When hunting for an off-plan property investment, studio apartments will almost always pop up. Studio apartments have been gaining popularity, especially in prosperous UK cities. These cosy little apartments may seem more effort than they are worth at first. However, you can definitely make a good investment on them, and here’s why.
What is a Studio Apartment?
A studio apartment generally means that the total amount of living space is contained in a single room with the exception of the bathroom. Basically, the bedroom area is in the same space as the kitchen and the living room. It is essentially the highest form of open-plan living. Studio apartments are by no means new. In fact, they have been around for centuries. These days studio apartments are particularly sought after in metropolitan areas. They offer an affordable renting solution, more so for young professionals looking to advance their careers in cities. In turn, they make an incredible property investment for investors.
What Is Off-plan Property Investment?
The term off-plan is used to describe a property within a development which has not yet been constructed or at times completed but is made available for purchase. Many investors prefer an off-plan property investment because there are usually several incentives to be had. For developers, they hope to find buyers before the construction is complete so that they aren’t left with vacant property for sale after the construction is complete.
The trouble with an off-plan property investment is that it can be a waiting game. Naturally, issues can arise and construction can hit delays. This can irk the investor. It is important to keep in mind that while delays don’t always happen, they are a possibility.
Increasing Demand for Rental Properties in UK Cities
In 2019, the number of renters increased significantly. Now that much larger mortgage deposits are needed to purchase property, young professionals are needing to rent first, especially in prominent UK cities. A large number of students actually remain in the cities in which they studied following their graduation. Many of them are finding that the job prospects there are much greater than they are back home.
Studio Apartments Offer Affordability
Another cause of demand for studio apartments is affordability. Generally, one and two-bedroom apartments afford more space and capacity which make them more expensive. Studio apartments, on the other hand, usually take up less space and have a lower capacity, making them cheaper. The affordability of renting a studio apartment means that they largely appeal to those living alone or couples hoping to save for their first mortgage deposit. Purchasing a studio apartment is usually more friendly on the savings as well. Investors purchase studio apartments to rent out as a way of building their property portfolios.
Easier To Maintain
Because of the open-plan living space and the smaller area, studio apartments are generally much easier to maintain. Less space means less mess, and that makes for an easier cleaning routine. Think of it this way: everything is on show with the bedroom, kitchen, and living area all being in one room hence guests will be able to see it all. Ultimately, this creates a greater incentive to keep the place neat and tidy. Aside from the cleanliness of the apartment, maintenance should also be minimal. With fewer walls, doors, and floor space there is only so much that needs maintaining. This again is beneficial for those on a tighter budget.
High Rental Yield
When looking at off-plan property investments to rent out, studio apartments generally give higher rental yields than one or two-bedroomed apartments. Also, keeping in mind that they are usually cheaper to purchase in the first place. On average the rental yields for most one or two bedroomed apartments is between 3 and 4 per cent. Whereas the average rental yield on a studio apartment is around 6 per cent. That is one of the main reasons that studio apartments appeal to many investors. It is also why a majority of first-time investors choose a studio apartment as their first investment. For more tips on investing in property, check out our Property Investment guide.
Affordability Results in Higher Occupancy Rates
Because of their lower rents, studio apartments tend to have higher occupancy rates. Those on low wages looking for a rental apartment to gain some independence will almost always search for an easy to maintain studio apartment. The same goes for couples that are trying to save some money for a mortgage deposit. As well as the rent being cheaper, other bills typically are as well. The smaller area could result in a lower council tax band and the open plan living area should mean that electric and heating costs are also lowered.
Development companies building these types of apartments usually find studio apartments are the first to sell. Quickly followed by the one bedroomed apartments. Larger apartments with more than two bedrooms are usually on the market longer. It is believed that because more space is obviously required by any potential buyers, a house could be more ideal. Prices of apartments with more than two bedrooms are generally much higher than one and two-bedroomed apartments. When comparing the price to a house there is usually little difference. For people needing more space, a house would provide private outside space and possibly private off-road parking.
Amicable for Investors and Renters
Many aspiring investors start small. Opting for an off-plan property investment is a very popular move among investors at all levels. Studio apartments offer many benefits to both the renter and the landlord. Currently, the demand for studio and one-bedroomed apartments outweigh the supply, making them desirable investments in 2019. As it stands, young professionals are struggling to find studio apartment rentals that meet their criteria and are instead, having to opt for ones they don’t necessarily like. Part of making smart investment moves is understanding what people want and where. Once you spot demand like this, its time to pounce.