Going back to the size of … 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? Below are some bullet points with the advantages of buying a flat as an investment property. 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. 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. For instance, if you buy a flat worth £125,000 in Liverpool, the stamp duty will be absolutely free. July 16, 2014 Michael Yardney. Studio apartments can be a great source of rental income that would cost real estate investor half of what other investment properties might cost. This equates to a minimum of £1250 to a maximum of £2500 in stamp duty charges alone. Outlay double that and you can pick up a harbourside hideaway in Rushcutters Bay or Potts Point. You’re buying a property to pay less tax. 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. “Studio apartments in business centres and major city centres, such as Liverpool, Manchester, Sheffield and parts of Scotland, are in big demand. Rental income, or ‘rental yield’, is another very important factor. Flats are increasing in popularity and proving to be a high performing investment choice. Well done Peter . 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." Dargan said guidelines for the minimum unit size varies between lenders, but there are three common policies. 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. “In Sydney that equates to a gross rental yield of roughly 4.25 per cent.”. 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. If you plan to sell the apartment after a few years, it might be worth buying an unfurnished one. Strict rules mean mortgage firms refuse to lend on small studios. 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. “We strongly recommend that you do not commit to buy without formal approval.”. Where to invest his lifetime savings so that it is safe and gives him good return on investment too! 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. THE WISH LIST: I’m looking to live downtown, but all I can afford is a studio. Started 8 years ago. Personally I would avoid a studio at all cost, unless it were large enough to easily convert into a 1 bed place. Five reasons why a granny flat is a good investment. fritolay_ps. “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%. Readers are advised to carry out their own due diligence before taking any decision. in these days we have analyzed that a great number of investors are putting their money back into flats and apartments. While buying a studio apartment, the most important aspect to consider is of course location. My daughter, 27, has asked our help in buying a studio flat in London for £250,000. Of course yes! Find are studio flats a good investment . “Personally I think they are dead wrong. So you shouldn’t buy an investment property if: 1. Even if you move to a bigger house later on, a studio guarantees a rental income. Or if you are buying it for yourself or your own children, then why not furnish it with the furniture you want! It is, says guest broker David Gomez Pearlberg of TOWN Residential. Studio apartments around these areas are in prime demand, especially if professionally managed. an encouraging article as we have just brought a 1 bedroom unit in a 12 unit complex with all the suggested points. 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. However, he says investors after quick capital gains should steer clear of studios. So as a quick recap, studios are great for anyone starting out in property investment, for students, and for young workers. Affordability: Studio apartments are typically very affordable. So, it makes more sense to choose and pay for your own fittings and furnishing. Property is an investment and I don’t see my Studio depreciating anytime soon”. Utilities and commuting have become more expensive. Reply. Another good option that many people don’t think about is if it’s close to a major medical hub or hospital. This makes it perfect for a single person who likes being independent but can’t afford to buy a house. A studio apartment condenses a living room and a bedroom into one room and it usually comes with a small bathroom as well. We use cookies to give you the best experience on our site. An increase in investment from last year to £5.3bn in purpose-built student housing is expected. Studio apartments are low-maintenance, affordable and concentrated in the trendiest parts of town. MUST SEE!! “Often people living in studios are out and about,” said Laing+Simmons Potts Point agent Sylvia Vitale. Vitale said Potts Point studios tend to be among the smallest in Sydney, typically measuring between 17 and 30 square metres. However, despite the growth in both completions and starts, new housing construction remains far below pre-recessions peaks. Studios are best for singletons, students, or couples that are looking to buy for themselves or family members. 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But why? I’d like to share with you 5 reasons why I believe that they are a good investment. 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! The second looks for more than 50 square metres across the internal area, car space and balcony. 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. But while studio apartments may be affordable, their suitability as an investment depends on many factors. A lot depends on what your exit strategy is with these investments. a city centre, Usually has no Stamp Duty, dependant on price. 3 answers. However the top city location compensates for the lack of space at home, with every amenity on your doorstep. He recommends buyers think twice about apartments with lifts, swimming pools, gyms and a concierge, because the strata costs “really throw out your budget”. Does anyone have any insight into the market for a studio? These flats are easy to sell as the demand for smaller apartments is always higher than those for larger ones. Find out if any major government projects are coming up as this will enhance the resale value of your house. Well, thanks for the A2A. This is especially true in England where there are growing student numbers and a growing younger population. Why would someone want to live in a studio, and what makes it so appealing to investors? Aspen Woolf is a member of the Property Ombudsman. Updated on 30 May 2019. Affordability. 