Amazing Mathematics: Earning With Rental Properties

Занимательная арифметика: сколько должна стоить аренда жилья на Кипре, чтобы зарабатывать на этом?
15 October 2021 DOM LiVE
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Any owner is interested in how much their property can bring if it is rented out. Because rent is a stable passive income, an opportunity to get freedom of action.

The demand in Cyprus is very high all year round, in any district. Closer to the sea or in the mountains, cities or suburbs - there are tourists and locals, young families and students.

Which income can an apartment or house in Cyprus bring if you rent it out? Let's try to count. But first…

Apartment or house - which is more profitable to rent

The answer to this question can be absolutely unambiguous: it is profitable to rent out ANY property! Because the criteria of profitability in this case is not the type of housing, but its location, condition, area and other factors.

But if you are going to buy property in Cyprus and then you want to rent it out, then look at this question from the other side. Renting out an apartment is often EASIER than a house.

Why? It's simple:

  • demand for apartments is higher, especially in cities
  • it is easier and cheaper to maintain an apartment - this is especially important if you want to rent out something remotely
  • as a rule, the downtime between the arrival of new tenants in apartments is much less than in houses
  • an apartment is easier to resell if for some reason you want to do it.

A living example: in a private house with a swimming pool, you always have to solve many problems. Is the sewer clogged? Interruptions in light? Need some minor repairs? Cleaning the pool? And so on - many questions fall on the shoulders of the owners.

Конечно, их можно делегировать специалистам (кстати, агентство DOM оказывает подобные услуги), но не всегда это целесообразно.

С апартаментами все намного проще. Особенно если они находятся в закрытом комплексе – практически все проблемы арендаторы могут решить через управляющую компанию.

Так что вывод прост: сдавать квартиру чуть полегче, чем целый дом. Но везде есть свои плюсы и минусы.

Если приобретать новую квартиру – через сколько она окупится?

Окупаемость среднестатистической квартиры на Кипре составляет примерно 8-12 лет. За это время аренда покроет полную стоимость недвижимости, иногда даже с учётом всех налогов и дополнительных затрат.

Конечно, можно отнять от этого срока или добавить к нему 2-3 года, но это зависит от самих хозяев и от ситуации на рынке. Например, за последние 3 года средняя арендная плата в Лимассоле сильно выросла – чуть ли не на 20%. Поэтому владельцы лимассольской недвижимости уже получили ускоренную окупаемость.

Итак, чтобы подтвердить эти цифры, приведём пару живых примеров.

Первый – квартира в Лимассоле, в достаточно хорошем районе под названием Гермасойя. Это ближайший пригород, тихий и ухоженный, но при этом – с развитой инфраструктурой. До центра города недалеко ехать, добираться можно на авто или автобусе.

Небольшая односпальная квартира на 40-50 квадратных метров стоит (условно) 150 тысяч евро.

Of course, they can be delegated to specialists (by the way, the DOM agency provides such services), but this is not always profitable.

If you choose an apartment, everything is much easier. Especially if the apartments are located in a closed complex - tenants can solve almost all problems through the management company.

So the conclusion is simple: renting out an apartment is a little easier than a whole house. But there are pluses and minuses everywhere.

If you buy a new apartment - how much will it pay off?

The payback period for an average apartment in Cyprus is approximately 8-12 years. During this time, the renting will cover the full cost of the property, sometimes even taking into account all taxes and additional costs.

Of course, it can be 2-3 years more or less, but this depends on the owners and on the market. For example, over the past 3 years, the average rent in Limassol has grown dramatically - by almost 20%. Therefore, owners of Limassol real estate have already received an accelerated payback.

To confirm these numbers, here are a couple of live examples.

The first is an apartment in Limassol, in a fairly good area called Germasogeia. This is the closest suburb, quiet and beautiful, but at the same time - highly developed. The city center is not far away, you can get there by car or bus.

A small one-bedroom apartment of 40-50 square meters costs -/+ 150 thousand euros.

