pork or beef) served with dumplings and potatoes or rice. A traditional meal consists of a hot soup starter and a main course of pork, cabbage (or sauerkraut) and gravy, washed down with a glass of pivo. Despite the importance of meat in the diet, if you are a vegetarian there are a number of dishes that are vegetable based, such as breaded cauliflower and mushrooms or nedliky s vejci – diced dumplings fried with beaten eggs and served with pickles.
THE PROPERTY MARKET
Thanks to the economic and political stability the country offers, the Czech property market has continued to thrive. EU membership, strong GDP growth, a central location and high demand versus low supply have all helped to strengthen the market and resulted in constant price rises year-on-year ever since 1991. Nevertheless, prices are still much lower than in Western Europe, although the likelihood is that the gap will continue to shrink as the Czech Republic continues on its path to Westernisation and becomes a wealthier nation.
Foreign direct investment into the country is huge, reaching a peak in 2002 when €9,012.4 million was invested. Foreigners still only represent between 1–2% of the buying activity though, and have little direct influence on the property market, especially when you look outside of Prague.
Apartments in the centre of Prague are the most sought after commodity – especially as the Czech people become more consumer driven. Prices for modern apartments increased by 30% in the capital in 2006, while investors can easily expect to secure gains of between 10% and 20%, and rental yields of more than 7%. Outside of Prague, price rises have been cited as hitting between 10% and 25%– with an overall average of 10% – as new markets open up, further fuelled by the growth in budget flights and improvements in the country’s infrastructure, as well as spiralling prices and living costs in Prague, and a lack of available property.
It has also become increasingly easy to obtain a mortgage in the Czech Republic, with loans of 100% now available, adding to the pressure on the already undersupplied market. Also, Czech residents are starting to view property as an investment, a new development which has heaped additional pressure on the market.
Tourism continues to fuel growth and as tourist figures have increased – they currently sit at 17 million – so has foreign investment in property. Currently, 90% of tourism into the Czech Republic is directed at Prague, but as awareness and interest in the country continues to increase, new markets are constantly opened up and foreign purchase of property is set to rise.
Adopting the euro
The biggest influence on the property market at present is the anticipated adoption of the euro, scheduled for between 2010 and 2013 depending on when the Czech Republic can meet the criteria laid down in the Maastricht Treaty. There is much anticipation as to the impact this will have on prices. Trends seen in other countries imply that euro adoption will result in immediate price gains, although, the country has already seen vast price increases in recent years. It’s anticipated that euro adoption will only encourage the price rises already predicted, which will continue until house prices in the Czech Republic reflect those of other European countries.
With the exchange rate set to change from 28CZK per euro (68p) to 26/25CZK (63p/60p) on the eve of adoption, it’s anticipated that purchasers could experience appreciation of 7% over the next three years, based on the oscillating exchange rate alone.
Consequently, 2007 is expected to be a year of continued growth at similar levels to 2006, with a possible slowing to come into effect in 2008, but continued sustainability in the market right up until euro adoption.
Where to buy
The hottest market with the highest appreciation rates, Prague is an intriguing city and one of the most attractive and historical in Europe. Back in November 2006, the daily newspaper Hospodarske Noviny reported that flat prices had increased by 20% to 30% in the capital. There is high demand for apartments in Prague, and consequently prices have continued to rise at a rapid rate as supply has failed to meet demand. Ease of access has encouraged market growth – today, over 20 UK airports offer flights into Prague.
Located on the banks of the Vltava River, buyers are drawn to the city thanks to its fabulous cultural and historical attractions, cosmopolitan air and vibrant lifestyle, with numerous clubs, bars and restaurants.
Prices vary dramatically within the city, and despite seeing price hikes of 35% between 2000 and 2004, a studio apartment on the city’s outskirts requiring renovation can be picked up for as little as €50,000. However, if you are looking for two bedrooms closer to the city centre then the average rises to €223,000. With appreciation rates set to grow at roughly 10% per annum and rental returns sitting at upwards of 7%, Prague still represents a good investment and looks set for continuing price appreciation, despite having already seen massive growth since 2000.
Rapidly emerging as an investment centre, largely thanks to the numbers of expatriates and professionals relocating to the city, Brno has become a European business hub. Ryanair began flying into Brno’s international airport at the end of March 2005 and this has also helped to put it on the map as a property hotspot.
