What is important for the tenant and what should be important for the investor? Is it worth buying a new apartment from the primary market or is it better to buy a used apartment?
If you are thinking of buying an apartment for rent, keep focusing on primarily guided by the location. Location is important, but you can’t pay attention only to it. And so…. where to buy an apartment for rent? First of all, if you start investing in real estate, it is best to buy a flat for rent where you live, i.e. where you know the market and where you can easily serve your tenants. This is especially important if you assume that you will manage the rental of your apartment yourself. It is very difficult to handle an apartment for rent at a distance – all the more so when you are just starting your adventure with renting and you do not have much experience in it.
Also Read: Dubai apartments for sale cheap
Are you thinking of buying your first property? Be sure to read this article. When is the good time to buy your first investment property?
What is important for the tenant?
Imagine you are looking for a flat to rent. You are moving from another city and are browsing a page with offers of apartments for rent looking for a flat for you. What will you pay attention to when looking at ads? What selection criteria will be most important to you?
Few suggestions that a tenants should follow:
- The first feature that tenants indicate is the price – there is always a greater response to ads with a lower price than to ads with a higher price
- The cost of maintaining such a home must be low and predictable as far as possible.
- The flat must be clean.
- It should also be neatly finished.
- The proximity of public transport is very important.
What is important for the investor buying a flat for rent?
Well, but a flat in the center (in a better location) will always be rented more expensive than somewhere else! You’re right! But is it worth paying more to have a better location?
When buying a studio apartment in a great location, you will have to pay for example USD 200,000. You can rent it later for USD 1,500 per month plus community fees. It turns out that by buying a studio with a similar size, but at a distance of e.g. 500 m from the center, you can pay for it 50,000 USD less! Now check for how much you rent the second studio. Of course, when the location of the flat is weaker, the rent will also be lower. Let’s assume that the rent will be USD 1,200 per month plus community fees.
We assume that the fees to the community / cooperative will be the same.
And now we take the calculator and count:
The above calculations prove clearly that even if you rent your premises up to 20% cheaper, you will still get a higher rate of return on your money. See also that, regardless of the rate of return, you still have the funds that you can spend on buying another apartment. Therefore, remember that only by location you will often overpay for a flat. You must remember that people looking for a flat to rent usually sort ads at a price. Therefore, if you have a choice of two apartments in a similar location then it is worth buying it cheaper.
Used on the secondary market?
There is no clear answer here. It depends on what market segment will be your target audience. When renting, it doesn’t matter what flat you offer. A flat in a townhouse can be rented just as well as a new flat from the developer. If you invest in studio apartments, it is worth buying them as small as possible. According to the latest building regulations, you cannot build smaller apartments than 25 m2, so look for smaller studios on the secondary market.
If you want to buy a new apartment that is to be built, be sure to read this article. Is buying a flat from a developer risky?
What is the plus of buying an apartment on the secondary market? By buying such an apartment, which is in good condition, you can practically rent it right away. In addition, if the apartment meets certain criteria, you have the option of using the tax depreciation of 10% per annum. What flat is this? The flat must be fully owned and must be used for a minimum of 60 months before buying. (When you buy a flat from a developer, you first have lower purchase costs (you do not pay PCC tax when buying a flat of 2% of the value of the flat). In the apartment, all installations are new, so you can be sure that they will last for many years and there will be no unexpected expenses in the near future. You can finish such an apartment for your tenant.
Angelique Chrisafis is the Guardian’s Paris correspondent. She is responsible for churning out quality articles based on her research while keeping an eye on the tech world. She likes technology, gadgets, and food. Works as an individual contributor to the team.