If you want to be investing in Real Estate, and you’re interested in Student Flats. In this video I’ll calculate a home.
I’ve been a real estate investor for about 10 years now. And I’ve invested my money in student flats, or student apartments or student homes, whatever you want to call them. Is it a good investment, and should you get started with that?
Let’s run the numbers first.
On average, a home in a student city, is somewhat around 330k
As for an investment, you need to have about 30% downpayment, 70% of loan from the bank. Meaning.
110k is your own money
220k is the loan of the bank.
The home is similar to an HMO (house in multiple occupation), meaning, you do have your own bedroom, but there are shared rooms like bathroom, living room, kitchen, garden, garage maybe.
In most cases you have 3 bedrooms, and sometimes 4.
For each room, you’re able to charge somewhat between 350-450 euros per room, depending on how big the room is.
For this calculation, let’s use 400 as an average.
Meaning for the student home, you’ll get 1200 euros per month, for a 3 room home.
Mortgage for the loan is about 900 euros per month
If you take 100 euros per month as insurance
100 euros per month as risk coverage, when things break.
That means you’ll have 100 euros net income from that property.
It’s still a positive cashflow, but very little money left per month. Not seriously interesting. When you use the calculation of Return on investment. It’s around 4% return.
how do you know that? Income divided by the purchased price.
The moment you have a fourth room in the home, the ROI goes up to 6%
Which is around 500 euros per month, a lot more interesting.
This is why so many investors in student flats, turn the living room into a bedroom as well, and then people can only share the kitchen, bathroom and garden together.
So is a student flat interesting? Only if you have enough rooms to create a positive cashflow that is interesting, otherwise… don’t
But, if you really want to make it interesting. Don’t forget, you’ll also get equity growth.
5k in mortgage
And 5% in equity value growth. Which is about 16.500 euros per year.
That’s 21.500 per year. Although you might be getting 100 euros cashflow per month.
But then again, that’s not money that you take out straight away. It’s equity growth.. let’s leave that for now.