Why student apartments are worthwhile

There is a housing shortage in almost all German university cities – and this is exactly where your investment comes in. Small apartments or shared apartments near the university(map with universities) are always in demand, and you can buy, upgrade and rent them out directly without a lot of start-up capital – stress-free via a property management company.

Constant tenant turnover is an advantage

Students are moving more frequently, starting a new semester or changing cities. For you as an investor, this means: no fear of vacancies, but constant demand – especially in central locations or close to the university.

Compact size = high efficiency

An apartment with 20 to 30 m² will cost you less to buy and less to maintain. At the same time, you can achieve more rent per square meter than with larger apartments by equipping it with a kitchen and possibly furnishing it.

Little effort, clear processes

Instead of taking care of rental contracts, utility bills and minor repairs yourself, you can commission a property management company – ideal for beginners or if you have a busy work schedule.

• High demand all year round
• Compact properties with strong returns
• Hand over administration completely

What you should consider when buying

When it comes to student apartments, location counts. If you buy centrally, you will get more rent and find new tenants more easily. It is also important that you have the incidental purchase costs under control – and know your net yield, not just the gross figure from the exposé.

Only proximity to the university brings real returns

The classic: a small apartment within walking distance of the university or with a direct subway connection. Without this, it will be difficult to reach the target group – especially for smaller units.

Keep purchase price low

The trick is to find a solid property below market value – e.g. in a basic condition that can easily be upgraded with a little paint, a new kitchen and furniture. This will increase the value without you having to dig deep into your pockets.

Buying cheap real estate? Here are my tips from Los Angeles: Buying real estate cheaply (acquisition)

Plan property management from the outset

The monthly costs for property management (usually €25-40) are manageable – in return, you get peace of mind, professionalism and legal protection. This is worth its weight in gold, especially if you have several tenants per year.

• Affordable shopping with potential
• Location = daily demand factor
• Property management saves time and nerves

More rent through simple fittings

Do you want more than the standard price? Then invest specifically in equipment – and target students who don’t want to organize their own furniture or kitchen.

Fitted kitchen as a rental booster

For €399, you can get a modern, small fitted kitchen with a fridge, hob and storage space. This will immediately set you apart – and you can easily charge €50 more rent. Many students specifically look for apartments with their own kitchen.

Fitted kitchen = 399 €

Surcharge per month = 37.50 (at 1.50 € / m² for 25 m²)

Amortized in 11 months

To do this, make a handwritten note in the rental agreement that your tenants are responsible for any damage or repairs to the fitted kitchen.

Furnished = more rent, less vacancy

A simple bed, desk and wardrobe – that’s all you need. You can include the furnishings in the rent; many tenants are happy to pay for this as they don’t have to buy or transport any furniture.

Paint once = better effect

A light coat of paint makes a big difference. Clean walls and a well-maintained floor look immediately more modern – even if the substance is simple. The effort is minimal, the effect is great.

• Kitchen: +50-100 € rent possible
• Furnished = reach target group directly
• Looks count – even for students

Micro-apartments as an alternative or extension

If you want to scale up the concept, take a look at micro-apartments – they work in a similar way to student apartments, but are often more modern and also appeal to young professionals or commuters. Advantage: often slightly higher rent, same basic logic.

More target groups, similar strategy

You can reach more tenant groups through better facilities, services (e.g. Wi-Fi, cleaning) or location in business districts. The principle remains: small space, high rent, low vacancy rate.

Investing through society

Especially if you are buying several units, it is worth taking a look at GmbH structures in order to work efficiently from a tax perspective. We will be happy to advise you on this – or you can learn more in our further videos.

• Scalable due to many locations
• Broader target group than students
• GmbH models for larger investments

10 % return is achievable – if you buy smart

Student apartments offer you a solid, calculable entry into the world of real estate. If you buy cheaply, modernize a little and adapt to the target group, you can achieve realistic net yields of 8 to 10 percent. Even better: you hand over the management directly – and have created your first real investment property with a small apartment. Now it’s up to you to take the next step.