The country’s second largest city, prices here are roughly one-third of those in Prague, but as with the capital, newly-built and modern apartments are the popular choice. Surrounded by forests, with the Moravian vineyards lying to the south and the protected Moravian Karst to the north, there are many country lodges and ski chalets to be purchased outside the city.
There are numerous attractions in this cosmopolitan metropolis, such as theatres, museums, cinemas and clubs, and the city won the competition for European City of the Future in both 2004/2005 and 2005/06. With rapid economic growth, averaging more than 9% during the last decade, Brno has been compared to Prague 10 years ago, and as such represents an excellent investment. Rental income sits at roughly 8%, although it can get into double figures.
A new motorway development that will link Moravia with Poland will see completion in 2008, making it an attractive area for Polish investors, which is anticipated to bolster the market. Currently, you can buy a studio apartment for 1,200,000 to 1,450,000CZK (£29,085 to £35,160), which it’s estimated will make you 8,000 to 9,000CZK in rentals per month (£193 to £218); a two-bedroomed flat priced at 1,850,000 to 2,200,000CZK (£44,860 to £53,347), will generate 12,000 to 13,000CZK (£290 to £315) and for three bedrooms you would be looking to pay 3,000,000CZK (£72,633), with a rental return of 18,000 to 20,000CZK (£435 to £484). (Figures courtesy of www.czechpoint101.com).
The Czech Republic’s ski resorts may not be as developed as those of neighbouring Slovakia, but they have experienced a steady market and capital growth of 10% over recent years, and seen increased interest and demand from foreign buyers.
Spindleruv Mlyn is the Czech Republic’s foremost resort and a recent host of the Women’s World Cup. Although the mountains don’t reach the heights of Slovenia, they enjoy 150 centimetres of snow in mid-December, as well as good seasonal skiing, with the numerous summer activities creating a year-round demand for rentals. What’s more, ski pass prices are half that of France.
Representing a good long-term investment, typical properties include newly-built apartments of 60 square metres for 4,500,000CZK (£108,000), or a ski cottage with land for only 2,600,000CZK (£62,500). With budget flights extending into Brno and Ostrava improving accessibility, these are destined to be new hotspots. Another excellent area which has seen little investment is the Beskydy Mountain range. While it has smaller mountains than the north, it’s very cheap and offers year-round recreational activities.
What to buy
Predominantly, property which experiences the most demand and generates the best rental returns are apartments. Many are located in partitioned period buildings built in a Haussman style. Property built during the communist era tends to be poorly constructed and unattractive – think 1960s towerblocks. There are a number of newly-built developments springing up in Prague and Brno, but outside of these centres, property generally tends to be rural village houses or ski resorts, and many of these require renovation. Nevertheless, there is no shortage of property types to choose from, although for the best appreciation rates and rental returns, you need to chose a property that is easily accessible and close to tourist hotspots and amenities.
For those with money to burn, there are a number of dream properties for sale in the Czech Republic, including a 17th century castle for £912,000, a historic château in Moravia for £1,000,000 and a palace with 19 bedrooms, perched beside a 62 hectare lake for £3,000,000.
BUYING A PROPERTY
More advanced than many of their neighbours, the Czech Republic offers a comprehensive and straightforward purchasing system. However, for foreigners, there are restrictions on how you buy, and on ownership.
Stage 1: Restrictions on foreign buyers
Unless you hold a residency permit in the Czech Republic then you will not be able to purchase property as an individual. Instead, you will be required to set up a Czech Limited Company or an SRO. Just when this restriction is likely to be lifted remains unclear, but what is clear is that even if you do have residency you will not be allowed to purchase agricultural or forestry land.
If you do not have residency then setting up an SRO is a straightforward and inexpensive procedure, with the total costs panning out at between £1,000 and £1,600. Forming a Czech limited-liability corporation, is the fastest, most convenient and cost-effective way for a foreign citizen to establish themselves as a resident in the Czech Republic with all the required visas, a tax base, health insurance, and the many benefits of being a legitimate resident. Some ‘favoured nations’ also have special agreements with the Czech Republic which allows their citizens to buy land as individuals. This applies to countries such as Switzerland, Norway and the USA.
Stage 2: Funding the purchase
Most buyers will be looking to raise the funds for a property purchase through a mortgage, and in the Czech Republic there are plenty of local lenders who are not only willing to lend to foreign buyers, but do not discriminate between local and foreign investors. There are different mortgages open to you depending on whether you are buying as an individual or as an SRO. The maximum you will be lent as an SRO is 75% of the price of the property, leaving 25% to be paid, with the borrower obliged to invest at least 15–20% of their own funds into the purchase. As an individual buyer, it’s now possible to get a mortgage for 100% of the value of the property.
