What type of rental apartment is best? The market situation matters
Regardless of which side of the rental relationship you are on, the current market situation has a significant impact on you. Some people prefer to pretend that politics or the economy does not concern them, but unfortunately this is simply not true. It is worthwhile to educate yourself in these topics at least on a basic level, as it will allow you to make wiser decisions in the short term, as well as prepare for potential upcoming changes.
Rental from tenants’ perspective
We asked Rendin experts about the current situation. According to their experience, tenants’ short-term position is indeed as difficult as the media hype indicates. The most popular apartments for rent right now are… all apartments.
At the moment, tenants just want a place to live. The market belongs to the landlords. Warsaw-based property owners receive up to a hundred calls a day from people interested in renting their apartments
- says Mateusz Kalinowski, Account Manager at Rendin.
These figures may seem frightening to people who are wondering what kind of rental housing they will be able to afford under such conditions. Unfortunately for tenants, their situation does look bleak at the moment. But does this translate into an El Dorado for property owners?
Investing in rental units: landlords’ market situation
According to Tadeusz Napierała, Account Manager at Rendin, landlords’ situation is not at all as rosy as tenants might think when frustrated by the fact that, from their perspective, the cost of renting an apartment keeps rising. "We are living in very interesting times, and to put it bluntly, I wouldn't want to be in the place of landlords right now," Tadeusz admitted. While he recognizes that the position of landlords versus tenants has improved in the short term, he doubts that such a power dynamic will continue in the long run.
Rental prices have skyrocketed, but the upward trend is slowly fading. Mainly apartments in large cities, in a good location and of a high standard are maintaining high prices. Such property characteristics have an additional advantage from an investor's perspective because they increase the likelihood of renting to a person of a certain social status, which translates into a better financial situation
- the Rendin expert said.
However, the situation in the rental market is dynamically changing. Some people who came from Ukraine have already moved forward or are considering returning to their own country. On the other hand, people in the 28-35 age bracket, who are often interested in buying their own apartments, are waiting with their decision because of the high interest rates. At the same time, however, they are also refraining from changing their current rental property because with the current economic situation they do not want to generate additional costs – the moment of transition from apartment to apartment is always accompanied by the moving period when we pay for two properties for at least a few weeks. Moreover, there is the cost of the move itself and, in most cases, losing part of the deposit paid to the landlord at the beginning of the lease.
- added Tadeusz Napierała.
The market factors mentioned by the Rendin expert mean that the rental market, although it has been very hot in recent months, will not necessarily continue to be so kind to landlords.
Investing in the rental market: is it worth it to buy an apartment in 2022?
Although the high interest rates have caused everyone to look at the topic of buying real estate much less optimistically, many people feel such a temptation due to the rising prices of rental housing. But does it make sense to buy an apartment for rent these days? As with any investment decision, the right answer here largely depends on your individual situation.
If you have the cash and can afford to buy an apartment for rent without taking out a loan, it can be a good decision, although we see that currently, the housing market is starting to become more negotiable for buyers
- said Tadeusz Napierała.
On the other hand, a lot depends on location and standard. Apartments from the second-hand market, in a good standard, still maintain fairly high prices, but developers of properties that are just being built are starting to reach out to people on their own, offering a garage or parking space for free, which was not the case a few months ago
- he added.
Is it worth it to buy a rental apartment in 2022?
According to the Rendin expert, it can be a good option for people who want to diversify their investment portfolio. However, he notes that compared to current inflation, the return on investment is not very high, and the risk remains considerable. It increases even more for those who would like to finance their investment with a mortgage – the high and dynamically fluctuating interest rates make it less possible to repay the loan from monthly rent than before the war in Ukraine began. Mortgage installments have recently been continuously increasing month to month.
For the reasons mentioned above, rental income is now not as stable as it could be in the past. Of course, the surplus obtained after paying the monthly mortgage installment is not the only benefit the property owner receives from renting. After all, they also use the tenant's money to pay off the assets that contribute to their equity. However, with the ever-increasing cost of loaning money, there is a growing financial burden that the owner has to deal with during periods when the apartment is "between tenants" – after all, the mortgage also has to be covered when the property stands empty.
Before you start wondering what type of rental apartment to choose, think through all these issues and consider whether your risk tolerance allows such an investment when taking the current market situation into account.
I am a tenant: what rental apartment to choose?
Are you planning to rent an apartment and wondering how to decide what type of property to target? With the current market reality in mind, the first step is to work out a realistic set of expectations – that is, one that fits into your budget. Unfortunately, these days only the wealthiest tenants can afford to make demands. If your financial means are closer to the average, we recommend that you start the process of choosing an apartment for rent by setting priorities.
Take a look at the following real estate characteristics and consider which ones are key for you, and which you can be flexible about.
Proximity to the city center
Convenient public transportation
Proximity to infrastructure
Apartment size
Apartment quality
Apartment equipment
Building quality
Rental start date
We advise you to rank these features in order from most to least important or mark them as crucial / nice-to-have / unimportant. Every website with apartments for rent will allow you, thanks to filtering, to display the properties that fit your set of requirements best.
It's up to you and your needs what priorities to decide on, but the general rule of thumb is that in order to fit into a realistic rental cost, you have to agree to go for some compromises. So if you want a large apartment close to the city center, you'll probably have to settle for renting an average place in a rather older building. If, on the other hand, you want to live in a nicely equipped and fully furnished unit, but not spend your entire salary on rent, you should probably look around for properties located on the outskirts.