Micro-apartment as a capital investment: advantages for you

Small apartment with 25 m² instead of a large 4-room apartment. Why? More and more people are living alone in single households. Students, singles, holidaymakers, but also professional groups such as fitters, who are often in different cities. Learn more about investing in small condominiums, so-called micro-apartments, here.

• Micro-apartment as a capital investment

5% return: All 3 themes in 1 video

What does 5% yield mean? Why is a 5% return too low if you want a cash flow property? And why is 5% yield good again for an investment property?

What is return on investment?

Return is a term often used in connection with investments. It refers to the profit or potential return that an investment provides in relation to the capital invested. Return can come in various forms, including interest, dividends, rental income or capital gains.

A return of 5% means that an investment has generated a profit of 5% of the invested capital in a certain period of time. Sounds simple, doesn’t it? But the meaning of that 5% can vary significantly depending on the type of investment. Let’s take a closer look.

Why do you need more than a 5% return?

The question of whether 5% return is enough depends on your financial goals and risk tolerance. If you are looking for stable income and immediate cash flow, 5% might not be enough to cover costs and make a profit in some cases. In this case, you would need to look for investments that offer a higher return.

On the other hand, 5% return might be quite acceptable for long-term investors aiming at capital gain. However, it is important to consider individual circumstances and long-term goals.

Why is 5% bad for cash flow properties?

In the world of real estate investing, the term “cash flow” is crucial. Cash flow refers to the rental income that is left over after deducting ongoing operating expenses and mortgage payments. If you own a property and only get a 5% return, that means you’re making a relatively small profit after deducting costs and expenses.

Such cash flow can be considered poor in many real estate markets, especially if mortgage, maintenance and tax costs are high. In expensive real estate markets, it can be difficult to be profitable with a 5% return, as the cost of capital can exceed income.

Here is a video that further explains this concept:

[Video: Warum sind 5% bei Cashflow-Immobilien schlecht?]

Why is 5% almost good again for investment real estate?

On the other side of the spectrum, we have investment real estate. This type of property is often purchased with the goal of achieving long-term capital growth. If you buy a property and are able to generate a 5% return, this can be considered a solid investment.

Why? Because investment real estate is designed for capital gain. A 5% return could mean that the value of your property will increase over time, ultimately leading to a higher total return. It’s important to note that investment properties are typically geared toward long-term gains, while cash flow properties are geared toward regular income.

Watch this video to understand why 5% returns on investment real estate can be a good thing:

[Video: Warum sind 5% bei Investment-Immobilien fast schon wieder gut?]

Conclusion

The importance of 5% return depends heavily on the type of investment and individual goals. In the world of real estate investing, cash flow properties are focused on regular income and may require a higher rate of return to be profitable. Investment properties, on the other hand, can benefit from a 5% return as a solid long-term investment.

It is important to consider your own financial goals and risk tolerance when making investment decisions. Ultimately, return is only one factor of many that should be considered when choosing investments.

What is yield, anyway?

First of all, I’ll clarify what yield means in the first place. Many people hear this term but don’t know exactly what’s behind it. Yield is a crucial factor in real estate investing, and I explain why it’s so important.

Video: How high can returns be?

Why can’t returns be high enough?

The question of why the return on real estate can’t be high enough is critical for any investor. In my video, I discuss the reasons why a high return is so desirable and how it can affect your investment.

The “higher the return”, the more you earn!

Let’s look at the calculation and why more income (annual net cold rent), above a threshold, always brings more profit:

Calculate net yield

The net operating income of a property is calculated by the following formula:

Net yield = (annual net cold rent – operating costs) / investment costs × 100%.

Let’s assume you buy a property for 200,000 euros and receive annual rental income of 12,000 euros, with operating costs of 2,000 euros. The net return would be calculated as follows:

Net return = ( 12.000€ -2.000€ ) / 200.000€ × 100% = 5%

In this example, the net return is 5%. This shows that you expect an annual return of 5% on your investment, based on the rental income minus the operating costs in relation to the investment costs.

