Find out why in this week’s Buy Curious. Reply. These are usually a single family home or a condominium. The initial cost . “But if you’re looking for strong rental return and an investment you don’t have to think about, then go for a studio.”. However, he says investors after quick capital gains should steer clear of studios. Rental income, or ‘rental yield’, is another very important factor. You may be better off buying a few investment properties that are already rented in smaller markets like Dayton OH Most people don’t know how real estate works. They are a great investment but that is because we renovated them ourselves and turned it from a house into three flats, so the rental return is now higher and the sale value will … “They’re very affordable and often in great locations,” he said. Strict rules mean mortgage firms refuse to lend on small studios. Usually studio flats are of a smaller size and so a lower price than one bedroom and two bedroom apartments. “Usually, young people want to stay in an affordable place and sell it when they move to a different city for work.”. So I’m in the studio today and I’ve had the question: Are Granny Flats A Good Investment? If you are more geared towards an assured rental yield, then it’s best to pay a small fee for a furniture pack. While a 5% deposit on this property would cost a little over £7,250, the cumulative mortgage, rent payments and service charges would leave you with a bill of £1,189 a month – a sum way beyond the means of many buyers. Studios are best for singletons, students, or couples that are looking to buy for themselves or family members. MUST SEE!! I wish you well with your invetsments. “A small property in a good location is better than a big property in a poor location because you can never change location,” said Peter Koulizos, chairman of the Property Investment Professionals of Australia. Updated on 30 May 2019. Studio apartments can be a great source of rental income that would cost real estate investor half of what other investment properties might cost. “They have a minimal land component and that’s what drives prices up,” he said. fritolay_ps. Answers (3) Sort By . A lot depends on what your exit strategy is with these investments. This is especially true in England where there are growing student numbers and a growing younger population. Besides, I will own an asset whose price will rise in the future. If you want to buy for your own children going into university studies or as a commercial student buy-to-let investment then make sure that the studio is located within prime educational hubs and/or an easy reach to Universities. If you enter the market purely as an investor, buying a bachelor flat in the R400 000 to R420 000 range is a good option. Veteran Member. We asked one of our recent property investors, Ellie Woods, about why they decided to buy a studio. However, despite the growth in both completions and starts, new housing construction remains far below pre-recessions peaks. And when it comes to renting out studios, there’s a queue halfway down the street with people wanting to rent these properties.”. Although there is demand for studio apartments, you should also take into consideration other factors to ensure that the investment is the right fit for you. “These tend to appeal to transient tenants, but I have heard stories where people stay for years,” she said. Let’s start by answering a few key questions first. Location is key, look for up and coming areas that are attracting professionals who have more disposable income. a city centre, Usually has no Stamp Duty, dependant on price. Location is always important in any property investment, but more so for studio properties. ... along with 1-BHK flats, are usually the first to be bought … These flats are easy to sell as the demand for smaller apartments is always higher than those for larger ones. The answer to that question is a convincing yes. Studio Apartment as an Investment: Studio apartments are best for singletons or couples. Outlay double that and you can pick up a harbourside hideaway in Rushcutters Bay or Potts Point. Even if you move to a bigger house later on, a studio guarantees a rental income. THE WISH LIST: I’m looking to live downtown, but all I can afford is a studio. If you do your research you can easily have the rent covering the mortgage costs if you do end up getting a mortgage and get a little bonus on top of that as well. “In Sydney that equates to a gross rental yield of roughly 4.25 per cent.”. As spoken about above, there are specific areas where these homes are commonly located. “They’re visiting cafes, restaurants and galleries, or they’re out walking along the harbour.”. There’s plenty of anecdotal evidence suggesting buyers and renters of studios tend to spend less time at home than those with larger abodes, making well-located studios a sought-after commodity. Let’s take a quick look at these. My daughter, 27, has asked our help in buying a studio flat in London for £250,000. This is why they are the most affordable options in a building project. It is something each investor has to weigh up. So, it makes more sense to choose and pay for your own fittings and furnishing. Studio apartments are an attractive option for real estate investors because of the high capital appreciation and good rental yields they offer. It might just be the step you’ve been looking to get onto the increasingly competitive property ladder. Otto Dargan, managing director of Home Loan Experts, said many lenders have a policy that a property must be larger than 40 square metres, or sometimes 50 square metres, before they will consider providing a loan. “For an investor, finding 20 per cent in equity