Typically, when buying with a residency permit, the bank will allow a deposit of 15 to 20% and sometimes less. With an SRO, it is rarely under 25%. The maximum lending period rarely exceeds 15 years, although some banks are beginning to offer 20, and interest rates range from 4–6% per annum, with the rate being fixed for a maximum of five years before recalculation.
Stage 3: The survey and background checks
It is recommended that you carry out a survey before signing the preliminary contract, even though this is not a common occurrence. You also need to ensure you carry out all the necessary background checks. In some cases, the property you are looking to buy will be protected by general Czech law and contractual provisions, but this will not safeguard against the possibility of the seller disappearing and leaving you with a house that may carry financial or structural damages. Consequently, you should get some form of survey carried out.
Your lawyer is responsible for researching the history of the title with the property registry in order to ensure it is free of third-party rights – in other words that there is not collective ownership of the property and no debts attached to the title. A major issue to be aware of is that if you buy a plot of land with buildings on it, the buildings and land may have separate titles and even separate ownership. Note that it’s possible to obtain title insurance for added security.
Stage 4: Ownership
There are two main ways to own property in the Czech Republic and you’ll find them on real estate listings as OV (osobní vlastnictví) or private ownership, and DV (družstevní vlastnictví) or cooperative ownership.
In the Czech Republic there is no leasehold system as exists in the UK – although occasionally you may come across a cottage where the town or state owns the land and the owner leases the land from them.
Private ownership most commonly applies to stand alone homes, but is now becoming more and more common in apartment buildings. Newly-built apartment buildings are almost always owned as OV.
The benefit of buying OV is that both SRO and individuals can purchase them, and banks are willing to offer mortgages on them because they have collateral for money being lent. Consequently, these properties are slightly higher in price than DV properties because they are easier to finance.
Cooperative ownership (DV) has members who have bought the rights to be a member and use a particular flat. The land registry doesn’t record the particular flat that the member lives in, just that they reside in the building. This type of ownership is virtually impossible for a foreigner to buy into. The memorandum of association (notarsky zapis) usually stipulates that membership is only available to Czech citizens. Often SROs and companies aren’t even allowed to become members.
These flats are usually a little cheaper than OV flats because banks are less eager to lend to prospective DV owners.
The benefit of buying into a cooperative is that there’s no waiting period for becoming the official owner of the flat, whereas when purchasing a privately-owned flat, the process of becoming the recognised owner in the eyes of the land registry can take up to six months.
There is the possibility of changing a DV flat to an OV, but it requires the cooperation and willingness of all members in the cooperative. Naturally, this process can be a painstakingly slow one. If even one member disagrees, it can cause real problems and drag out the process even longer.
Stage 5: The contract
As already mentioned, the Czech property registration system is well developed and has the correct searches and safeguards in place to allow you to obtain a clean property title. The process is divided into three stages, the first being the signing of a reservation contract which takes the property off the market and ensures it is not sold to anyone else. At this point a reservation fee of 0.5% of the property’s sale value must be handed over to the estate agent.
Second is the preliminary or future contract. This binds both parties to the sale and the buyer can use this in the mortgage application process.
Signing this document is equivalent to an exchange of contracts in the UK. Once this has been signed, a deposit of between 10% and 20% needs to be paid.
Last of all, there’s the final purchase contract. Once all other stages have been completed – i.e. when the property is finalised, has the relevant occupancy permit and the buyer has raised all the necessary funding – then the buyer and seller should proceed with the signing of the purchase contract in the presence of a notary. This is the equivalent of completion of a sale in the UK. Once the final contract has been signed, the remaining funds need to be paid in order to finalise the sale. However, despite the contract being signed and funds exchanged, you are not technically the legal owner of the property. Following completion, all the necessary paperwork needs to be submitted to the land registry to be processed; this can take several months. It is only once the land registry has acknowledged the sale and lodged you as the new owner on the registry records that the sale is technically complete.
Stage 6: Completing the sale
As stated earlier, officially you are not the owner of your property until you obtain the title deeds following registration of all the necessary documentation with the land registry. Consequently, it is essential that you deposit the final funds with a neutral party – preferably the notary – until you receive the final registration documents.
