There are at least 7 ways to make money on real estate in Europe
Gazety.Ru surveyed experts in the foreign real estate market to find out what kind of property you can buy to get a good income, and most importantly, in which countries it is worth doing.
Apartments
One of the most reliable ways to invest is buy-to-let apartments in major European cities. In Europe, people acquire their own housing much more slowly, and not everyone even feels the need for it, so there will always be clients. You can also earn from tourists, in which case it will be income from short-term rentals: it may be even higher, but planning occupancy is more difficult.
Experts at the foreign real estate broker "Tranio" advise paying attention to Austria – because about 43% of the population rents housing, so demand in the rental market is stable. A small apartment in Vienna can be bought for 150 thousand euros, rental yield will be about 4%. "Apartments are more of a savings investment; most of the return will come from the appreciation of the property itself," the company notes.
Managing partner of W1 Evans Anna Levitova considers the Czech Republic a good option for investment because property prices here are significantly lower than in other European countries. For 280 thousand euros you can buy a three-room apartment in the center of Prague near the embankment. The rental yield for such an option can reach 7% per annum.
If the goal is to obtain a residence permit (RP), an excellent option is Portugal, which currently has one of the most advantageous "golden visa" programs. In addition, the effects of the crisis are still felt here, and a purchase can be very profitable. According to Henley&Partners, housing prices in Portugal are on average 40% lower than pre-crisis peaks, but there is already positive dynamics.
Experts believe that real estate in Portugal will rise in price over the next few years, meaning what is bought today can be sold for more. The price growth is also facilitated by the RP program – attractive conditions have caused an increase in demand in the most popular destinations.
Hotel apartments
A fairly convenient investment method is hotel apartments; its advantage is that the hotel itself will take care of such property. You can sign a management agreement, and then you won't have to find clients yourself – moreover, the contracts often specify a guaranteed yield for a certain period. If they promise a return of 8-10%, you should be wary. Most likely, this is achievable only for a short term.
"Such a return is achieved very simply. The property is typically new and initially sold to the client at one and a half to two times the market price. Then the management company operates the property, pays the promised 8-10% of the cost over five years, and then refuses management, and the market rates for the property turn out to be one and a half to two times lower," warns Tranio expert Georgy Kachmazov. The normal yield for hotel apartments is up to 5%.
It makes sense to buy apartments in resort countries; good offers are available in Israel, Spain, and Portugal. As a rule, the contract stipulates that the owner can stay in the apartment for up to three months a year – that solves the vacation issue too. The average price of a standard one-bedroom apartment is up to 300 thousand euros.
Ski chalets
Another type of resort real estate for investment is ski chalets. Of course, they are best bought in Austria or Switzerland. "These two countries have been the strongest ski real estate markets for several decades, with high occupancy rates, long ski seasons, and developed infrastructure for summer and winter mountain holidays," says real estate investment manager and founder of Indriksons.ru Igor Indriksons.
But if of the two countries – leaders in this segment, Switzerland attracts more, it is worth remembering the restrictions for foreigners. Only 1,500 permits are issued per year for non-residents to buy real estate. At the same time, the starting price of a chalet is 112–120 thousand euros, and the yield will be about 5% per annum.
Apartment buildings
In Europe, apartment buildings are a very common business. In many large cities, there are multi-unit residential buildings where all housing is rented out.
The leader in this market among European countries is Germany, where 57% of the population rents housing. And in Berlin, 85% of residents already rent apartments. Buyer interest is growing in cities such as Cologne, Essen, Düsseldorf, Aachen, Duisburg, Dortmund, Oberkhaim. The owner's profit from renting out premises is 6-7% per annum. In central city areas, the yield is lower – up to 5% per year. In Berlin, prices for apartment buildings start from 3 million euros. In a good area of Düsseldorf, you can buy a building with 10-20 apartments for 1.5–2 million euros.
Hostels
A similar type of business is budget mini-hotels and hostels, but this investment is aimed at generating income from short-term rentals. Hostel rooms are typically occupied by young tourists. Therefore, unlike apartment buildings, which are rarely located in central areas, hostels should be bought in major tourist cities and areas.
According to Tranio, the yield of a hostel is about 6-8% per annum depending on location and property quality. A hostel with nine rooms in the center of Barcelona costing 1 million euros brings a return of 6% at an average occupancy of 80%. The minimum investment to open a small hostel is 300-500 thousand euros for a property needing renovation and from 1-1.5 million euros for buying an existing business. Such properties pay for themselves in about ten years with proper management.
Supermarkets
A popular type of investment at the moment is supermarkets, which can be bought as a ready-made business or leased to chains. According to Knight Frank, the yield of supermarkets in Germany and Austria, where such business is most profitable, can reach 7-8% per annum. However, Marina Kuzmina, head of the foreign real estate department at the company, notes that such properties usually do not come onto the open market but are sold in private sales.
According to Tranio, the budget for buying a supermarket in Germany is 3-10 million euros. The company's analysts consider the country's lease agreement specifics a major advantage. Tenants are typically large German chains that are accustomed to taking the property for 15 years on 'strict' terms, where neither the owner nor the tenant can refuse to fulfill contractual obligations. Therefore, even if the retailer moves out, they still have to pay rent for 15 years.
Storage lockers in warehouses
Recently, buying a locker in a self-storage warehouse complex, which can then be rented out, has become popular. 'Moves of individuals or companies accompanied by the transport of belongings become easier thanks to storage lockers that allow designating a space in the storage system. And investors can take advantage of this,' says Igor Indriksons.
The advantage of self-storage warehouses is the low entry threshold, meaning a relatively small cost. In the UK, where such a service is already common, the initial investment in a locker is 15-50 thousand pounds sterling. Yields, according to Indriksons.ru, reach 8% per annum. Self-storage warehouses exist on the real estate market in Germany, but there the cost of such properties starts from 700 thousand euros.