Trends & News Should Real Estate Investors Go for Micro Apartments? by Ahmad Shukri August 13, 2018August 10, 2018 by Ahmad Shukri August 13, 2018August 10, 2018 Micro apartments are among the newest trends in real estate. The concept relies on the minimalist lifestyle of the tenant or resident. In many crowded cities all over the world, this phenomenon is rising in numbers. Accordingly, real estate investors are constantly considering real estate investing in micro apartments. However, with micro apartments being a trend, many investors are refraining from jumping on the bandwagon. We’re here to debate whether you should or shouldn’t go for this type of investment property. What are micro apartments? Micro apartments are rental properties ranging from 200 sq. ft to 600 sq. ft. Most real estate investors who go for micro apartments are usually going for multi-family properties in real estate investing. To be precise, this type of income generating assets relies on a single room. Meaning, it’s very similar to a studio apartment. The living room is the bedroom, the kitchen, and the bathroom. What type of tenants are you going to get with micro apartments? There are two distinctive types of potential tenants for such apartments: People who can afford to live in bigger spaces but choose the minimalist type of living. People who can only afford to live in micro apartments or share with others. While most people would look for a large living space when looking to buy a property, for these types of people, it makes perfect sense. Most importantly, the low cost of living in such a tiny space can make it worth the inconvenience it creates. What can you do with micro apartments as income generating assets? Most successful real estate investors will tell you not to buy an apartment or investment property before conducting a real estate market analysis. Yes, this works for micro apartments too. A full-on real estate market analysis can be conducted through an investment property calculator. To go more deeply into it, Mashvisor’s investment property calculator can do all the hard work for you. It performs an encompassing real estate market analysis that includes the current market value of any potential investment property and estimates future value as well. This happens through variables that include the cap rate, cash on cash return, and estimated rental income. To learn more about Mashvisor’s investment property calculator, read this blog post: Should You Invest in an Investment Property Calculator? Now, with Mashvisor’s investment property calculator, you’ll be given two rental strategies to choose from with comparable figures, of course. They are as follows: Airbnb rental strategy: Micro apartments work great for Airbnb rentals. They offer a clean space in a centralized location for a low price. Not to mention, the privacy. Most Airbnb guests would prefer a tiny Airbnb over a hostel or a shared apartment. Traditional rental strategy: Yes, there is a market for long-term tenants of micro apartments. Many young adults and millennials are going for them. By doing so, they are cutting the costs and creating less space for them to take care of. Win-win deal! Related: What Rental Strategy to Choose: Airbnb vs Renting Out Traditionally? What to consider before purchasing micro apartments as a real estate investment Find the right financing Financing investment properties requires pain and sweat. If it was easy, everyone would do it. Finding the right financing requires the entrepreneur to hustle and plan. With this type of investment properties, finding the right financing can be difficult as most vendors refrain from providing loans for them mainly because the size is too small. If you’re not sure about financing methods, read this blog post: Discover the Most Popular Real Estate Financing Methods. Be that as it may, financing micro apartments can be done if you find the right mortgage lender. Research and study every mortgage option you find. Just make sure to save up for a hefty down payment. Find the right rental strategies The rental strategy depends on the location of your micro apartment and how much Airbnb traffic the said location gets. Whether you go for a long-term rental or a short-term rental, it can be lucrative if done right. Find the right tenants Finding the right tenants for micro apartments is no different than for any other type of investment property. You advertise, collect applications, filter them, call references, and check criminal records and credit scores. By doing so, you’re skipping a headache from late rents and eviction procedures. Manage the micro apartments Managing micro apartments isn’t different than managing bigger properties, only smaller in scale. You will need to collect rents, enforce rental agreement’s terms and take care of mortgage payments and such. For the case of Airbnb rentals, you will be providing the utilities, so keep these costs in mind. Not to mention that you can hire professional property management to take care of that for you. If you wish to learn more about property management, read this blog post: When Should Landlords Opt for Professional Property Management? Maintenance and upkeep Due to the smaller size of this type of real estate investment, you can maintain it for a low cost, and if something breaks down, you can replace it. In fact, given the size of micro apartments, the tenants are most likely to be single adults. Meaning, upkeep won’t be needed as much as upkeep for a rental property with a family residing in it. Should you go for micro apartments? To begin with, real estate investments come in all shapes and sizes. Many real estate investors and investment companies have invested in such apartments in the form of an apartment building. You can see the trend anywhere in big cities, such as Vancouver, Mumbai, Shanghai, and even New York. If you are interested in investing in micro apartments and you’ve studied the market and you’ve seen the need for it, by all means, go for it. Meanwhile, if you don’t see the need for affordable minimal living spaces in your community, you might be better off buying a traditional investment property. To sum up, micro apartments can be a lucrative opportunity in real estate investing. With investors looking for market opportunities on the go, be the first one to spot a market opportunity and fulfill it. Your real estate investing portfolio awaits your first step, start taking the first step for tomorrow’s investments. If you have any more insights regarding micro apartments, please share them with us in the comments section. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0 FacebookTwitterGoogle +PinterestLinkedin Ahmad Shukri Ahmad is Content Writer at Mashvisor with a degree in marketing. He enjoys writing about everything related to real estate and especially the top markets for investment properties. Previous Post Renting Out Your House vs. Buying a Rental Property: Which Is Right for You? Next Post Are There Investment Opportunities in the Boston Real Estate Market 2018? 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