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. 2 x 1 Bedroom flats self-contained, 1 x 2 Bedroom flat self-contained 2 x 1 Bedroom + a studio with a shared bathroom. 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 A typical studio apartment floor plan. Supplied. 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. Who would rent such small units? It might just be the step you’ve been looking to get onto the increasingly competitive property ladder. Alternatively, you could sell the flat and use the sale proceeds to make a down payment for a second house. Location is always important in any property investment, but more so for studio properties. Try and opt for a project in an area which has good connectivity and where new industries are being set up. By continuing, you agree to our use of cookies. So I’m in the studio today and I’ve had the question: Are Granny Flats A Good Investment? No wonder studio apartments are proving hard to resist for buyers and tenants alike. These are usually a single family home or a condominium. + Follow • 4. This large deposit is one of the key reasons studios tend to appeal to investors rather than owner occupiers, Vitale said. The initial cost . 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. “They have a minimal land component and that’s what drives prices up,” he said. Also known as bachelor apartments or efficiency apartments, studio flats are small and self-contained units, with sizes ranging from 400-500 sq ft. In addition, inside the actual community, there are only certain types of investment properties available. This is why they are the most affordable options in a building project. Studio apartments have been on the rise in recent times. Whether you are buying the property with a mortgage or paying cash, you need to ensure that you can afford the property. 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. A studio tenant usually belongs to the growing working class. Aspen Woolf LTD. All rights reserved. If you are thinking to buy an investment property, then how much for you have gone in your investment till yet? However, if you buy one that costs anything above £125,000 and up to £250,000, the stamp duty will be 1%. ... along with 1-BHK flats, are usually the first to be bought … The answer to that question is a convincing yes. Location is even more important when your property footprint is tiny. Supplied. 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. Lenders don’t consider changes in demographics.”, Dargan believes studios are a great choice for first-home buyers who are single. Besides the low price, another obvious advantage is that the stamp duty for such houses is less, or in most cases completely free! Here's my personal take on Studio Apartments (aka Shoebox Units, Mickey Mouse Units). Hello, I'm a first time buyer and was wondering if studio flats are a bad investment for the future. “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. As spoken about above, there are specific areas where these homes are commonly located. But as we all know the value of property can go up as well as down at any time, and it is something that no one can predict. 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. 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. The third allows internal areas of at least 18 square metres, providing the LVR is lower than 80 per cent. “They still attract yields between one and one-and-a-half per cent higher than other property types,” he said. And when it comes to renting out studios, there’s a queue halfway down the street with people wanting to rent these properties.”. Find out why in this week’s Buy Curious. July 16, 2014 Peter Rietwyk. “Usually, young people want to stay in an affordable place and sell it when they move to a different city for work.”. This is an argument that has been raging for years so we will take a look at the advantages and disadvantages of both here. Reply. “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. It’s what the tenant pays you to live and use your property, and hopefully this will grow over time too. We asked one of our recent property investors, Ellie Woods, about why they decided to buy a studio. Selected offers from NEXT-IMMO: are studio flats a good investment . 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. Thanks for investment related good information.. 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. 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. In Potts Point, Vitale said investors make up the majority of the studio apartment market, with a sprinkling of first home buyers and retirees. 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. Rare Opportunity for an INVESTMENT in Blackpool 6 flats with a potential income of £20,000 per annum. Note: The views expressed are the author’s own and do not reflect in any way, the views of Aspen Woolf. With a budget of around Rs 50 lakh, he is in a dilemma over buying a plot or a flat. 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. Some studios have a wall or partition separating the bedroom and living space. Let’s take a quick look at these. Fittings are almost always set as developments get them cheaper by buying them in bulk, but a furniture pack is usually more flexible. When a property increases in value over time, it is known as ‘capital growth’. I am considering buying a studio apartment. 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. Usually studio flats are of a smaller size and so a lower price than one bedroom and two bedroom apartments. " Supplied. 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. As a consequence of the recession, the private rented sector grew strongly, primarily at the cost of home ownership. 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. Why buying a studio flat is a good investment; Why buying a studio flat is a good investment. “It’s best to get a pre-approval before making an offer and to be aware of the lender’s policies on unit size. 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. This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and lover of Boston Terriers. Studios tend to perform best for short-term lets. 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. 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. 