It is also worth considering when the lease would start. In order to spend the least possible amount of time paying for two apartments at once, tenants usually want to avoid overly long "overlaps" between leases. But what if you come across an offer that fits your requirements perfectly, or comes with a very attractive rent, but requires you to start the lease, for example, a month before the end of your current contract? In such a case, we advise you to consider how the cost of the unnecessary weeks will affect the cost of renting the property from the perspective of the entire year.
And what is the easiest apartment to rent from a tenant's perspective with limited budget?
Well, one that meets as few of the criteria listed above as possible, that still fulfils all the needs. This kind of property – of a rather low standard, far from the city center, unfurnished – is not very attractive, so it is likely to attract rather few applicants and be available at a low cost.
What can you do to free up some funds in your pocket and feel more confident as a tenant in the rental market? First of all, try to find an offer without the involvement of an apartment rental broker. Their commission can be as high as the equivalent of a month’s rent.
Secondly, we recommend using the Rendin platform. You can get a background check performed on it, which will increase your credibility and give you a better chance that the owner of an attractive property will choose you as a tenant. On top of that, you will rent an apartment without having to pay a security deposit – instead, only a small fee will be added to the monthly rent.
Another advantage of Rendin is that you will sign a fixed-term occasional rental agreement with your landlord through the platform. This will ensure that no rent increase will occur without your consent for the duration of the agreement. In times of ever-increasing rental costs, such a safeguard becomes even more useful for the stability of the household budget. Check out apartments for rent without security deposit on Rendin.
Investing in rental apartments: what property to buy?
If you're still interested in investing in rental housing after learning about the market situation, you're probably wondering which rental apartment is the best choice to purchase. What's the easiest to rent out and which apartments are most in demand? You'll have a lot of decisions to make before you generate a rental income from your apartment – and it's also useful to know how to rent an apartment without worrying about complicated paperwork.
According to Rendin’s Business Development Manager, Piotr Kula, the market demand is currently the highest for apartments priced at 2000 to 2500 PLN per month and located in the largest cities: Warsaw, Cracow, Łodz, Poznań, and Gdańsk. Experts are also noting a higher demand for shared properties as tenants are often quite price-sensitive. Since inflation and other factors have been driving the cost of living up, especially younger people and expats are increasingly interested in sharing apartments or renting individual rooms. In these cases, the cost incurred by a single tenant is usually around 800-1500 PLN per month.
Piotr also points out that chasing trends is not always the best idea: in some cases, specialty apartments can be even easier to rent out than mid-tier ones. For instance, big cities usually lack 3 or 4-room apartments, which makes them a valuable catch for tenants with bigger families. Even though, unlike the cheaper ones, these properties often do not get a lot of candidates, people are more likely to be really, really interested in securing them as quickly as possible because the supply is very limited.
Whether you decide to follow the market, go against it, or try to find your special niche, it’s worth it to consider a few important choices that you’ll have to make more in detail.
Second-hand or newly built property?
Apartments from the secondary market are more often better located and available "right now." On top of that, in most cases, they are ready to rent already after a gentle refresh. They also provide some tax benefits, as they allow to expense amortization on a faster schedule, but also tax costs – you have to pay the 2% PPC tax upon purchase, which you would avoid when buying a new apartment.
On the other hand, for an apartment from a developer you have to wait quite a while, and then incur an additional cost in the form of renovation and purchase of equipment. However, this allows you to possess an attractive property of a high standard located in a modern building in an easier way than in the case of a general renovation of an apartment from the secondary market.
How big a property to buy and with how many rooms?
The average size of an apartment in Poland is 52.8 sqm for properties completed in 2021, and according to Rendin experts, two-bedroom apartments are the most commonly offered by landlords.
However, there is no reason you have to necessarily follow the crowd. When deciding what kind of rental apartment to buy, it's good to consider the pros and cons of each solution and compare them to your preferences. Let's take a look at some typical configurations chosen by investors
Should you purchase a ready-to-rent apartment or one that requires renovation?
Potential investors often wonder which rental apartment is better to choose – one that has already been renovated and is ready to be rented out or one that requires some time and additional resources.
On the real estate market, it is easy to find a lot of offers with properties for sale described as "for rent", for which the seller has sometimes even calculated the potential rate of return on investment. It is worth noting the business model of the people who put up such offers. Typically, they buy an apartment that requires a complete overhaul or in a developer finishing standard and “bring it up to speed” to then sell it at a much higher price, which, of course, covers not only the cost of the renovation itself but also includes a margin that makes such business activity profitable.
So when you are deciding what kind of rental apartment to buy, you are really answering the following question: do I prefer to pay someone extra money to not have to worry about the renovation? Or would I rather take on the burden of organizing the renovation and furnishing the apartment, but keep for myself the amount that the seller would charge as their margin?
Of course, there are also intermediate solutions – there are more properties available on the market than just ruins and beauties. You might as well opt for an apartment in average condition and only lightly refresh it. In that case, however, you won't be able to demand as high a rent as for a recently renovated apartment.
As you can see, as in other spheres of life, the principle of "everything being a trade-off" also works perfectly in the rental market. All apartments for rent have their own characteristics, and the final decision depends on your preferences and financial possibilities – whether you are a tenant or plan to invest and earn money from renting.