Registering a change of ownership is quicker if you buy in Prague – from four to six weeks compared with up to 24 weeks outside of the capital. Obviously you don’t want to be left kicking your heels until registration comes through before you can move in, and so it’s common in Prague to release some of the purchase price to the seller in exchange for the keys to the property. However, you will still only legally become owner of the property when the land registry records the change and not when the purchase agreements are signed.
Stage 7: Additional costs and taxes
On the completion of a sale, the seller will be required to pay property transfer tax of 3%. The buyer will be the guarantor of this payment and should the seller fail to pay, you could be asked to cover the cost instead. You can safeguard yourself against such an occurrence by arranging with the notary – who will be holding all the funds – to only release the sum equivalent to the payment of the property tax once the seller has made the payment.
The buyer will also be liable to pay property taxes and VAT. VAT on newly-built apartments is currently 5%, while for a parking space – which would be sold separately – VAT is 19%. Property taxes are minimal and the amount charged depends on the type, size and location of property purchased. Typically, you would be looking to pay £50 per year for a one-bedroomed apartment in Prague. There is a distinction made between property and land when it comes to taxes, and so you will also be subject to a land tax.
You will be liable for other costs too, and in total you should allow up to 8% of the price of the property for these. They include legal expenses which can be up to €2,000 if you have to set up a limited company, as well as paying the lawyer for the drawing up of the contract and background checks. Next come the notary’s fees, roughly €300–€400, and finally the estate agents’ fees of between 3–6% of the property price.
THE LETTINGS MARKET
The Czech Republic has long been regarded as a good investment, but what is critical to remember is that while the jet-to-let option is viable in other countries, it’s not necessarily applicable to the Czech Republic. The problem with the Czech market is that its rental system is riddled with problems and there’s very little legislation in place to control it. Rentals are dominated by the black market, with common practice being for property to be sublet by a tenant; it is very unlikely that the occupier will be renting from the owner of the property. Added to these complications is the issue of rent controls. In place to protect the locals from rent inflation, rent control means that the owner is unable to charge market rates for rent, and in fact is forced to charge rents averaging out at about a fifth of market rates. Tenants under rent control are also nearly impossible to evict and generally speaking there is very little a landlord can do if a tenant decides not to pay.
As an absentee or foreign landlord, be aware that you are likely to be the target of attempted overcharging for maintenance of a property, and property management companies often place problem tenants into foreign-owned property.
The relationship between property prices and rent continues to be favourable in most parts of the country. Rental returns obviously vary depending on where and what you buy, but you can expect to generate in the region of 6–15% without too much trouble. Rental returns in Prague have slowed since the boom during the 90s, and while the capital has only seen a small increase in rents, property prices have jumped substantially.
In comparison, Brno has seen the development of a much more stable lettings market, thanks to the influx of newcomers, which has caused a substantial growth in house values and allowed rentals to keep pace with rising property prices. Yields sit at between 6 to 8% per annum.
For more lucrative returns, expect to take a greater risk. Certain properties, such as ski chalets and family homes, can potentially generate higher rental returns but are not guaranteed the sorts of appreciation rates associated with newly-built city apartments.
Finding a buy-to-let property
If you intend to buy a property to let then make sure you carefully research the market. If letting to locals or looking at long-term lets, be aware of the rental restrictions and also the fact that the spending power of the Czech people is relatively low, so you need to be realistic about how much you’ll be able to charge.
The main demand for rentals comes from expats and young Czech couples. For a one-bedroomed flat within Prague, you can expect to generate £465 a month–sometimes you’ll be looking at more than you’d pay in London for a similar property–and up to £193 per month in towns outside of the capital. Foreigners will generally pay more, and on average you can expect to generate a gross rental yield of around 5 to 7% in Prague, and 6 to 8% in Brno.
When looking to rent somewhere for yourself, be aware that agencies will typically charge two months’ rent, with three months rent expected to be paid up front, prior to moving in. Consequently you can end up paying 25,000CZK (£606) before you even move into your apartment – and be aware that the money will not be returned should you discover all is not as promised.
RENOVATING A PROPERTY
There is no shortage of property to renovate in the Czech Republic, whether it’s a run-down country house in a rural area or a communist tower block in the centre of a city. If you renovate a property and then turn it into a hotel or B&B then all associated business expenses, plus repairs and improvements, are directly deductible from any income derived from the business, thus reducing your potential income tax.
As always, prior to buying, ensure you have planning permission for your modifications and any renovation work you intend to carry out.