Although there are plenty of opportunities to invest your capital, in the context of long-term investments real estate is one of the most certain ways of multiplying your funds.
According to the latest report on the real estate market published by the National Bank of Poland, rental is presently more profitable than bonds, providing return higher than interest rates of mortgage as well. Therefore, investing in real estate may be among the best ways of investing your funds. One of the top agglomerations for investing in real estate is the TriCity (Gdańsk, Sopot, and Gdynia). This is confirmed for instance by information included in the NBP report: ‘Information on Prices of Flats and the Situation on the Residential and Commercial Real Estate Market in Poland in Q1 2018’, where average asking and transaction prices of rent in Gdańsk were above PLN 40 per sq.m. since Q2 2017, but already at PLN 43 per sq.m. in Q1 2018. You have to pay more only in Warsaw, where an average asking and transaction price in Q1 2018 was at PLN 53 per sq.m. (source: NBP). In addition to obvious tourist attractions, an important advantage of the TriCity is its booming economy and the growing network of foreign investors and corporations. Both Polish and international companies are willing to open their headquarters in the region of Pomerania. The developing economy is another reason for the growing demand for apartments for executives and managers as well as key personnel.
ROI – Return on Investment
Regardless of the purpose of investment in real estate, the most important factor is the return on investment (ROI), which is also referred to as a capitalization rate, an annual return rate or IRR and is usually measured in annual periods. Investing in flats continues to be a good source of revenue, although much depends on the way real estate is managed. This is so because investments in real estate have become very fashionable recently and the supply more and more often exceeds the demand. It means that if you want your apartment to show the highest possible ROI, you have to adjust the method of its use to current circumstances.
Ways of investing in real estate
Investing in real estate may have many different forms. Rental alone gives a broad range of opportunities: a flat may be designated for long-term rental, short-term rental, or corporate lease. Therefore, before you take a decision to invest your funds, it is worth checking which option gives the best opportunities in terms of the return on investment and a risk level.
Corporate lease and return rate
From the perspective of buying a flat for rent, corporate lease turns out to be an optimum solution. With the traditional long-term rental, ROI is at about 4%-5% per annum, while from an annual bank deposit you can get approximately 2%. The most favourable is corporate lease, which offers profit in excess of 6% per year. While in the case of long-term rental parties of a contract are usually a landlord and an individual, in corporate lease a flat is let to large enterprises, companies and corporations, which often operate on an international scale. Corporate lease is characterised by higher safety of transactions (rent is usually paid directly by a firm), limited red tape, as well as higher and more certain profits. This is so because this type of investing in real estate increases also the chances of its full occupancy, which is definitely not the case in short-term lease. The greatest downsides of short-term lease include also an uncertain return rate, which depends on the occupancy of a flat, and prices of real estate, which have been growing in recent years. At locations that are most favourable for this type of rental, prices have achieved the level of at least dozen thousand zlotys per square meter. Importantly, outside the season, interest in short-term lease is low. Therefore, owners of such apartments, looking for lost profits, often come to Lasota Business Consulting in order to dedicate their real estate to corporate lease. In recent years, we have seen a large number of apartments that were initially offered in short-term rental. Owing to our comprehensive knowledge and long experience on the real estate market, we know where to invest to provide our clients with the highest possible ROI, which is the idea behind the LBC INVEST programme.