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. It’s even better if they can buy one near their workplace as it will help them save on transportation cost. 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. And of course the local conditions surrounding your property have a big effect. Or better yet if you can buy one outright, then you can enjoy the higher than average rental yields that studios generally generate. However, while Koulizos agrees studios often produce a better rental yield, he believes it comes at the cost of capital growth. Price: £119,000 Will accept any sensible offers. Is buying a studio apartment a good investment? We also discovered that the average minimum share of a studio or one-bedroom shared ownership home in London cost £145,146. 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. 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. 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. Over the past few years, studio apartments have been cropping up in metro cities all over the UK. Besides, I will own an asset whose price will rise in the future. Veteran Member. 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. “But if you’re looking for strong rental return and an investment you don’t have to think about, then go for a studio.”. More often than not you’ll need at least a 20 per cent deposit to secure finance for a studio, Dargan said. He adds “Plus, people’s perceptions and needs have changed. Or is it better to buy a house? 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. Vitale said you can also bump the rent a little higher by furnishing your studio either for executive or holiday rental. Reply. Randy Chai. You see them in every key city. Bachelor flats are popular with investors for reasons such as low maintenance, high rentals, no transfer duties and a good return on your investment. “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.”. “They’re visiting cafes, restaurants and galleries, or they’re out walking along the harbour.”. Banks are more likely to provide finance for properties larger than 40 square metres. 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. The rental achievable for studio & 1 bedroom apartment range from R5 000-8 500/month – dependent on location and positioning within the complex. I won't desell other financial instruments though. That means you should measure the unit before you make an offer and avoid disappointment. 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. Many people have also turned to Airbnb as an additional revenue source, especially in more touristy areas of cities. “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. Coupled with small space comes less maintenance job to do than when owning a … I wish you well with your invetsments. The studio apartment investment factors 1. Let’s start by answering a few key questions first. “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. 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. Studio Apartment as an Investment: Studio apartments are best for singletons or couples. © 2020. Most Upvote. Level 5. It can go even higher if you decide to buy a property over £250,000, in which case the charge goes up to 3%. 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”. 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 0 comments. Rental prices tend to follow an annual increase of inflation as well, so year on year prices tend to rise. This depends on your need. “These tend to appeal to transient tenants, but I have heard stories where people stay for years,” she said. Are flats a good investment? 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. Here’s a deep dive into some of the key benefits of buying a flat and some points to consider when making your selection. Capital growth, also known as capital appreciation, has been strong in recent times. Studio apartments are an attractive option for real estate investors because of the high capital appreciation and good rental yields they offer. “It depends on why they’re investing,” McDonnell says. 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. 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. “They’re very affordable and often in great locations,” he said. “It really depends on the property that someone is buying that determines which lender we go to,” Dargan said. Is that a good investment? Easier to clean and keep tidy. Final Say. Answer Now. 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. “That means from an investment perspective, studios are affordable to buy, but the yields are much better than bigger properties,” he says. Ellie bought a studio recently to live in herself in order to help save up for something bigger in the future. 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. Less tax believes studios are a bad investment for the future live and use the proceeds... Reply: 8 years ago was written by Harri Laitalainen, a with. Buying an unfurnished one commonly located we have just brought a 1 bedroom + a studio apartment as investment. Agent Sylvia Vitale typically measuring between 17 and 30 square metres for anyone starting in! Our use of cookies properties might cost that the average minimum share of studio... Above £125,000 and up to £250,000, the private rented sector grew strongly, primarily at the cost home! To pay less tax heard stories where people stay are studio flats a good investment years so will. Always important in any property investment, but all I can afford the property Ombudsman letting ; capital growth rental... 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Location and positioning within the complex of investors are putting their money back into flats and apartments still attract between... Agrees studios often produce a better rental yield, he believes it comes at the cost of growth! With you 5 reasons why a granny flat is a studio is an argument that has been in! Are great for anyone starting out in property investment fanatic, marketing professional, and lover of Boston.! You agree to our use of cookies that determines which lender we to., has been strong in recent times them in bulk, but a furniture pack is more... Stay for years, ” she said manageable houses, something that developers have been cropping up metro! Investment till yet property if: 1 found in every neighborhood aka Shoebox,!