Tip. Use my real estate app with:

• Net Yield Calculator
• Net Yield Check

Find more answers in the video!

To find out what yield really means and why it’s so crucial in real estate, check out my new video. I’ll answer all the important questions and give you valuable insights into the world of real estate investing, even for your first property!

Don’t forget to subscribe to my channel so you don’t miss any updates. Real estate investing can be complex, but I’m here to make it understandable and help you make smart decisions.

See you in the video where we explore the fascinating world of returns in real estate!

You want to know more?

10 golden investment rules

Start your real estate journey right! Time and time again, people dream of investing in real estate, but few turn that dream into reality. These 10 indispensable rules are key to turning your ideas into successful real estate ventures. No bullshit. 10 Clear Rules.

• 10 golden investment rules

Lukinski YouTube: Yield, Capital Investment & Co.

Discover with me the crucial factors, key figures and basics of real estate investment. Compared to other forms of investment, real estate offers a ‘safer’ way to invest capital with consistent returns and long-term appreciation. Want to invest your money wisely? My recommendation: Real estate, passive income and a good life.

• Lukinski YouTube

Start! #1

Everyone has ideas, but very few put them into practice.

Learn the mechanism of return #2

Yield is the key to profitable real estate.

• Real Estate Yield

Learn the quick real estate appraisal #3

That’s how you evaluate real estate listings from your desk in seconds:

• Quick rating

Learn Real Estate Investment #4

Look at all the relevant topics: Buying, Investing, Financing, Renting, Managing, Selling, Valuing. In addition, YouTube is an excellent source of experience.

• Learn real estate

You really want to learn a lot? I’ve written over 1,000 guides here: Real Estate Experience.

Make it known that you have something to do with real estate #5

If no one knows that you buy, sell, rent, rent on Airbnb, or even flip real estate, why should they bring good real estate offers to you? Therefore, make it known that you have something to do with real estate.

• Real estate acquisition

If something feels funny, then it is funny#6

There are many persuaders in the real estate world. But don’t be blinded by words. Learn how to use capital and reputation as safe guidelines to make the best decisions.

• No link, but remember!

Go straight to the right, quality leads #7

Time is limited, so use it wisely. We’ll show you how to research and select your lead sources and leads to target the highest quality opportunities.

Be prepared and motivated #8

Before you dive into the real estate world, you should be prepared. Learn how to build equity, prepare for bank meetings and stay motivated to achieve long-term success.

• Equity for a property
• Self-report for your credit

Nobody becomes a millionaire overnight:in.

In the purchase lies the profit #9

The cheaper your real estate purchases, the higher your profit. Acquisition and negotiation skills are your daily business.

Make extremely much from nothing minus x #10

The road to becoming a real estate millionaire is not a sprint, but a marathon. Start perhaps at kilometer zero, but with the right approach and perseverance you will reach the top.

Calculator off: Real Estate Guru App

Christmas 2022 gave me the idea, since then I’ve been programming the Real Estate Guru App! By now, the app has over 30 real estate and financial calculators, plus an investment learning system, 50,000 craftsmen and over 20,000 real estate experts.

If you like the calculators (below), be sure to check out your app store and get my free investor app!

• 30 + Real Estate Calculator
• #1 Real Estate Training in the World
• 50 + lessons “Real Estate Investment
• Craftsman recommendations throughout Germany
• Real estate experts throughout Germany

App Download

Free in the App Store for iOS and Android.

There is also more online:

• Real Estate Guru

8 real estate calculators presented!

Free, online, always and everywhere and all without Excel! My little real estate investment toolbox for you!

PS: Professionals can of course skip the first calculators around equity and savings plan and start directly with the yield, the yield check & Co.

Good luck, your Lukinski!

Equity: Calculate assets

Everything starts with equity. You can’t do without it, unless you have someone to vouch for you. Typically, if everything else is solid, you need 20% equity and the bank gives you 80%. Example:

• Equity = 5,000 euros (20%)
• Credit volume = 20,000 euros (80%)
• Maximum purchase price = 25,000 euros

For this, you calculate your assets:

• Equity calculator

Savings plan: How much can you save each month (building equity)?

