In the era of turmoil on the investment markets, many people decide to invest their funds safely, i.e. in real estate. Check out how to start investing profitably with limited risk.
If you have an apartment, you can rent it
- Long-term – you conclude a contract with one tenant or several tenants, usually for 12 months. It does not have to be a fully equipped premises – it all depends on who you are addressing the offer to. The tenant pays rent in the agreed amount.
- Short-term – in this case, it is about daily rental, which is mainly used by tourists, as well as employees on business trips. The apartments are fully equipped – often the owners even provide some groceries. This form of rental requires you to spend more time, but it can generate higher profits. After each stay, the apartment requires cleaning, changing bed linen, towels, replenishing personal hygiene products.
These two forms of rental are definitely different. Long-term usually requires less commitment on a daily basis, and you don’t have to invest in fully equipping the apartment. On the other hand, a good solution will be to provide the appliances necessary for life, such as a refrigerator, washing machine or gas stove.
In the case of short-term rentals, you have to spend a lot more time. This requires a greater investment in equipment, as well as buying a property in the right location. Tourists usually care about the proximity of the biggest attractions in the city or a place well connected to them. In this case, you also incur running costs due to housing fees, renovations, replacement of equipment and replenishment of missing products. You may also need a cleaning employee, find time to find tenants and service them. With this form of rental, it is worth considering entrusting the short-term rental service to a company specializing in this field. However, a big advantage of this form of rental is the possibility of achieving a higher profit. In addition, there is no risk of coming across a dishonest tenant who will not pay – usually an upfront payment applies. Short-term landlords also do not have to worry that the customer will occupy the premises and will not want to leave it, and such a problem occurs in the case of long-term rental.
Short-term and long-term rental – how much can you earn?
Both forms of investing can bring a satisfactory profit, while profitability can vary. Will the apartment be occupied by tenants all the time? What measures did it take to prepare it for rent? How much does it cost you to clean and maintain your apartment with a short-term rental?
There is no single answer to the question of which form of rental is more profitable. First of all, you need to assess whether you have the time to manage short-term rentals. While you can delegate such activities to the company, this will reduce the return on investment.
The profitability of long-term rental, assuming that the apartment has been occupied throughout the year, is 3-5%. In the case of short-term rental, it is usually 4-10%. On advertising websites you will find offers of ready-made investments, where sellers document a return on investment of over 10%. This is especially true for the so-called micro-studios, i.e. apartments divided into several smaller ones. If you want to start investing in this type of real estate, be sure to use the services of a specialist who will check whether the investment has been carried out in accordance with the art of construction. It is also necessary to verify the interest in renting on a given market and whether long-term trends in rental allow for a constant level of income from a given property.
Investment in an apartment and savings
The real estate market is not only for people with large capital. You can take out a mortgage to finance the purchase, and ideally, the income from the rent is enough to cover the installment. It is best when you have a high own contribution, because thanks to this the commitment can be cheaper and the monthly payment lower. Using a mortgage can allow you to buy more than one apartment, so perhaps you will get a better purchase price, at the same time managing the rental of several apartments next to each other will be an easier task. Contact our Financial Expert, who will analyze the offers and suggest where you can get the most favorable conditions.
Remember that every investment is associated with risk, so if you want to invest in the real estate market and invest your savings in this way, check the current market situation, assess your financial capabilities and only then decide whether it is a good time.