Investing in mikrokawalerki

Investing in mikrokawalerki

Apartments up to 25 sq.m. m., the so-called mikrokawalerki, find many both tenants and buyers. But is it worth investing in them?

Apartments up to 25 sq.m. m., the so-called mikrokawalerki, find many both tenants and buyers. But is it worth investing in them?

The so-called mikrokawalerki, that is, apartments with an area of usually 10-12 square meters, have not been present on the real estate market since today. However, recently there has been a noticeable increase in their number, which is due, among other things, to an increase in demand for this type of housing. The question arises whether it is worth investing in micro-cavaliers. So let's look at the pros and cons.

The growing popularity of mikrokawalerki has at least two reasons. First, due to their small footage, their price is affordable enough that even people with little credit rating or income, such as new graduates, can afford them. This price is also understandably tempting to novice investors who are thinking about buying a micro cavalier for rental purposes.

Most likely, even someone who purchased such a property for their own use will want to move to a larger apartment in a year or two, and rent out this mini version. And, most likely, he will find those willing, which, in turn, is connected with the social transformations taking place in the country. They are the second main reason for the growing interest in the smallest apartments on the market.

Who can rent a mikrokawalerki

An increasingly large group of Poles are single people who work long hours and also eat and see friends outside the home. An apartment is just a bedroom for them, so they don't want to spend too much money on it. However, they also do not want to share living space with roommates because they value their independence. Mikrokawalerki fit perfectly into the needs of such people - as long as they satisfy several conditions, which we will talk about.

Singles may want to both own a mini-apartment and rent it temporarily, which is obviously more interesting from an investment point of view. However, tenants can also be successfully sought among students, businessmen coming to the city as part of a delegation or to work on a specific project, as well as tourists looking for an alternative to a hotel. Let's not discount immigrants either.

What is an attractive mikrokawalerki?

Experts estimate that mikrokawalerki make up a relatively small percentage of the real estate market and are likely to remain so. The demand for them will not be very great, but there will always be people interested in renting. To be attractive to potential tenants, a small apartment must meet at least two conditions: be in a good location and be functionally furnished.

Location

A microcavalier in a suburb or small town will be a bad idea, because the audiences listed above are more interested in the centers of large cities. Thus, a tiny apartment must either be located in such a center or be very well connected to it by transport. Premises located near universities, tourist attractions or clusters of office buildings (for example, Warsaw's off-centre Mordor) will also have potential.

Functionality

It should be understood that mikrokawalerki can be called a variety of types of apartments, the common denominator of which is, basically, only the footage (from only 10-12 to a maximum of 23-25 sq. m.).

These may include large apartments divided in a not very thoughtful way, equipped with inadequate furniture and appliances. When looking at them, the word “cage” comes to mind, not “micro-cavalier”.

At the other end of the spectrum are units also called “micro-apartments.” Already at the project stage, the developers took care to equip their small space and use it as efficiently as possible. The solutions used can sometimes surprise you with their originality, and the furniture is usually made to measure and combines several functions. For renting such a room, of course, a much higher fee is charged, especially since the good location additionally makes the apartment desirable.

What you need to pay attention to when buying a mikrokawalerki

When purchasing a microcavalier, keep in mind that replacing existing equipment and furniture with new ones can be expensive, because standard (and therefore cheaper) items from the store may not suit you. When investing in a micro cavalier, you should be aware of this.

Just like the fact that, by law, a room with an area of less than 25 square meters. m. cannot have the status of an apartment. The alternative remains to purchase micro-premises on the secondary market or that real estate that has been officially assigned the status of commercial premises, because such restrictions do not apply to it. However, at least two complications arise here.

Firstly, in the case of official control, the intended use of such premises may be called into question, and this violation of the rules can cost you dearly. Secondly, if you are buying property on the primary market, you must remember that although the VAT rate for apartments is only 8%, in the case of commercial premises it increases to 23%. This means that when buying an apartment for 130 thousand zlotys, you must have almost 30 thousand zlotys to pay VAT instead of 10.5 thousand zlotys.