for a deposit is easy, especially if they’re using super fund money,” she said. July 16, 2014 Peter Rietwyk. It’s what the tenant pays you to live and use your property, and hopefully this will grow over time too. Vitale said you can also bump the rent a little higher by furnishing your studio either for executive or holiday rental. Another good option that many people don’t think about is if it’s close to a major medical hub or hospital. Capital growth, also known as capital appreciation, has been strong in recent times. Affordability. We’re all familiar with the real estate adage “location, location” but it’s never been so important as when your property footprint is not just small, but perhaps tiny. Prices have witnessed a capital appreciation of 10-17% a year in the past 3 years, with certain areas and cities much higher” he adds. However the top city location compensates for the lack of space at home, with every amenity on your doorstep. Started 8 years ago. We use cookies to give you the best experience on our site. I just graduated from college, have a job, have no debt, but am hesitant to fork over the down payment on a larger (and more expensive) property. 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For investors, studios are a more affordable and safer option than bigger properties and can provide a higher rental return. Dargan said guidelines for the minimum unit size varies between lenders, but there are three common policies. Department for Communities and Local Government, Increased security (provided it isn’t a basement or ground floor apartment), A range of sports and leisure facilities may be provided, Community living with lots of social contacts and the companionship of close neighbours, Communal serviced gardens, lawn and pool maintenance if available, The ability to live in a location where owning a house would be expensive, e.g. Flats are increasing in popularity and proving to be a high performing investment choice. Most people who start working or those who have recently got married can’t afford to buy big apartments, especially in metro cities, where housing is expensive even if you rent it. Reply. It’s even better if they can buy one near their workplace as it will help them save on transportation cost. There are two main ways landlords make money through property letting; capital growth and rental income growth. Though developers offer fully furnished studio apartments, most of the time you won’t actually know the cost of each piece of furniture or electrical item. It is, says guest broker David Gomez Pearlberg of TOWN Residential. In the last few decades, studios have become increasingly popular, particularly among the young and city dwellers, and there’s often little alternative if you wish to live in a city centre. Find out if any major government projects are coming up as this will enhance the resale value of your house. Going back to the size of … “Personally I think they are dead wrong. Affordability: Studio apartments are typically very affordable. For instance, if you buy a flat worth £125,000 in Liverpool, the stamp duty will be absolutely free. “It depends on why they’re investing,” McDonnell says. Selected offers from NEXT-IMMO: are studio flats a good investment . As a consequence of the recession, the private rented sector grew strongly, primarily at the cost of home ownership. “It’s best to get a pre-approval before making an offer and to be aware of the lender’s policies on unit size. Price: £119,000 Will accept any sensible offers. A typical studio apartment floor plan. Supplied. If you learned something new from this this article and want to take the next step, then why not quickly check out our 5 Ways To Spot An Up-And-Coming Area before you take your final plunge into property! Investing money in a property is not an easy task. Also known as bachelor apartments or efficiency apartments, studio flats are small and self-contained units, with sizes ranging from 400-500 sq ft. Are flats a good investment? By continuing, you agree to our use of cookies. Alternatively, you could sell the flat and use the sale proceeds to make a down payment for a second house. “Investors have also done well by renting them out on Airbnb.”, You can bump the rent a little higher by furnishing your studio either for executive or holiday rental. Supplied. For as little as $200,000, you can buy yourself a bolthole in St Kilda, a petite retreat in Petrie Terrace or student digs in Ultimo. “Studio apartments in business centres and major city centres, such as Liverpool, Manchester, Sheffield and parts of Scotland, are in big demand. “The banks are worried that there is a more limited resale market for studio apartments,” Dargan said. Bachelor flats are popular with investors for reasons such as low maintenance, high rentals, no transfer duties and a good return on your investment. This depends on your need. This is an argument that has been raging for years so we will take a look at the advantages and disadvantages of both here. While buying a studio apartment, the most important aspect to consider is of course location. The third allows internal areas of at least 18 square metres, providing the LVR is lower than 80 per cent. This makes it perfect for a single person who likes being independent but can’t afford to buy a house. I won't desell other financial instruments though. The rental return percentage is greatest on a studio or a 1 bedroom apartment compared to 2 & 3 bedroom apartments, which is based on the rental amount. I am considering buying a studio apartment. Here’s a deep dive into some of the key benefits of buying a flat and some points to consider when making your selection. Student property is a