Comparison: Microapartments vs. traditional apartments as an investment
An apartment as an investment is one of many ways to invest money profitably. The idea behind it is to purchase a property and then rent it out. The success of such an investment in a property as a capital investment depends primarily on the extent to which an apartment meets the requirements of current and future tenants.
In this context, an important trend has developed in recent years: the number of single-person households has risen sharply, so that the demand for small apartments – so-called microapartments – has increased, especially in cities. According to figures from the Federal Statistical Office, the proportion of single-person households in the total number of households has climbed from 19 percent in 1950 to 42 percent in 2022 – and the trend is rising.
This results in a lower need for living space and rooms per household. The sharp rise in rents has also contributed to tenants looking for smaller apartments. You can find out what this means for your investment in real estate in this article. To do this, we compare microapartments with traditional apartments.
Microapartments: features, advantages and disadvantages
There is no clear definition of what exactly constitutes a microapartment. However, features have emerged that can be used to identify a micro apartment:
1. Between 20 and 30 square meters of living space
2. Maximum of two rooms
3. Often close to the center
4. Mostly fully furnished with multifunctional furniture
5. In some cases rental at a flat rate including electricity, internet, etc.
Target group
The main target group of microapartments are singles under the age of 30 who are looking for a cheap apartment near a city center. These largely include students, but also young professionals or trainees. In addition, there are commuters who, for example, live near their jobs during the week and outside or in another location with their families on the weekends. They use the small apartments as a second home. Recently, older people have also discovered micro-apartments for themselves. The apartments are often in large houses with many units and common areas, which opens up the opportunity for social contacts.
Advantages tenant: Prime location and affordable overall rental price
A micro apartment is beneficial for tenants in many ways. Because these are usually apartments in prime locations that are offered at a low overall rental price. A so-called “all-inclusive rent” usually includes additional costs such as electricity and internet as well as extras such as cleaning and caretaker service. Most of the small-format apartments are fully furnished. This saves costs because you don't have to purchase your own furniture or even a kitchen. Thanks to common rooms and your “own space”, mini-apartments offer a better opportunity to retreat than, for example, shared apartments and at the same time the chance to find social contacts.
Advantages of investment: Low total purchase price and high rents per square meter
But small apartments also have their appeal for investors in real estate as an investment. The apartments are affordable as an investment, especially if you have a small basic budget. Due to the small number of square meters, some of the properties are offered for less than 200,000 euros. At the same time, very high rental prices per square meter can be achieved – often well over 20 euros per square meter. Demand is high and long-term rental is therefore very likely. A good prerequisite for investing in real estate as an investment. In addition, the apartments are located in large residential complexes that are managed by an administration, so that landlords often do not have to worry about the capital investment themselves.
Disadvantages of tenants: Little space for a lot of money
The disadvantages of micro-apartments for tenants are obvious: they offer extremely small floor spaces and are almost exclusively suitable for single people. The prices per square meter are often significantly higher than average, so there is less room for the money.
Disadvantages of investment: Limited target group and quite expensive per square meter
For landlords or investors in real estate as an investment, it can be disadvantageous that the target group for microapartments is significantly limited. Because there is only room for one person in the apartments, couples and families are not the target group. As a rule, the mini apartments are also quite expensive in terms of purchase price, calculated per square meter. In addition, the supply of mini apartments is currently very low, which tends to drive up purchase prices. It is important to calculate precisely so that the capital investment works.
At a glance: Advantages and disadvantages of micro-apartments for investors
Traditional housing: features, advantages and disadvantages
The distinction between a “traditional” apartment and a micro-apartment basically results from the definition of mini-apartments. Accordingly, traditional apartments are characterized by the following features:
- Larger than 30 square meters
- Two or more rooms
- Rarely furnished
Target group
The target group for traditional apartments is broad. Depending on the size, it can appeal to singles, couples and families. The objects are often suitable for all target groups. There are no restrictions when it comes to generations either, as most traditional apartments are suitable for tenants of all ages. Particularly in attractive locations with high rents, the apartments, which are usually quite large, appeal to a tenant clientele who have the necessary income to be able to afford a high-priced apartment. This speaks for an attractive return, with which investing in a property as an investment quickly pays off.
Advantages for tenants: Lots of space for self-development and more space for your money
Traditional apartments usually offer a lot of space and therefore room for self-development and design. Because rents per square meter are generally lower compared to microapartments, tenants get more space for their money. For families, the advantage is the higher number of rooms, so that all family members have the opportunity to retreat.
Advantages of investment: Larger selection and less location-dependent
A traditional apartment also offers advantages when investing in property as an investment. This starts with the purchase. In most cases, normal-sized apartments are significantly cheaper per square meter than micro-apartments. Due to the larger selection – micro-apartments only make up ten percent of all apartments in Germany – the selection is fundamentally larger.
In addition, location plays a smaller role than with microapartments. While the demand for small apartments decreases rapidly the further away they are from the city center, the demand for larger apartments remains stable even in the suburbs of metropolises. You can find out what else you need to know about locations for real estate as an investment in the article “Real estate as an investment – location decision as a success factor”.
Disadvantages tenants: Higher total rent and unfurnished
Although larger apartments are usually cheaper per square meter than their mini counterparts, the overall price is significantly higher. Since the apartments are usually not furnished, there are acquisition costs for furniture and possibly even a kitchen, especially for the first apartment. Since you always have to take your own furniture with you, this means less flexibility when moving house.
Disadvantages of investment: Lower rents per square meter and higher costs due to more space
For a traditional apartment, the achievable rents per square meter are usually lower than for mini apartments. Depending on the purchase price, this can have a negative impact on the return on investment in a property. In addition, a larger apartment causes higher costs for renovation and renovation over time due to the additional space. Ultimately, the management of the property is usually in the hands of the landlord, so investors have to take care of many things themselves when making this investment. The properties of the DFK Group are an exception here thanks to the worry-free concept.
At a glance: Advantages and disadvantages of traditional apartments for investors
Conclusion and investment recommendations
The comparison shows: microapartments and traditional apartments each offer their advantages and disadvantages. In this way, they appeal to different investor groups for investing in a property. While micro apartments are more suitable for smaller budgets, large apartments are more suitable for investors who have larger sums of money to invest. Due to the different achievable rents per square meter, we at the DFK Group assume that both variants achieve similar returns despite different requirements. Accordingly, both variants are suitable for investing in real estate.
A major limitation for real estate as an investment in the form of a mini apartment is the very low supply. Although this fact generally also applies to traditional apartments, micro-apartments are currently hard to find because new buildings are lying idle in Germany. The low supply coupled with a still stable demand ensure that the prices for mini apartments per square meter are significantly higher than for traditional apartments. It is therefore important to calculate carefully whether an investment is worthwhile as an investment.
In addition, some of the advantages of a mini apartment also apply to traditional apartments. Each of our apartments is handed over to the new owners and tenants with a complete kitchen and a fully equipped bathroom. In addition, landlords don’t have to worry about anything with us. Because our management company, MIAG GmbH, offers a worry-free concept in which we rent your property as an investment for at least ten years. During this time we take care of everything, from tenant changes to complete communication to repairs and renovations. You can find our current real estate offer here.
Would you like to get to know our concept personally? Then arrange a non-binding consultation appointment now. Whether at one of our locations throughout Germany or online, we are there for you and look forward to seeing you!
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