An apartment divided into rooms and rented per room, which means that you derive income as an investor from renting each of the individual rooms instead of the entire apartment. These types of apartments have the best location near metro lines, as well as wherever it is close to work centers.
What strategy:
Long-term rental only, usually for students. Due to the lack of private dormitories and the low competitiveness of state dormitories, it can be considered that this strategy is perfect today. In a dormitory at the university, you can rent a three-person room for PLN 500, and by paying an additional PLN 400 you can count on your own room in the apartment.
ROE:
Up to 10% You are probably wondering how this is possible? The math is very simple. In Warsaw, a 64 sqm apartment prepared for rent for rooms can be bought for about PLN 670,000 Renting six rooms will bring you a monthly profit of about PLN 5,300 after deducting rent and fees. If you only run a business, you can apply accelerated depreciation, so you will not pay tax on the said profit. Accelerated depreciation is a deduction of 10% of the value of the apartment per month from the costs, which is in accordance with Polish tax law. In my agency, we sell a lot of such apartments, and the interest from investors is growing. Investing in real estate through these apartments is a very hot topic today.
Funding:
There are two challenges here. First of all, the bank may have a problem with the purpose of the apartment, because it has been divided into rooms, which has lost the character of an apartment and has become an investment product. According to the Mortgage Loan Act, it cannot be financed with a housing loan, but with an investment loan. There are ways to remedy this, but this is the higher school of real estate financing that we use in my second companySmall Business Finance. Secondly, the purchase price is determined by the profitability of the apartment, not its value on the market, so you must have a higher than 20% own contribution here. Investors usually buy this type of apartments for cash.
What area:
It does not matter much here, it is important that there are 4 to 6 rooms, two bathrooms and a kitchen with a small dining room in the hallway. An ideal apartment is one between 63 and 70 sqm for 6 people.
Crisis resilience:
Now I will present you my private theory, which I have not heard so far from other real estate investors or trainers. I believe that this type of housing is very resistant to the crisis. Even if a situation completely different from the one Sebastien talked about happens. So real estate prices in Poland may fall, the prices of ready-made investment products will not fall, and may even increase. Why do I think so? Investing in real estate for rent into rooms is a strategy for buying an apartment, the price of which is determined by the profitability from renting. In other words, how much you will earn on renting for rooms, the price of your property will be. Room prices in Poland are still much lower than in Western Europe, so I think that there is a probability that the value of such apartments will increase over time. In the end, you will lose the least on such apartments, because only two years of rental theoretically secure a 20% drop in the price of the apartment
Hazards:
Don’t try it alone at home. This means that you will not find such a property on your own if you do not have the right experience, nor will you carry out a proper renovation without professional knowledge. Knowledge of construction law is crucial here.