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If you rent it out, you can get about 1,300 euros per month. That is, this property will pay off in 115 months - this is 9.5 years.

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But there is a high probability that rental prices will rise during this time. If so, the payback period will be reduced.

The second example is a two-bedroom apartment in Paphos. It is well known that the cost of apartments and the rent is lower here than in Limassol. One-bed in the city can cost about 100 thousand euros.

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Renting such apartments costs 900 euros per month. Subtract small expenses (about them - a little below), and there will be about 850 euros. To return the full cost, the apartment must be rented out for 118 months, less than 10 years.

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It turns out that an apartment in Cyprus pays off in 8-12 years - we add several years +/- because of unforeseen situations, jumps and falls in the real estate market, personal circumstances and other moments.

If you buy a new home, how much will it pay off?

Let's see if the income of houses and villas is different from the income from renting out apartments. Let's look at examples again - it will be clearer.

Let's take a look at Larnaca, a city that is just entering the international arena. Foreign investors have already begun to pay attention to Larnaca real estate, but there is still no such excitement as in Limassol and Paphos.

This means that real estate is inexpensive, but in a few years the demand for it will grow sharply. This will raise the rent as well.

A three-bedroom house in the nearest suburb costs an average of 300-500 thousand euros. Let's take the average price - 400 thousand euros for a new house of 150 square meters.

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What is the reasonable price for tenants? Approximately 1,500-2,000 euros - depending on the condition of the house, area and courtyard. Since this is a new house with everything you need, it will cost 2000 euros per month.

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It will take 200 months to pay off. Much longer than for an apartment - that's 16.5 years!

But here you need to understand - Larnaca is now very appetizing. It is quite possible that in 5-7 years the rent will grow by a quarter. This means that you can safely reduce this period by 3-4 years.

Also, when buying real estate in Cyprus from 300 thousand euros, you can apply for permanent residence for you and your family.

But what if you take a look at an elite property? A living example can also be cited here.

A three-bedroom villa in the tourist suburb of Limassol can cost as much as several hundred thousand euros or 1.5-2 million. For convenience, you can take the arithmetic mean - 800,000 thousand euros.

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Renting such a villa for a month costs 5000-6000 thousand euros. This means that it will pay off in 133 months, or 11 years.

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It turns out that a separate house will pay off longer, but! All other things being equal, it will bring in more income than an apartment.

Short or long term rent

All examples were long-term rentals with monthly payments. But in tourist areas, there is always a short-term rental option. If you establish a flow of guests, then real estate (even a house, even an apartment) will pay off much faster.

Take the last example of a villa in Limassol. Such housing can be rented out for about 1000 euros per night in the high season. If you subtract 5 days for putting things in order, unforeseen downtime, etc., you get 25,000 euros per month!

But it will be hard to find tenants for every time, plus the off-season should not be discounted. Therefore, we will simply divide this amount in half. Again, everything is very arbitrary.

This means that a villa worth 800 thousand euros will pay off in 64 months, which is only 5.5 years! But you need to understand that this figure was obtained without taking into account various factors. In real life, it can take up 8-10 years.

Apartment and house expenses: per month and per year

Owning a property is not only an investment of capital, but also some recurring expenses. They should be deducted from the annual rental income in order to get a net profit.

Communal payments

As a rule, all calculated costs (electricity, water supply, gas, etc.) fall on the shoulders of the tenant, since they can never guess how much the tenant will spend on resources. This also includes Internet and TV bills. This arrangement is convenient for both the home owner and the tenant.

But other utility bills are fixed. This means that they can (and should) be included in the monthly rent. What are these payments:

  • garbage removal
  • sewerage system maintenance
  • common house service (elevator, adjacent territory, maintenance of the swimming pool in the complex, etc.)
  • regularly visiting specialists (gardener, pool cleaner) in a private house.

Of course, the property owner has the right to decide which payments to include in the rental amount and which not. Also, the tenant and landlord can agree on conditions that suit both parties.

