These flats are easy to sell as the demand for smaller apartments is always higher than those for larger ones. Selected offers from NEXT-IMMO: are studio flats a good investment . If you are thinking to buy an investment property, then how much for you have gone in your investment till yet? I’d like to share with you 5 reasons why I believe that they are a good investment. Reply. 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. 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. + Follow • 4. A studio apartment condenses a living room and a bedroom into one room and it usually comes with a small bathroom as well. Studio apartments have been on the rise in recent times. Are studio apartments good for investment or rental? Limited Investment Properties: Retirement communities are not found in every neighborhood. “Personally I think they are dead wrong. It’s what the tenant pays you to live and use your property, and hopefully this will grow over time too. Alternatively, you could sell the flat and use the sale proceeds to make a down payment for a second house. Five reasons why a granny flat is a good investment. Note: The views expressed are the author’s own and do not reflect in any way, the views of Aspen Woolf. “Often people living in studios are out and about,” said Laing+Simmons Potts Point agent Sylvia Vitale. 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. As a consequence of the recession, the private rented sector grew strongly, primarily at the cost of home ownership. A lot depends on what your exit strategy is with these investments. Usually studio flats are of a smaller size and so a lower price than one bedroom and two bedroom apartments. 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." It is something each investor has to weigh up. Easier to clean and keep tidy. However, he says investors after quick capital gains should steer clear of studios. Utilities and commuting have become more expensive. “We strongly recommend that you do not commit to buy without formal approval.”. 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. Flats are increasing in popularity and proving to be a high performing investment choice. © 2020. Families of most people who have to undergo long treatments prefer to live in a studio apartment rather than shell out money for expensive hotel rooms. “But if you’re looking for strong rental return and an investment you don’t have to think about, then go for a studio.”. 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. 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. 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. “For an investor, finding 20 per cent in equity for a deposit is easy, especially if they’re using super fund money,” she said. Location is key, look for up and coming areas that are attracting professionals who have more disposable income. It is, says guest broker David Gomez Pearlberg of TOWN Residential. Is that a good investment? 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. 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. Veteran Member. 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 Try and opt for a project in an area which has good connectivity and where new industries are being set up. “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. Andrew Donnelly, CEO of property marketing firm Whiterock Capital Partners, says studios can command rental yields of 1% to 1.5% higher than one-bedroom and two-bedroom apartments. 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. This large deposit is one of the key reasons studios tend to appeal to investors rather than owner occupiers, Vitale said. They want affordable, modern, stylish, and manageable houses, something that developers have been very quick to cater to. While buying a studio apartment, the most important aspect to consider is of course location. The answer to that question is a convincing yes. Vitale said Potts Point studios tend to be among the smallest in Sydney, typically measuring between 17 and 30 square metres. Studio apartments around these areas are in prime demand, especially if professionally managed. 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. Genius. We also discovered that the average minimum share of a studio or one-bedroom shared ownership home in London cost £145,146. Despite a trend towards smaller household sizes and higher density living, studios continue to carry a stigma with many of Australia’s big banks, some of which won’t lend against a property they deem to be “too small”. This depends on your need. It can go even higher if you decide to buy a property over £250,000, in which case the charge goes up to 3%. You’re buying a property to pay less tax. Hey Gabriel, Great question! The initial cost . This equates to a minimum of £1250 to a maximum of £2500 in stamp duty charges alone. This is why they are the most affordable options in a building project. Lenders don’t consider changes in demographics.”, Dargan believes studios are a great choice for first-home buyers who are single. a city centre, Usually has no Stamp Duty, dependant on price. Of course yes! “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. Coupled with small space comes less maintenance job to do than when owning a … But why? 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Over the past few years, studio apartments have been cropping up in metro cities all over the UK. Another good option that many people don’t think about is if it’s close to a major medical hub or hospital. 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. And when it comes to renting out studios, there’s a queue halfway down the street with people wanting to rent these properties.”. A studio tenant usually belongs to the growing working class. For investors, studios are a more affordable and safer option than bigger properties and can provide a higher rental return. “In Sydney that equates to a gross rental yield of roughly 4.25 per cent.”. “The banks are worried that there is a more limited resale market for studio apartments,” Dargan said. Thanks for investment related good information.. But while studio apartments may be affordable, their suitability as an investment depends on many factors. We use cookies to give you the best experience on our site. 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. 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. Vitale said you can also bump the rent a little higher by furnishing your studio either for executive or holiday rental. And of course the local conditions surrounding your property have a big effect. THE WISH LIST: I’m looking to live downtown, but all I can afford is a studio. The studio apartment investment factors 1. 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. Well done Peter . July 16, 2014 Michael Yardney. 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. Outlay double that and you can pick up a harbourside hideaway in Rushcutters Bay or Potts Point. 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. Aspen Woolf is a member of the Property Ombudsman. 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. 0 comments. Strict rules mean mortgage firms refuse to lend on small studios. Reply. Or if you are buying it for yourself or your own children, then why not furnish it with the furniture you want! Rental income, or ‘rental yield’, is another very important factor. 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. However, despite the growth in both completions and starts, new housing construction remains far below pre-recessions peaks. Final Say. I wish you well with your invetsments. Who would rent such small units? This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and lover of Boston Terriers. 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. Find out if any major government projects are coming up as this will enhance the resale value of your house. So I’m in the studio today and I’ve had the question: Are Granny Flats A Good Investment? 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. The first requires an internal area of at least 40 square metres. Whether you are buying the property with a mortgage or paying cash, you need to ensure that you can afford the property. Or is it better to buy a house? Answer Now. Personally I would avoid a studio at all cost, unless it were large enough to easily convert into a 1 bed place. With a budget of around Rs 50 lakh, he is in a dilemma over buying a plot or a flat. Some studios have a wall or partition separating the bedroom and living space. This is an argument that has been raging for years so we will take a look at the advantages and disadvantages of both here. Level 5. 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