Residential property investment has grown more popular in recent years. An increasing number of people are considering taking up this form of investment. One its major advantages is the fact that it is not as susceptible to economic trends as many other forms of investment are. Particularly, small apartments in growth centers are always in demand.
One reason for the popularity is the variety of options residential property investment provides. For some, a couple of rental apartments and a steady flow of rental income is the way to go, while others may want focus on increase in value or flip apartments, i.e. renovate and sell them off as quickly as possible.
Average rental profit has remained steady for quite a while. After regulations were eased off in the early 90s, rental profits have remained at approximately 3 to 4 percent. Investors have not only benefited from the profits but also from increase in value, particularly in growth centers. Increase in value is truly an important factor to consider in your profit calculation. As you look for an investment property, pay attention to its location and choose a city and an area where it is likely that property values are going to trend up.
Private landlords rent out over 300,000 apartments around Finland. This constitutes two thirds of non-subsidized rental apartments. Most private landlords are small-scale investors who own one or two apartments. According to a survey (in Finnish) by the Finnish Landlord Association, a common goal of residential property investment is saving for retirement. In other words, the span of a residential property investment is usually quite long.
The Finnish Landlord Association and Pellervo Economic Research PTT publish an annual forecast on future real estate investment profits. The forecast includes 24 cities and looks at rental profit, increase in value, and regional factors. The report is available here (in Finnish).
Regional differences are on the rise, particularly regarding increase in value, but average rental profit is likely to remain steady throughout the country. The best rental profit is made in smaller university towns. Recently, the increase in supply in growth centers has eased pressure to raise rent prices. They are expected to increase approximately two percent annually.
As a long-term investment, apartments have provided quite a solid protection against inflation, and good profits have been available in growth centers simply through increase in value. However, future is looking different. Investment property values are expected to go down even in the more popular regions. Local changes, such as major traffic initiatives, new residential construction, and decisions made by educational institutions and employers affect sale prices as well as rent prices. As a landlord, it is definitely worth it to keep up with local developments on a wider scale.
Published by the Finnish Landlord Association, the ’Aloittelevan asuntosijoittajan opas’ guide for beginner real estate investors is helpful, too.