ᐅ Multi-family residential building as an investment property in a city with an aging population
Created on: 2 Oct 2016 12:08
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MaxPower90
Hello everyone, my concern is not directly related to building a house, but maybe some of you will find it interesting and want to join the discussion, which I would appreciate. Given the low interest rates and the fact that I have saved some equity, I am planning to buy 3 to 4 smaller condominiums to rent out, or even better, a small multi-family building.
I come from the Ruhr area and want to buy in this region as well. Of course, with a property, just like with a nice vacation, I want good value for money. At first glance, for example in Herne, you can find properties without maintenance backlog yielding around 7% net annual rental return. In my opinion, this high return is linked to the fact that Herne is not an attractive city for any age group. I have reviewed all the population forecasts I could find online, and Herne is aging faster than average and is projected to lose up to 10% of its inhabitants by 2040.
My question to you is: Is investing in a city like this likely to be a losing strategy due to falling property prices and probable vacancies? Or could it also be an opportunity if the micro-location is good (shopping facilities, public transport, parks, etc.) and the building could potentially be converted to be barrier-free in the medium term? Especially considering the attractive rental yield and the fact that retirees, whom I imagine to be “good” tenants, might be the main target group.
I have never bought residential property before and find it really difficult to assess. I look forward to your opinions!
I come from the Ruhr area and want to buy in this region as well. Of course, with a property, just like with a nice vacation, I want good value for money. At first glance, for example in Herne, you can find properties without maintenance backlog yielding around 7% net annual rental return. In my opinion, this high return is linked to the fact that Herne is not an attractive city for any age group. I have reviewed all the population forecasts I could find online, and Herne is aging faster than average and is projected to lose up to 10% of its inhabitants by 2040.
My question to you is: Is investing in a city like this likely to be a losing strategy due to falling property prices and probable vacancies? Or could it also be an opportunity if the micro-location is good (shopping facilities, public transport, parks, etc.) and the building could potentially be converted to be barrier-free in the medium term? Especially considering the attractive rental yield and the fact that retirees, whom I imagine to be “good” tenants, might be the main target group.
I have never bought residential property before and find it really difficult to assess. I look forward to your opinions!
MaxPower903 Oct 2016 12:57The property I am considering is 20 km (12 miles) from the University of Bochum and 25 km (15.5 miles) from Dortmund. I find it unlikely that a student would want to move in since there are tens of thousands of other apartments between the house and the university. I would rather count on elderly people or newcomers.
So, do you think this is not such a good strategy? In a city like Dortmund, where the population is expected to remain stable or grow slightly, I would then have a 2% lower return on investment right away.
So, do you think this is not such a good strategy? In a city like Dortmund, where the population is expected to remain stable or grow slightly, I would then have a 2% lower return on investment right away.
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garfunkel3 Oct 2016 19:25Something like this is simply hard to say.
Have you already discussed your project with your house bank? What do they say about it?
I would also recommend consulting independent experts. That way, you get an unbiased opinion.
Have you already discussed your project with your house bank? What do they say about it?
I would also recommend consulting independent experts. That way, you get an unbiased opinion.
Since the mid-1990s, the population has been declining sharply both in Herne and throughout the Ruhr area. The Arnsberg administrative district has decreased from over 3.8 million to under 3.6 million, with projections continuing downward. Herne’s population dropped from 181,000 to 164,000. I would rather choose Cologne or Düsseldorf. Or if it has to be the Ruhr area, then Münster. Possibly Neuss in locations that are very well connected to Düsseldorf.
Certainly, these cities may have a lower initial yield, but in the long term they are “probably” the better investment. The surplus of apartments is not only a problem in Herne but also in almost all surrounding cities, which are mostly shrinking as well. More apartments become vacant than are newly occupied, leading to an increasing number of vacancies.
Certainly, these cities may have a lower initial yield, but in the long term they are “probably” the better investment. The surplus of apartments is not only a problem in Herne but also in almost all surrounding cities, which are mostly shrinking as well. More apartments become vacant than are newly occupied, leading to an increasing number of vacancies.
blockhauspower3 Oct 2016 21:24Grym paid close attention in geography. Münster and Neuss are now considered part of the Ruhr area.
I only checked Wikipedia, where it mentioned the Münster administrative district and the Ruhr area. Okay, it doesn’t refer to the entire Münster district, just part of it. The part about Neuss was not meant like that; that was thought of in a different direction.
So let’s make it simpler: Ruhr area = thumbs down.
Nearby, but no longer Ruhr area: Düsseldorf, Cologne, Münster. Possibly Neuss. I don’t know, I’m not familiar with it. Here with us, the core city’s price development, population growth, and housing demand also influence the surrounding towns. Depending on the area, you can get from Neuss to downtown Düsseldorf in 10-20 minutes. But Düsseldorf, Cologne, and Münster are definitely more reliable options.
So let’s make it simpler: Ruhr area = thumbs down.
Nearby, but no longer Ruhr area: Düsseldorf, Cologne, Münster. Possibly Neuss. I don’t know, I’m not familiar with it. Here with us, the core city’s price development, population growth, and housing demand also influence the surrounding towns. Depending on the area, you can get from Neuss to downtown Düsseldorf in 10-20 minutes. But Düsseldorf, Cologne, and Münster are definitely more reliable options.
blockhauspower3 Oct 2016 21:39Sorry for being pedantic, but as someone from the Ruhr area, I couldn't resist.
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