Yield in Budapest: Buy an apartment for a student shared apartment

Yield in Budapest: Buy an apartment for a student shared apartment

Studying abroad is always an adventure, at least at the beginning.

And this applies even more to Budapest, because here we not only have a foreign city, but also a completely foreign language! Hungarian is in a league of its own!

That's why sharing a flat with other foreigners is the ideal place to first arrive and familiarize yourself with the city and its people. If the landlord or his representative, i.e. us, also speaks German and English, it is always a huge relief.

This is a perfect target group for you as an investor because:

• We are currently talking about 32,000 foreign students post-pandemic, almost 12% of them from Germany. The overwhelming majority come to Budapest, so we're talking about a pretty big market.
• Students from abroad usually have a solid financial background: their parents' home. Studying at Hungarian universities costs a lot of money for foreigners - prospective dentists at Semmelweis University pay around 20,000 euros per year for the German-language course for 5 years. This cannot be achieved with Bafög.

This means that for this target group the cost of rent is not the primary criterion.

This is good news for you as an investor.

Important criteria for selecting an apartment suitable for shared sharing

Therefore, here are the 5 most important factors for your shared apartment tenants (and their parents!):

1. Proximity to the university: So, can I get to my university in 10 minutes on foot or in 1-2 metro stops? Those who have the choice want to be comfortable and not have to worry about bus timetables and transfer times. Cycling isn't an option - the only cyclists I see here are paid to do it - they're the ubiquitous pizza delivery guys.
2. Security: The more central the safer, that is the rule of thumb. On the other hand, you don't want to go to the sleepless party districts, and if you live next to the parliament, or even on the expensive Buda side, it's quite a long way to the university. Here you can see a map showing all international universities and faculties. The clumping in the 8th and 9th districts is clearly visible.
3. Location within the building: a pleasant environment for learning is bright (so definitely not on the ground floor), quiet (i.e. side street or facing the inner courtyard), and not directly in the attic - that just gets way too hot in the summer.
4. Structure of the apartment: Be careful with ex-AirBnB apartments. They are often styled to the point where it is no longer possible, but: AirBnB customers usually only used these apartments to sleep anyway. Therefore we see many with only 1 or 2 windows, located on the ground floor and facing the courtyard. This means: little daylight and bad, humid air in winter.
5. Furnishing: it's worth investing a little creativity. Simple but sturdy IKEA-style furniture, beautiful accent colors and good light ensure that the tenants feel comfortable there. This in turn reduces fluctuation and increases the chance of direct follow-up rental.     

At this point a little bit of self-promotion: That's our job: Find the right property, prepare it for the target group, and rent it out. Are you afraid of too much work with tenants and desperate parents calling you because, according to cell phone tracking, the boy slept somewhere else for two days? It won't happen because they won't get your number from us.

Back to topic.

We have now talked about the target group.

Prospects for value development of
Properties suitable for shared apartments in Budapest

Now let's talk about the actual objects. So the WHERE.

Things get even better here because:

The university districts are usually B locations that are not yet fully developed. This is your chance for performance that is far beyond the 2% that is always used in Germany, for example.

In addition: the price per square meter decreases with the size of the property. Apartments that are occupied by 3 or more parties provide a significantly higher net return than 3 small apartments that are rented to individuals.

Divide and conquer: When we carry out projects like this, we always pay attention to how suitable an apartment is for shared sharing and whether, for example, Through clever renovations, another rentable space can be created.

Here you can see an example (in the video).

First the original floor plan: there are 3 rooms. What you don't see here: in order to reach the third one, they put a HALLWAY INTO THE BATHROOM, which definitely didn't do the bathroom any good.

So here is our plan for the conversion: Remove the wall and then put an open kitchen in the old bathroom. A new bathroom with shower will be added to the chamber, and the old kitchen will become a large new room.

That makes 4 parties instead of 3, and the renovation budget of 20,000 euros generates net rental income of around 4,000 euros per year. You will get the additional investment back in 5 years, and if you want to sell the apartment afterwards - which is tax-free from this point onwards - you will then get the money again from the buyer. At least.

Last but not least: risk distribution. If ONE of 4 shared tenants fails, for whatever reason, your rental income will temporarily decrease, but it won't stop completely.

Let's come to the last point, HOW

When renting, it's worth having a clear positioning - and we'll help you find this BEFORE you buy a suitable apartment.

A few examples:

1. Specialization – How about a shared apartment just a few minutes from the University of Veterinary Medicine? Or film school? Students of the same subject among each other, that creates attraction. The result: little to no vacancies, with the help of appropriate Facebook groups or notices at the university itself.
2. Nationalities – the obvious ones are German students whose parents are delighted when they can communicate with us in German. But also interesting are e.g. Japanese students who are known for taking care of the apartment. I know these are stereotypes, but they seem to work.
3. Women's shared apartments - When I was researching apartments for our daughter to study, it was VERY important to me that it was a purely women's shared apartment. The alternative would have been to send my daughter to close combat training with the Israeli military, but again my daughter couldn't warm up to that.
   
   Maybe I'm a little paranoid.
   
   No matter, there are of course also very practical reasons for this choice - a men's shared apartment needs to be completely renovated after 2 years, while a women's shared apartment usually needs a sweep once. Sorry, I digress.

By the way: If we... Take care of tenant selection for you, we conduct Skype interviews with the candidates, seek security such as a parental guarantee, collect the deposit and take care of the “on-boarding”, i.e. takeover protocol, introduction to the house rules, etc.

This reduces your return a little, but the result is “passive income” for you - you then only have to deal with the property very rarely and can devote yourself to other things.

At this point I would like to thank you for still being there! You invested your time and I hope it was worth it for you.

Don't hesitate, contact me if you have any further questions.