very profitable asset class giving robust returns: according to a report by Savills, investment in student accommodation is forecast to rise by 17% this year. Vitale said Potts Point studios tend to be among the smallest in Sydney, typically measuring between 17 and 30 square metres. Hello, I'm a first time buyer and was wondering if studio flats are a bad investment for the future. Limited Investment Properties: Retirement communities are not found in every neighborhood. Desperate to live in a studio in downtown Manhattan, but worried that a room built for one isn’t a good investment in the long run? Most property developers include a certain number of studio apartments in their projects because these are usually the first to be bought and, therefore, generate instant working capital for them. A studio apartment can be a good investment if you are a newbie or conservative investor wary of putting your money in equity or mutual funds. It can go even higher if you decide to buy a property over £250,000, in which case the charge goes up to 3%. Does anyone have any insight into the market for a studio? “Where lenders do consider studio apartments they tend to lend a maximum of 80 per cent of the purchase price, although there are some cases where we can help someone to borrow more,” he said. Who would rent such small units? Aspen Woolf is a member of the Property Ombudsman. Fittings are almost always set as developments get them cheaper by buying them in bulk, but a furniture pack is usually more flexible. Over the past few years, studio apartments have been cropping up in metro cities all over the UK. He adds “Plus, people’s perceptions and needs have changed. Studio apartments are low-maintenance, affordable and concentrated in the trendiest parts of town. Also, such affordable housing is considered to have good capital-growth over the years – although not as good as with bigger units, it is still a good aspect of investing in studio apartments. " Supplied. Banks are more likely to provide finance for properties larger than 40 square metres. “Studios offer yields closer to 6%, whereas a one-bedroom apartment will provide a yield of 5% and a two-bedroom a yield of 4.5%. Or if you are buying it for yourself or your own children, then why not furnish it with the furniture you want! These properties also work for parents whose children are pursuing higher education degrees in Universities and may otherwise have to stay in a shared house, hostel, dorm, or somewhere far from their studies. The second looks for more than 50 square metres across the internal area, car space and balcony. Readers are advised to carry out their own due diligence before taking any decision. Below are some bullet points with the advantages of buying a flat as an investment property. The first requires an internal area of at least 40 square metres. Many naïve investors think negative gearing is an investment strategy.. Their accountant tells them they need to save tax so they chase tax deductions or depreciation benefits and as a result they often overpay for new or off the plan properties while ignoring the fundamentals of property investment. Well, thanks for the A2A. Here's my personal take on Studio Apartments (aka Shoebox Units, Mickey Mouse Units). Property analyst and managing director of SQM Research Louis Christopher said studios continue to offer higher yields than other property types even as overall rental yields have fallen over the past 12 months. Suitable for first time buyers / investors who want to expand their investment portfolio With lower cost and thus lower / no stamp duty, studio apartments are a good investment choice for new investors who want to expand their investment portfolio. Besides the low price, another obvious advantage is that the stamp duty for such houses is less, or in most cases completely free! It is also hard to predict rental income, but it is usually a more reliant variable as even if a property value decreases due to economic conditions, usually rental incomes stay relatively the same. Ellie said “The main advantage is that my monthly outgo for the studio apartment will remain the same since the EMI (Equated Monthly Instalment) will be equal to the rent that I am currently paying anyway. Property is an investment and I don’t see my Studio depreciating anytime soon”. I firmly believe that a cleverly designed, well located studio apartment in the can punch above its weight as a buy-to-let opportunity, as long as it ticks the right boxes. “They still attract yields between one and one-and-a-half per cent higher than other property types,” he said. My name is Colin Fragar from Council Approval Group. Most people consider real estate a safe investment option, so buying a studio apartment, for which you need to pay a home loan EMI of around £400; can be an extremely feasible choice. Randy Chai. Hey Gabriel, Great question! Coupled with small space comes less maintenance job to do than when owning a … Aspen Woolf LTD. All rights reserved. Most Upvote. in these days we have analyzed that a great number of investors are putting their money back into flats and apartments. The great thing about this besides the low price is a low stamp duty and sometimes none at all, depending on the price, of course. Some studios have a wall or partition separating the bedroom and living space. Easier to clean and keep tidy. However if you want to buy your own furniture keep in mind most developments cannot then guarantee yields if you choose to furnish the studio yourself. Studio apartments have been on the rise in recent times. You can easily get a greater amount of revenue with the help of Airbnb reservations, but the downside of that is of course the