If you have the means, it's better to invest in an apartment building than in one or more separate units. Here's why.
As long as you have the necessary funds, it is always better to invest in a block of flats rather than in individual rental units within a condominium. BuyerSide summarizes for you the main advantages of this formula.
1/ To buy, you are not put in competition with the mass of the candidates purchasers.
In the investment property segment, only investors are by definition likely to be interested. By concentrating on this segment, you will not suffer from the double competition:
- from other investor candidates who would have too limited a budget to access this segment of the market on the one hand ;
- and of the candidate buyers who are looking for a place to live on the other hand. The latter, who feed the vast majority of the demand on the real estate market, are looking for the property of their dreams and are ready, for reasons much less rational than yours, to pay the price to acquire it. As a result, not only do they drive up the price, but they also risk taking the property you covet for the simple reason that they want it at any cost, without taking into account the potential return.
2/ To manage, you are the only master on board.
In a building of which you are the only owner, you alone decide on the relevance, the extent or the timing of renovation works to be carried out or of possible administrative steps which would be in your interest (in order to increase your rental yield or the value of your property on the market for example).
In concrete terms, this also means:
- No endless discussions at the General Assembly (GA) with other co-owners who do not have the same opinion as you on the decisions to be made, nor any formalism specific to the GA (quorum, costs, respect of legal provisions etc.);
- No owner-occupiers among the voters who will push for expenses that have little or no positive impact on the return on your investment (brand new mailboxes, a marble entrance hall, etc.);
- No bad payers among the other co-owners who will make you, in spite of yourself, play the bankers in their favor and cause a lot of trouble and costs to obtain the payment of the outstanding debts. Due to a lack of budget, the condominium may also have to postpone work that would improve the energy efficiency of the building and allow for a better EPB certificate. However, not only are tenants becoming more and more careful about this when they are looking for a place to live, but it is also no longer possible to index 100% of the rent without an EPB A, B, C or D certificate (-> link);
- You alone (possibly helped by experts) will have the control on the analysis of the possible works to be carried out and on the estimates which you will examine and will negotiate, undoubtedly, with more detail and more firmly than certain syndic (whom are not the debtors);
- No incompetent or even dishonest syndic (such cases are regularly reported in the press), to be kept until the end of his mandate, for then having to look for another one. Not to mention the costs associated with this which can affect the profitability of your investment if they are not passed on to the tenant.
- On the other hand, it is necessary to recognize that for the people having little time to devote to their investment and to the potential rental issues, the fact of being in joint ownership with a syndic who will be able to regulate a certain number of concerns, will certainly be a not negligible advantage. But be careful, a syndic will never totally replace a property manager/regulator who will take care of your apartment. Like for example the renting, the constitution of the rental guarantee, the inventory of fixtures, the indexation of the rent or the technical concerns specific to the apartment (Leaking tap or flush, refrigerator or dishwasher falling out of order, electrical problems, etc).
Experience has also shown us that a simple water leak can become a real "nightmare" for the person who tries to solve the problem when he owns his property in co-ownership. A search for a leak or an intervention in the neighboring apartments is inevitably complicated in co-ownership (rejection of responsibility, difficulty of access, refusal to carry out the necessary work). Whereas if you own the whole building, your tenants will have difficulty refusing you access when an urgent intervention is needed.
3/ You will be in a better position to pay your taxes since,
generally speaking, the cadastral income (CI) of an entire building is proportionally much lower than the sum of the cadastral incomes of the different housing units that it is made up of. Your real estate withholding tax (based on the CI), and possibly the excess of taxation to the personal income tax (IPP) if you do not declare (enough) mortgage interests, will thus be more interesting than if you had bought separate units for an equivalent rental income (if it has not been revised for several decades, it is not rare that the CI of a rental house is equivalent to that of a new apartment...). With a consequent and immediate positive effect on the net yield of your investment.
4/ To resell, you can expect a capital gain of about 5% to 10%
whatever the evolution of the market price, since you can resell the apartments, you bought in block later on. For a seller, it is indeed often more interesting (for the reasons explained in point 1) to resell a building in pieces rather than in a single block. One can estimate on average a difference in price of 5% to 10%.
An entry ticket at 650.000-750.000 EUR
A prerequisite for entering this investment property segment is of course to be able to raise the necessary funds. In the south of Brussels, you should expect to pay at least EUR 650,000 to EUR 750,000 for a small investment property (it is of course possible to find cheaper properties in the north of Brussels and in the provinces, but there will be less demand for rental properties and more risk of empty rental).
The market having relaxed, it has become much easier to find quality rental properties for a more reasonable price than 1 year ago. You can now count on a yield (gross deed in hand) of 4.10% compared to 3.5% 1 year ago.