One-bedroom apartments as ideal investment properties

One of the advantages of buying a one-bedroom apartment as an investment property is its relatively low price. The low purchase price combined with low interest rates ensures reliable increases in value in often attractive and central locations. Buyers enjoy an attractive rental yield thanks to high rental income and significantly lower maintenance costs. The disadvantages include slower capital growth compared to larger apartments, as well as the capital risk associated with frequent tenant changes.

One of the most obvious advantages of buying a 1-bedroom apartment as an investment is the size – the smaller the apartment, the cheaper it is. For potential investors on a budget, properties also known as studio apartments are a boon. They also offer those who cannot afford to invest in larger apartments in the city center an opportunity to invest their money wisely.

Although the increase in value depends on several factors and is difficult to predict or measure, it is believed that more affordable properties such as 1-bedroom apartments can pay off handsomely, especially in the medium to long term. Property prices in Berlin have risen by more than ten percent per year over the last ten years, meaning that even relatively low prices have seen considerable growth over time. However, this is exactly what characterizes real estate as a capital investment. They are considered low-risk due to their low volatility. Low price fluctuations mean slower but more steady growth. Although capital growth is slower for one-bedroom apartments in particular, the security of the investment is all the greater. Added to this medium to long-term perspective is the fact that there is no capital gains tax on properties if they are not resold for at least ten years. So the longer you hold on to a property, the more profitable the investment will ideally be.

For those who find it more difficult to exercise patience, 1-bedroom apartments promise another advantage: on average, they achieve a higher rental yield. Due to factors such as their high functionality and often central location, rents per square meter for studio apartments are higher than for larger apartments. The ratio of the higher rents to the favorable purchase price increases the yield. The location factor deserves to be emphasized once again. It is one of the most important factors when deciding whether or not to buy an apartment. In the case of 1-bedroom apartments, the location is even more important. Buyers are well advised to buy where tenants are drawn to. And since the tenants of small apartments are primarily students and young professionals, it can’t hurt if there are business centers or universities nearby.

In line with the lower costs, buyers of smaller apartments also have less maintenance work to do. It is certainly possible to do smaller jobs yourself. After all, it’s easier to paint four walls than twice or three times as many. And even if you don’t have the skills for it: less space means lower costs and less time spent on renovations immediately after purchase or possible repairs after several years of tenancy.

Where there are a number of advantages, there must also be disadvantages – although not many. One of the disadvantages is the work involved in dealing with tenants. As a landlord, you may have to deal with re-letting the apartment, late rent payments and the resulting loss of income. Although the size of the apartment does not actually play a role here, there could be more frequent tenant changes in studio apartments, as the target group in large cities primarily includes young employees and students. For aspiring workers, the small home may be an interim solution and for students it is limited to the duration of their studies. However, this only results in a marginal amount of additional bureaucracy.

Just as every real estate investor, regardless of the size of the apartment, is confronted with the ‘care’ of the tenants, all those who buy an apartment should be aware that the financial flexibility of real estate as an investment is rather low. Once the money has been invested, it cannot be withdrawn at will. The occurrence of unexpected circumstances can therefore represent a risk that should not be underestimated in an already tight budget.

In summary, 1-bedroom apartments can be the ideal starting point for prospective real estate investors. While they are inexpensive to purchase, buyers enjoy a solid increase in value with comparatively high rental yields. The disadvantages tend to be independent of size and, like the administrative costs, are limited compared to larger apartments. If you are interested in investing in real estate in the future or if you would like to expand your investment portfolio, it is worth taking a look at the 1-bedroom apartments we offer.