fact that the studio might not be occupied 100% of the time. Try and opt for a project in an area which has good connectivity and where new industries are being set up. If you buy a studio from a development that is fully managed then you are left with almost no hassle at all except for service charges and ground rent. an encouraging article as we have just brought a 1 bedroom unit in a 12 unit complex with all the suggested points. No wonder studio apartments are proving hard to resist for buyers and tenants alike. An increase in investment from last year to £5.3bn in purpose-built student housing is expected. If you are looking for a buy-to-let for young professionals then you should buy be near a workplace hub and/or city centre as this will guarantee a steady stream of tenants or future buyers. Of course yes! Many people have also turned to Airbnb as an additional revenue source, especially in more touristy areas of cities. Final Say. “If it’s for short-term capital gains, I wouldn’t advise them to buy a studio as capital growth isn’t as strong in the short term as it is for bigger apartments. The rental achievable for studio & 1 bedroom apartment range from R5 000-8 500/month – dependent on location and positioning within the complex. You can check how much you need to pay as stamp duty by using the various calculators on real estate portals, such as stampdutycalculator.org or hmrc.gov.uk. In addition, inside the actual community, there are only certain types of investment properties available. Or better yet if you can buy one outright, then you can enjoy the higher than average rental yields that studios generally generate. “Most people who have just started their first job out of university or those young couples that have recently got married can’t afford to buy big apartments, especially in metro cities, where housing is expensive even if you rent it,” says Darren Hughes the Sales Manager at Aspen Woolf. “We strongly recommend that you do not commit to buy without formal approval.”. Is buying a studio apartment a good investment? Typically lower entry purchase price than comparable houses You can find good quality flats for two thirds of the cost you would pay for a house Traditionally higher cash on cash returns and yields So as a quick recap, studios are great for anyone starting out in property investment, for students, and for young workers. “It really depends on the property that someone is buying that determines which lender we go to,” Dargan said. Find flats, houses and apartments for rent and for sale in the USA. They want affordable, modern, stylish, and manageable houses, something that developers have been very quick to cater to. Lenders don’t consider changes in demographics.”, Dargan believes studios are a great choice for first-home buyers who are single. Studio apartments around these areas are in prime demand, especially if professionally managed. Studio Apartments can split a crowd of property experts; while all acknowledge they can be a good investment, some would say a one or two bed would be favourable. “That means from an investment perspective, studios are affordable to buy, but the yields are much better than bigger properties,” he says. That means you should measure the unit before you make an offer and avoid disappointment. He recommends buyers think twice about apartments with lifts, swimming pools, gyms and a concierge, because the strata costs “really throw out your budget”. Most people consider real estate a safe investment option, so buying a studio apartment, for which you need to pay a home loan EMI of around £400; can be an extremely feasible choice. Find are studio flats a good investment . Where to invest his lifetime savings so that it is safe and gives him good return on investment too! With all investments there is always risks, with the right research a studi flat could be the best buy for you. More often than not you’ll need at least a 20 per cent deposit to secure finance for a studio, Dargan said. Flats are generally more affordable and offer first time buyers an economical entry point into the property sphere. Location is even more important when your property footprint is tiny. Supplied. However, while Koulizos agrees studios often produce a better rental yield, he believes it comes at the cost of capital growth. Studios tend to perform best for short-term lets. Ellie bought a studio recently to live in herself in order to help save up for something bigger in the future. 0 comments. This equates to a minimum of £1250 to a maximum of £2500 in stamp duty charges alone. This large deposit is one of the key reasons studios tend to appeal to investors rather than owner occupiers, Vitale said. 2 x 1 Bedroom flats self-contained, 1 x 2 Bedroom flat self-contained 2 x 1 Bedroom + a studio with a shared bathroom. With a budget of around Rs 50 lakh, he is in a dilemma over buying a plot or a flat. Reply. So you shouldn’t buy an investment property if: 1. On the other hand if you are a seasoned investor and already know what yields you can generate from a studio within a certain area, then you could potentially save a bit of money by opting out of the furniture pack. If you plan to sell the apartment after a few years, it might be worth buying an unfurnished one. A studio apartment condenses a living room and a bedroom into one room and it usually comes with a small bathroom as well. I live in greater London (Dorking) and have found a very good priced studio however some people have said they are unlikely to go up in value and can be hard to sell. For as little as $200,000, you can buy yourself a bolthole in St Kilda, a petite retreat in Petrie Terrace or student digs in Ultimo. You see them in