How to make money work and invest it profitably in times when it is difficult to plan even a week ahead?
Purchasing real estate for rental purposes is one of the most reliable methods of investing money and providing a constant passive income.
Despite the fact that rental yields have been declining lately, as the cost of housing is growing much faster than rental rates, renting out real estate is still much more profitable than bank deposits. As it is known, in recent years, deposit rates tend to zero, and soon ECB may introduce negative rates on deposits for all banks in the eurozone.
Acquiring rental real estate is one of the simplest and most accessible investment tools. So, you have decided to invest your money in real estate, and the natural question arises - what to buy, a house or an apartment?
House or apartment?
The question of whether to buy a house or an apartment is both simple and complex. If you have a specific budget that exceeds average market prices, then you will be able to choose the best option from a variety of choices, and over time, your property will only increase in value.
However, if you have a limited budget, be prepared to choose from less favorable options. These may be either newly constructed buildings in less popular areas of the city or rather old buildings. It is also possible that the apartment or house will require extensive renovation, foundation reinforcement, or a complete replacement of pipes, which will make the investment less profitable. For this reason, it is better to spend money on an independent expert who will conduct a comprehensive assessment of the real estate object, and based on the results, you will receive the final amount of expenses, including repair costs.
When purchasing an apartment, pay attention to the utility bills, as well as the cost of maintaining the building and surrounding area, which in Cyprus is called Common Expenses. In new expensive complexes, this amount can range from a few hundred euros per month to several thousand per year. In the event of long periods of vacancy, this expense can result in significant losses.
New or resale property?
If you decide to buy an apartment, you can purchase it during the construction phase, buy a new apartment without a title deed, or buy a resale apartment. In any case, it is necessary to carefully calculate whether it would be more profitable to buy an apartment during the construction phase and wait for it to be completed, or whether it would be more profitable to buy an apartment that is no more than 5-10 years old. If you choose to purchase an apartment in a new development, statistically it is more advantageous to choose an apartment in a building that has already been completed.
Criteria for choosing
First, determine what type of rental you are interested in - long-term or short-term/daily rentals? Who is your target audience: students, young families, wealthy individuals, tourists? Can the areas you are interested in be classified as "residential", "business", "university", or is it the historical center of the city where there is more developed resort infrastructure?
Profitability
The average payback period for an apartment or house in Cyprus is 18 to 25-30 years. The business of renting out apartments involves significant initial investments, which require a long payback period before it starts generating income.
Number of rooms
Studios and one-bedroom apartments are in high demand in Nicosia. There is the lowest demand for three-bedroom apartments. They are the least profitable, so if the budget allows, it is better to buy two or three studios or one-bedroom apartments instead of one apartment with three bedrooms.
Despite the large number of such options on the rental market, they are in high demand and are quickly rented out, especially in the "student" areas of Aglantzia (University of Cyprus), Engomi (European University), and Makedonitissa (University of Nicosia). Thanks to this, the owner of the apartment can choose tenants and set a good rental rate.
The situation with the rental of large apartments (three bedrooms or more) is often diametrically opposed: there are enough offers, but the demand for them is small, so owners have to fight for tenants by lowering the price.
Housing class
When buying real estate for long-term rent purposes in Cyprus, it is necessary to first determine the price segment you are targeting. An apartment in prestigious areas of Nicosia will be more expensive, but the income from it will be higher. Housing in a suburban area with good infrastructure, where new houses are being built (for example, Latsia), will be cheaper, but there will also be a good stable rental rate.
An apartment in an old building, even if it is located in a good area, will be relatively inexpensive, but you should not count on a good rental price. In addition, the purchase of such an apartment means constant expenses for repairs, including major repairs (replacement of pipes throughout the building, roof repairs, elevator repairs - and you will not be able to avoid participating in common expenses, otherwise the management company will sue you).
Security deposit
In Cyprus, the amount of the security deposit usually equals one month's rent (less commonly two months' rent). Experienced landlords advise increasing the deposit, especially if the apartment has undergone recent renovations or has expensive, high-quality furniture. Additionally, replacing the security deposit with property insurance can be a mutually beneficial solution, with the tenant paying for the insurance.
You can get detailed information about all the projects in Nicosia from the specialists of the #1 real estate agency in Cyprus, DOM, by phone at +357 22 030670, or in person at Archiepiskopou Makariou III 1, Lakatamia 2324, Nicosia, Cyprus.
Also read:
