Investment studios are apartments located in locations that guarantee traffic from tenants, such as work centers or universities. This type of apartment can also be bought in close proximity to the metro.
Definition
An interesting place to invest in studios are also artistic districts (popular in Europe, in Poland just being created), i.e. those that attract the attention of artists, tourists, open-minded people, and students. The world is just watching the awakening of such a place in Nowa Praga. Another way to buy investment studios is to buy apartments in tenement houses. There are few of them in Warsaw, because most of them were destroyed during World War II. Therefore, they are considered a limited good today.
For whom:
The first investment, or supplementation of the real estate portfolio. It is also a strategy for institutional investors who want to buy a package of real estate and thus achieve a discount from the developer. On the Premium market, investing in studios in tenement houses is a great product in the portfolio, very unique.
What strategy:
Rather only long-term rental. For today, it can be said that renting a studio apartment is a very good strategy. The rental time, regardless of the season, is only a few days. The same on the mass market as well as on the premium market in tenement houses. So when buying a studio, you can count on no problems with finding a tenant. If you buy a package of many apartments, or you buy at the first stage of construction, you can also count on an increase in price in the future.
ROE:
Since this concept appears for the first time in the article, I will try to explain it quickly. In the simplest terms, you multiply your monthly potential rental income (after deducting rent and fees) times twelve months and divide by the purchase price (you can take into account PCC, intermediary’s or bank’s commission in the case of a loan – however, these are one-off costs, so some definitions do not take into account these costs) In the case of investment studios, ROE should be at the level of 7.0% – 8.0% Then you can consider that it is a very good investment.
Funding:
You can easily get a loan from a bank, even if it is your second or third property (the next one may already be a problem due to the Mortgage Act) Using a loan for thirty years with a 10% down payment, you can count on the rental financing the loan and you will still have about eight hundred zlotys of free income. Assumption for the purchase of a studio apartment for about PLN 300,000. When buying an apartment in stones, the purchase price is usually higher, but then you can also expect a higher rent.
What area:
Today in the market, as a real estate investor, you may have a choice. Investment studios can be bought from 25 sqm (the best, because the cheapest) and will be rented just as well as 34 sqm (for the same price) The purchase of higher areas is not very profitable due to the price, which will affect the later profitability of the investment.
Crisis resilience:
A very resilient strategy for a potential crisis. Investment studios are always in demand on the market. Even in an environment of high interest rates, and thus high unemployment and lower interest in renting apartments (these vessels are always connected), you can count on your studio apartment to find a tenant. I must tell you that in our office, both clients starting their adventure with real estate and experienced investors come for this type of apartments. The latter buy packages of apartments, or selectively look for studios in tenement houses.
What properties to avoid:
Studios located on the outskirts of the city, in bedroom districts, apartments in large areas over 35 sqm. Your priority is studios on the primary market in revitalized tenement houses, and nice apartments on the secondary market in good locations in new blocks.
Hazards:
If you rent a studio apartment in the long-term rental system, you cannot enter the apartment without the landlord’s consent. Therefore, it is worth making an appointment for farm visits once a month or once a quarter at the very beginning. Another way is to hire your own cleaner, who can enter the apartment once every two weeks. This, of course, reduces profitability. However, my experience shows that it is also the most effective solution when it comes to knowing what is happening in the apartment.