Property taxes and perpetual use fees will also be higher. The first tax in the largest cities is less than 1 zloty per square meter of residential space and almost 29 zloty per square meter of commercial space. The fee for perpetual use is calculated from 3% of its value, and not from 1%, as in the case of residential premises. Thus, you, as a landlord, must consider the need to increase the rental price or give up part of the earnings by allocating it to taxes.

How much do mikrokawalerki cost?

Another problem is the prices of micro-apartments. Due to the small footage, they can be reassuringly low: in Warsaw they start from 250 thousand zlotys, and in Wroclaw from 200 thousand zlotys. It is not surprising that for less wealthy people with limited credit ratings, this is often the only option for purchasing their own home. Large and expensive apartments simply remain out of their reach.

However, things are a little different if you look at prices per square meter. On average, this is 20 thousand zlotys in the capital, 15 thousand zlotys in Wroclaw, Krakow or Poznan. These values significantly exceed the average cost of purchasing a square meter of “normal” housing in these cities. This is worth considering because perhaps by adding a few tens of thousands you can buy a full-size living space, which may be a better deal in this situation.

How to avoid problems

Alternatively, the purchased apartment can be divided functionally into two micro-cabinets, connected by an entrance area and, possibly, a corridor. Such a solution is colloquially called a two-pack; an apartment divided into three smaller ones is, in turn, a three-pack, etc. Such investments can increasingly be found on the real estate market.

In addition to the lower price per square meter and the fact that for a small space it is often easier to find a tenant, among the reasons for the popularity of this phenomenon should also be mentioned the absence of the need to pay taxes and fees, as for a commercial space (because the entire apartment has more than 25 sq. m. ). True, in the secondary market, “instead of” VAT, a 2 percent tax on civil legal actions is applied, but when you purchase premises owned by a municipality, city or treasury through a tender, then you do not need to pay either VAT or PCC.

To this we can add the absence of problems in the case of possible control (whether the “communal” premises are used for their intended purpose), as well as in the case of a possible sale: the apartment is divided functionally, not administratively, so it is sold in its entirety, which ultimately eliminates the issue of rules regarding the minimum area of living space.

Skillful division of the apartment and completion, of course, require certain financial costs. Therefore, in any case, you should carefully evaluate the return on investment, regardless of whether you are buying an apartment for resale or with the intention of subsequently renting out the micro-apartments created on its basis.

How much can you earn by renting a micro-apartment?

When assessing profitability, you shouldn't forget about the income you can expect from rent. And they, in the case of microcavaliers, can be above average, as well as the prices per square meter mentioned above. The rental price depends on the location, functionality, standard and condition of the minicavalry, but is unlikely to fall below 1.5 thousand zlotys monthly. In Warsaw, for example, it is usually 1900-2800 zlotys. The average rental rate per square meter in the capital is now about 80 zlotys. However, in the case of micro-apartments it can reach 120-150 zlotys.

Is it profitable to invest in mikrokawalerki?

Like any other investment, investing in a mikrokawalerki y must be preceded by a careful balance of costs and benefits. This is the only way to find out the answer to the question of whether it will pay off for you. This is certainly an option when you can afford to buy several of these units and want to profit from short-term rentals. Even when one micro-apartment is empty or being renovated, others can earn money. If short-term rentals are the basis of your economic activity, it is possible (although not so simple) to also deduct said VAT.

It is to such people that the offer of developers is primarily addressed, who build entire buildings full of mikrokawalerki (so-called micro-apartments, built as hostels, apart-hotels or dormitories). Maintained to a high standard and attractively located, these premises can generate returns of 7-8 percent annually, almost twice as much as “regular” apartments. The latter, however, may still prove to be a safer investment for individuals focused on traditional rentals.

Legislation

With all this, you need to take into account the current legislation regarding small apartments in Poland.

Since the beginning of 2018, regulations have been in force according to which the minimum usable area of an apartment is 25 sq.m.

In accordance with the decree of the Minister of Development and Technology of October 27, 2023, amending the regulation on the technical conditions that buildings and their location must comply with (2023, paragraph 2442), commercial premises in new buildings, as a rule, must have a usable area of not less than 25 sq. m. (as well as living quarters). Introduced from April 1, 2024.

Source: website listaprzetargow.pl