Buying flats to let – is it worth it?

If you asked investors about potential alternatives to a bank deposit, you would most often hear about bonds or money market funds. Buying a flat to let also turns out to be quite popular. Admittedly, a standard bank deposit is a form of saving, while property transactions are more a form of investing, but the subject is worth a closer look.

Letting flats – worth it or not?

If at the beginning of 2014 you had analysed the data on the yield of letting flats in Katowice, the figures would have been encouraging. Values between 3.5 and 5.0 per cent are quite a good result when compared with the average interest rate on bank deposits. It is worth examining this form of investment more closely, though, so that you are sure what it involves.

Pay attention to mortgages

While cheap mortgages please everyone who is currently repaying one, owners of rental properties should take into account the risk this involves. What risk? The low cost of credit may lead some families who have so far been renting a flat to decide to buy their own.

Is such a possibility actually a big problem for flat owners? Not necessarily. Why? Mainly because of the additional requirements that banks impose on borrowers to offset the low cost of the mortgage itself.

READ ALSO – YOUR BIK CREDIT HISTORY AND APPLYING FOR A MORTGAGE

Which flats are best to let?

If a flat is to serve investment purposes and "earn its keep" through letting, you should be guided by specific criteria. First of all, it is best to choose small properties. Rental prices per square metre turn out to be higher for them than for flats with a large or very large floor area. This is particularly evident when you compare 30-square-metre flats with those of more than 100 square metres. According to data from Forsal.pl, the yield of the former can be as much as 30 per cent higher than that of the latter.

Interestingly, though, it is not only floor area that matters here. It turns out that when buying flats to let, it is worth paying attention to the number of rooms. The rule is simple: the more, the better. Three small rooms are better than two medium ones. Two cramped ones are better than one large space. There are cases in which it is worth considering redesigning the interior and moving partition walls so as to create an additional room.

Why? It turns out that many tenants value having a private space of their own. All the more so because some of them are looking for flatmates (this applies especially to young people, including students).

READ ALSO – A FLAT RESERVATION AGREEMENT

Location matters

If you are investing in a flat or flats to let, choose the location carefully. Properties in the centre or in a well-connected area will find people willing to move in much faster. What is more, you can charge higher rents for them.

Areas near universities can also be a good location, although in this case, for obvious reasons, you should expect a different type of tenant and a tenancy for only nine, sometimes ten months of the year – which should obviously be reflected in the rent.

Caution is needed, on the other hand, with properties in unattractive locations. The investment itself will usually be cheaper, but it may turn out that finding a tenant takes longer in some cases than we would like.

SEE FLATS TO RENT IN KATOWICE