Considering that electricity, water, gas and communications will be paid by the tenant, the landlord is left with the maintenance of the sewerage system, garbage collection and common expenses. The first two cost about 150 euros per year - or 12.5 euros per month. The total costs in an ordinary apartment building will be 40-50 euros per month, in a closed complex - up to 100 euros, and in business and elite classes, they can reach several hundred and even thousands of euros.

Insurance

In Cyprus, insurance is an optional expense item.

But the owner of the Cypriot real estate should still think about how to insure the property.

First, earthquakes. The strength of tremors on the island is very small, and there is usually no damage from it. But! According to statistics, about once every 50 years in Cyprus, there are serious earthquakes. And more often - floods and hurricanes. In this case, it is very, very good to have insurance.

Secondly, if you are going to rent out your home to others, it makes sense to take extended insurance. Which will cover flooding, fire, and other minor domestic troubles.

Real estate insurance for a year will cost 200-300 euros for an ordinary small apartment. If you want to take out extended insurance, then it will be up to 500 euros. For the house, the price will be more. The total amount of the insurance depends on the total value of the property and the insurance conditions.

Tax

Since 2017, the state tax on real estate ownership has been abolished. But municipal taxes still remained.

They are equal to about 1-2% of the cost of the property in January 2013. That is, an average apartment for 150 thousand euros will require a tax of 1500 euros per year. Or 125 euros per month.

Additional expenses

If the apartment is rented out, it is quite natural that regular cosmetic repairs and refreshment will be required from time to time. You may need to purchase any additional items - household appliances, furniture, replacement of doors, etc.

It is also worth considering that at least once a year you will have to repair something. Either the washing machine, or the mixer, or something else.

After old tenants move out and before new tenants move in, it makes sense to hire a cleaning service as well as laundry and dry cleaning services. For this you also need money.

Another question is a realtor. If you used their services, then it makes sense to include at least part of the costs in the rental price.

Learn more about owner housing costs

Summary: what rent to set to be in the black?

Of course, the easiest way is to open rental ads in your area and take the price of the property that is as close as possible to your own apartment/house. But in this case, there is the that you don't take into account something important. Therefore, it is better to calculate everything.

So, you want to pay off your apartment in 10 years. For example, let's take the already mentioned Limassol apartment for 150 thousand euros. You need to get15 thousand euros every year, or 1250 euros per month.

It is also necessary to add here all the above expenses: taxes, utilities, insurance, and so on. This is up to 2 thousand euros per year, or 165-180 euros per month.

Plus expenses for repairs, cleaning, contingencies. Let it be about 50 euros per month.

Total: the monthly rent must be 1,450 euros.

Tip: You can add 10-15% to the monthly rent if tenants want to move in with children or pets.

Of course, you can "stretch" the payback for a longer period and exclude absolutely all expenses (except for tax) by writing them into the tenancy agreement. Thus, you will visually reduce the cost of rent, but at the same time you will not lose a cent.

As soon as your apartment or house is fully paid off, it can be considered that it has begun to generate income. In the above example, the property owner will receive 1250 euros per month, or 15 thousand euros per year. And this is 10% of the total cost.

The same story is with the house - it will pay off a little longer, but it will bring a higher income.

Have you decided to buy an apartment or a house in Cyprus? Contact the DOM Real Estate Portal! The website has a huge selection of real estate objects - residential and commercial. Experienced agency specialists will be happy to help you make the right choice.

Read more:

  • What is the Best Time of the Year to Rent and Rent Out a Property in Cyprus? (link)
  • Types of property in Cyprus (link)
  • Rules for inspecting an apartment / house you want to rent in Cyprus (link)
  • Studio vs. 1 bedroom apartment in Cyprus. Which one is right for you? (link)
  • Permanent residence permit in Cyprus (link)
  • Rules for inspecting an apartment / house you want to rent in Cyprus (link)
Source: DOM LiVE
Photos: pixabay.com, DOM LiVE
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