A great investment in the property market doesn’t always have to be costly. In fact, the return on investment (ROI) can be incredibly high for smaller apartments too, provided the quality of the area and the property itself can match the expectations of wealthy tenants.
ROI is indeed the magic keyword when you’re on the market for a bargain and looking to rent the property thereafter. Mathematically speaking, ROI is calculated by dividing the return for the amount you paid. If we’re looking at figures alone, an ROI above 15% is considered as a good investment by real estate experts, but many factors are involved and it is not always easy to reach such figures.
This is mostly because tax and rent vary significantly depending on the country and area you live in, and it’s harder to find a good vacant property at a bargain price if your market of reference is saturated.
External factors aside, it is still possible to maximize your ROI with some vision and hard work. Here are three great ways to do so.
Maximize available space
Investing on a small apartment means your investment will be relatively low and the return will be too. But a smart approach will go a long way in helping you increase the rent price. When buying a small property, it will really pay back to go for one with taller ceilings. This way you will be able to almost double up the space available with a mezzanine floor construction.
Mezzanine floors can give the apartment a post-industrial twist that will go a long way in making it more attractive for young and affluent urban dwellers. The rent will inevitably be higher than if only one floor was available.
Gentrification is a common phenomenon all around the Western world, so regardless of where you live in, look for the neighborhoods that hold the most potential for change and innovation over the next 5 to 10 years. Property might be still cheap around areas which used to have a bad reputation – yet many of these are changing for the better, and you will want to buy property there before everyone else does.
In order to do this you need to develop a strong knowledge of the cities you want to invest in, and keep exploring and asking questions to local residents. Considering that areas like London’s Shoreditch saw the average house value grow by 46% over the last three years, research can really pay off.
From house to hotel
A new wave of websites out there now allows you to rent an apartment to travellers from around the world for prices that can even be higher than the fancy hotel down the road. By renting a small apartment on AirBNB for over £50/night, you might be able to earn much more than you would by renting to a tenant. However, this option will require more involvement on your side as you will have to arrange regular visits from cleaners and meet new guests upon arrival.