You lack the necessary equity capital? Then there is only one way: Save! Here you can easily calculate how much you can set aside each month. Because often a few expenses are forgotten and you stop saving after the first month. Saving is your way to the goal! Calculate here how much you can put aside.

• Savings plan calculator

Maximum purchase price: How much property can you afford?

Your equity automatically leads you to the maximum purchase price. You have already learned how to calculate this in the equity section. If you need to do it quickly, you can calculate it here:

• Maximum purchase price

Incidental purchase costs: Purchase price + X

Incidental purchase costs, there was something else… Typically, depending on the state, 8% to 10% of the purchase price is incidental costs. That is in any case:

• Real estate transfer tax
• Notary fees
• Land registry costs
• Brokerage costs (if commissioned)

With my free purchase cost calculator, you can quickly and easily calculate all factors at any time, whether buying an apartment or a house:

• Purchase incidental costs calculator

Net yield: What does a property bring in?

The most important calculation for investors is the net rental yield of a property. It tells you what a property yields per month in %. Since you as an investor:in typically finance with credit, you pay:

1. Maintenance ~ 2 % p.a. (per year)
2. Interest ~ current interest rate for borrowing
3. Repayment ~ 2 % p.a.

Let’s say you take out a loan at 2% interest, you have (2% + 2% + 2% = 6%). If your yield is > 6%, your tenant pays off your property, your assets grow passively and you still get X Euro per month as positive cash flow from your rented property.

To help you do the math quickly and easily, here’s my:

• Net rental yield calculator

Yield Check: In 2 seconds

You don’t have all the figures for the net rental yield at hand right now? Then you should know my quick yield check. Here you can calculate any return in the Real Estate Guru app in 2 seconds. In the background, values are also assumed, such as the current 2% maintenance reserve per year, completely automatically.

You only have to push 2 simple knobs:

• Purchase price
• Rent / month

A yield check has never been faster! Click here to go to the:

• Yield Check

Purchase price factor: key figure for larger projects

Simply explained: The purchase price factor turns the yield calculation around:

• From ” Rental income / purchase price “
• Will “Purchase price / rental income “

Super simple!

• Yield = % Yield per year
• Purchase price factor = paid off in X years

The result tells you in how many years your property as an investment has been paid off by the rental income.

• Purchase price factor

Maintenance reserve: In 2 seconds

You’ve never calculated your maintenance reserves so quickly! My little calculator for maintenance reserves for real estate is just as simple as the yield check. The highlight, in the background I calculate everything according to Peter’s formula.

• Maintenance reserve calculator

Speculation tax: Sell tax-free after X years

Tax-free, great! That’s what many investors say to themselves, and they’re right. Roughly speaking, there are 3 types:

• Self-interest = 3 years period
• Renting = 10 years period
• Mixed model = X + 2 years period ( X = time of renting )

To make the calculation easy and fast in the future, I have developed this speculation period calculator.

• Speculation period calculator

Learn Online with my App!

Learn online with my real estate app. With 50+ individual lessons, from buying and yield, to managing and renting, to selling a property profitably. Net yield, gross yield or even purchase price factor we still do not say much or just a little? Perfect, because with my app you can prepare super easy for your first capital investments.

Real Estate Coaching 2.0: Online and free of charge

You can read 1,000 books and end up not knowing what really matters. Like my calculators, it’s all about the nuts and bolts of real estate investing: equity, return, maintenance, etc.

The training is designed to be extremely simple, just like all real estate calculators!

Real estate as an investment: Learn to invest!

In 10 lessons with about 5 training sessions each, you will learn what is important in the individual sub-disciplines.

• Buy real estate
• Real Estate Yield
• Real Estate Fix & Flip Strategy
• Upgrade real estate
• Rent real estate
• Sell real estate
• …

App Download

Free in the App Store for iOS and Android.

The real estate guru!