Are City Center Apartments Still the Best BTL Investments in 2023?
City center apartments are frequently considered the greatest buy-to-lets, but are they still a wise investment? Here, we’ll examine the benefits and drawbacks of this specific property type.
Why City Center Apartments (Can’t) Make Great Investments
Here are the primary factors that have contributed to new city center flats making excellent buy-to-let investments over time:
- City center apartments are frequently affordable. Apartments in metropolitan areas are frequently less expensive per square foot than comparable homes in suburban areas.
- Apartments in the city center frequently have high letting yields. Even though city apartments frequently have higher rentals than suburban homes, the yields can still be higher.
- Those that prefer to live in urban areas and have easy access to public transportation, as opposed to commuting, frequently have a high demand for city-center apartments. People frequently rent rather than buy in city centers since they may want to stay there for a while.
- In city centers, there are many different renting options. Apartments in the city center can be rented to professionals, roommates, and students. They can also be used as short-term rentals or serviced lodging.
- Renting in the city center is a simple buy-to-let venture to own and manage. These may qualify as “hands-free” investments. A managing agent is responsible for the building’s upkeep, common areas, and grounds. (There are typically service fees to pay.)
- Investing in a city-center apartment development offers a variety of options. Compared to houses on the resale market, new flats are much simpler to find and purchase. Another scalable investment possibility is new construction. You can purchase one, a few, or several brand-new apartments.
- Newly constructed flats in city centers are frequently seen in areas undergoing regeneration and renovation. These neighborhoods frequently receive investments, which can raise property values as the area develops.
- More space to build new structures in some city centers, such as old ones. The potential for price growth is good, and any newly available properties may be in high demand. As implied by the name, new-build apartments are brand-new. They are frequently highly well-liked by tenants because they contain the newest amenities and cutting-edge designs. Also, new homes require little to no care in the future, saving investors money on ongoing expenses.
- The most energy-efficient properties are typically newly constructed. They are also well-liked by renters due to their cheap operating expenses. The minimal energy efficiency standards for buy-to-let properties should be readily met by investors purchasing brand-new apartments, both now and in the future.
Residing Outside of Burbs and Small Towns
Many people who have always wanted to live in a big city eventually give in to its pull and discover themselves in a much more populated and concentrated location than they did in the suburbs.
Although many people prefer to relocate to a city, only some are suited to city living. It goes considerably quicker and significantly differs from life in a small town or the suburbs. Before leaving the suburbs for the big city lights, you must weigh the benefits and drawbacks of living in a major metropolis, as with any place.
benefits of residing in a city
Although city life has drawbacks, it makes up for them with all it offers. Large cities are important cultural hubs with thriving music and art scenes, a vast range of cuisine, additional attractions like museums, sporting events like ball games and concerts, and a diverse population sharing the urban lifestyle.
The Benefits of Living in a City
1. Meeting New Faces. Everywhere you go, you will meet new people. Nevertheless, in a metropolis, where a variety of people come from all over the world, the experience is different. A city also has a larger population. Thus you will frequently run into new people. It can be energizing and enlightening to meet and converse with new people who have had very diverse life experiences from your own.
2. Activities/ Night Life. You probably know your town very well and have done about everything there is to do if you have lived there for ten or more years. Even if you live in a major city for ten years, you won’t be able to take advantage of everything it has to offer. In a big city, there is always something to do to keep individuals from growing bored with their diverse interests. Most cities provide exciting nightlife, various cuisines to sample, shows of all kinds, museums, landmarks, parks, festivals, sporting events, and more. There are many options in big cities to join the scene if you are a musician, visual artist, or performer.
3. Public Transportation. The public transportation system is a decent alternative to driving your own vehicle and navigating big cities’ traffic and parking issues. You can go where you need to go using trains, subways, buses, taxis, and ride-sharing vehicles in cities. You can avoid the hassle of driving by using one of the many relatively reasonable public transit options, such as the bus or train. In most big cities, it’s possible to live without a car.
4. Big Events. Major cities host the largest events, including sporting competitions, concerts, festivals, and art openings. You don’t need to make the long commutes to and from the suburbs to attend a concert or a baseball game.