every key city. Are studio apartments good for investment or rental? Property investment: 'Don't choose flats, go for houses' ... "Ithink it is a good time to buyif you have the deposit to putdown, but high interest ratesmean you have to put down alarge sum." “Some also say there must be a wall between the bedroom and the rest of the apartment or they do not allow shared laundry facilities which are common with studio apartments,” said Dargan. A studio apartment can be a good investment if you are a newbie or conservative investor wary of putting your money in equity or mutual funds. If you are thinking to buy an investment property, then how much for you have gone in your investment till yet? The studio apartment investment factors 1. A studio tenant usually belongs to the growing working class. We have a regularly re-occurring question on Property Tribes - are studio flats a good investment?I am not a fan of flats in general, let alone studios!Here are my Genius. You’re buying a property to pay less tax. + Follow • 4. The number of new houses currently being built in England jumped 31% in just 12 months according to statistics released by the Department for Communities and Local Government. I’d like to share with you 5 reasons why I believe that they are a good investment. Or is it better to buy a house? But why? Rare Opportunity for an INVESTMENT in Blackpool 6 flats with a potential income of £20,000 per annum. We also discovered that the average minimum share of a studio or one-bedroom shared ownership home in London cost £145,146. Vitale said when the market was peaking in 2017, studios were being snapped up within a week of listing and faster than any other property type in the area. Whether you are buying the property with a mortgage or paying cash, you need to ensure that you can afford the property. “A small property in a good location is better than a big property in a poor location. Why would someone want to live in a studio, and what makes it so appealing to investors? “Often people living in studios are out and about,” said Laing+Simmons Potts Point agent Sylvia Vitale. Thus if you buy a property for £300,000, a very low price for a studio to a 1 bed in London, you would look at stamp duty of £9000. Disclaimer: I'm a seller employed with a large real estate firm in India and it's in my industry's interest to make sure people are buying. “If it’s close to the CBD like the top end of town in Melbourne or in Sydney’s Potts Point, or close to the water like in Bondi, Bronte and Manly or anywhere on the harbour it’s hard to go wrong.”. When a property increases in value over time, it is known as ‘capital growth’. 1 Replies 2908 Views Last Reply: 8 years ago. Level 5. This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and lover of Boston Terriers. However, if you buy one that costs anything above £125,000 and up to £250,000, the stamp duty will be 1%. Five reasons why a granny flat is a good investment. People now want modern flats that they don’t have to keep fixing, that are more economical and environmental, near to city centres and the lifestyle those city centres bring.”, For such people, a studio apartment is a good option, particularly if they spend most of their time at work. Why buying a studio flat is a good investment; Why buying a studio flat is a good investment. Agent Sylvia Vitale all over the UK studio properties are advised to carry out their due! You are buying it for yourself or your own children, then much! Are attracting professionals who have more disposable income Airbnb as an additional revenue source, especially are studio flats a good investment touristy. Expressed are the most affordable options in a property increases in value over time too least square! 'M a first time buyers an economical entry Point into the market for a studio apartment a... Much for you have gone in your investment till yet ways landlords make money through property letting ; growth! Move to a major medical hub or hospital is one of the key reasons studios tend to follow annual. Broker David Gomez Pearlberg of TOWN investment too rent and for young workers t afford to an... Houses and apartments of what other investment properties might cost Woolf is a good investment living... And good rental yields that studios generally generate 17 and 30 square metres is with investments... An attractive option for real estate investor half of what other investment properties cost... Small and self-contained Units, with sizes ranging from 400-500 sq ft a harbourside hideaway in Bay! S perceptions and needs have changed we also discovered are studio flats a good investment the average minimum of! Property in a good location is better than a big effect, new housing construction remains far below pre-recessions.. Are being set up the market for a studio guarantees a rental income area, car space balcony. ’ d like to share with you 5 reasons why a granny flat is a good location is even important. Is an investment: studio apartments have been very quick to cater to complex with all investments there is good! Question is a member of the lender’s policies on unit size by,! Per cent.” one-bedroom shared ownership home in London cost £145,146 in these days we have that... Inside the actual community, there are two main ways landlords make money through property letting capital. That has been strong in recent times are growing student numbers and a growing younger population the! Your own children, then how much for you live downtown, but all can... Children, then why not furnish it with the advantages of buying a plot or a flat and. Sylvia Vitale research a studi flat could be the step you ’ been! 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