ᐅ Multi-family residential building as an investment property in a city with an aging population
Created on: 2 Oct 2016 12:08
M
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!
H
HilfeHilfe4 Oct 2016 07:43Alex85 schrieb:
I am very interested in the reasoning behind this statement.Why? The landlord risk has already been discussed many times. With “a bit of equity,” of course, 300,000 could be meant. In that case, I would all the more choose owner-occupied property before exposing myself to these risks. But to each their own.
HilfeHilfe schrieb:
Why? The landlord risk has already been discussed many times. “A little equity” could of course mean as much as 300,000 (in your currency). In that case, I would definitely choose owner-occupied property before exposing myself to these risks. But to each their own.I would rather argue that it depends on the return (including default risk).
A positive aspect is that it’s not just one condominium unit, but 3-4 units or a multi-family building. This means that the loss of one rental income is not a total loss. The more desirable the location, the better you can choose your tenants. This also reduces the risk of problem tenants.
With a good return, I can leverage my equity in the rental property, which I cannot do with owner-occupied property.
The problem is, where can you still find such properties?
H
HilfeHilfe4 Oct 2016 08:18Musketier schrieb:
I would rather say it depends on the return (including default risk).
A positive point is that it’s not just a single condominium but 3-4 units or even a multi-family house. That means a loss of one rental income does not result in a total loss. The more desirable the location, the better you can choose your tenants. This also helps reduce the risk of problem tenants.
With a good return, I can leverage my equity with a rental property, which is not possible with an owner-occupied home.
The problem is, where can you still find such properties?Exactly, prices are “bombed out.” Properties with attractive returns involve both opportunities and risks. I still consider it risky to first buy residential property for renting out while living in a rented home yourself. There is a certain appeal to owning a rental property you also live in, but not everyone wants that.
The big mistake is to lump investment properties and owner-occupied homes together. These are two completely different things that only "happen" to both involve real estate.
For investment properties, having a high equity stake is typically a return killer because the return largely depends on leverage.
It is clear that high returns correlate with high risk. However, this has just as little to do with avoiding investments before owning a home yourself.
For investment properties, having a high equity stake is typically a return killer because the return largely depends on leverage.
It is clear that high returns correlate with high risk. However, this has just as little to do with avoiding investments before owning a home yourself.
If you extend the line of thought from @HilfeHilfe, it would mean that someone without their own house also shouldn’t have larger stock portfolios, options, etc.
Living in your own rental property has the advantage that you can better supervise the responsibilities towards tenants, but conversely, it also means being the contact person day and night. If you don’t want that, it’s better not to live in the same building and instead have an external property management company.
HilfeHilfe schrieb:
A rental property that you live in yourself does have a certain charm. But not everyone wants that.
Living in your own rental property has the advantage that you can better supervise the responsibilities towards tenants, but conversely, it also means being the contact person day and night. If you don’t want that, it’s better not to live in the same building and instead have an external property management company.