5. Share Experience. The fact that everyone in a large metropolis with millions of residents comes from varied backgrounds and experiences city life similarly can be incredibly reassuring. Large cities are friendlier than most people think, and if you frequent the same spots and engage in the same pursuits, you’ll rapidly meet new individuals who share your interests and likely move there for similar reasons to yours.
7. Free Activities. There are numerous free things to do when planned effectively, even if many activities are normally more expensive due to the greater overhead costs. You can spend the entire day keeping occupied for free by going to the park, window shopping, touring museums on free days, and taking in the sights downtown. Even though you won’t be spending any money, you will undoubtedly spend time at these breathtaking locations and maximize your urban experience.
8. Higher Salary. Employers are typically prepared to pay extra despite the high cost of living in the city. This is why many suburban residents commute into the city for a better wage while still taking advantage of the low cost of living.
9. More Jobs Available. Companies dominate city towers, so going without a job is difficult. However, locating one that pays your high rent could be challenging. But a city with many businesses also has many job prospects. You’re likely to find one you adore. According to statistics, those who live in major cities have access to more job prospects than those who live in the suburbs or smaller towns.
10. Close to Restaurants. In cities, there is always a need for fine dining. Within a mile or two, you can find a cuisine you appreciate, from fast food franchises to fine dining restos.
Although the city’s dining cost is typically greater due to increased rent, many restaurants offer lunch and supper deals and have food vendors available. You’ll need to research to take advantage of the best bargains.
The Disadvantages of Living in a City
Those who frequently travel to or work in a big city are aware of how troublesome they may be. Large cities might be more challenging to navigate because of the increased population, traffic, and neighborhood density. The biggest drawbacks of living in a big metropolis are as follows:
1. High Cost of Living. When people consider moving to a city, the increased cost of living is usually the first drawback they consider. Ordinary living costs like rent and utilities tend to be higher in big cities, and you can have additional costs like parking permits and laundry that you wouldn’t have in the suburbs. Major cities also have higher prices for gasoline, alcohol, food, and tobacco items.
2. Noise. Major cities typically have higher noise levels than the suburbs. Cities produce greater noise due to increased traffic, more people, trains, and neighboring airports with noisy jets flying in and out. A neighborhood may become noisier and more crowded due to special events like concerts and sporting events.
3. Limited Space. Downsizing your living area is nearly always required when moving from the suburbs to the city. Most people reside in flats in big cities; in some places, the apartments might be smaller. Having an outdoor area like a patio or yard is also uncommon. Homes with decent-sized yards are available in big cities but are significantly more expensive than homes in the suburbs. If you want to live in a city, you must be okay with your neighbors being on the other side of your walls in an apartment complex.
4. Limited Parking Space. Parking in a big city is an enormous nuisance compared to the suburbs. In the suburbs, parking is permitted in driveways and on residential streets, and most companies offer parking lots for patrons to utilize. Parking is only sometimes guaranteed in large cities. Streets with free parking quickly fill up because certain residential streets only allow permit parking, which requires you to purchase a permit. Some apartments have a designated parking place, albeit they are uncommon. Also, it is uncommon for businesses to have parking lots, so you will probably have to pay to park somewhere on the street, possibly even a few streets from where you need to go.
5. Higher Auto-Vehicle Insurance Premiums. Congested city life will increase your chance of accidents if you must have a car and live in a city. As a result, city residents will pay a greater insurance premium than those who live in the suburbs.
6. Increasing Crime Rates. You can bet on urban locations to be riskier than smaller communities, even if some cities have higher crime rates than others. Crime increases with population.
The Current Situation of City Center Apartments
The majority of people concur that the real estate market has altered recently. Thus, it’s crucial to take into account a few factors when determining if new city center flats are still wise investments:
- The real estate sector, notably the market for apartments in cities, has been impacted by Covid. People’s preferences for where to live (and rent) and what kinds of properties have been impacted. Nowadays, more people are working remotely. Some workers no longer require access to an office. Hence, renting or buying a home in the city center or living there is no longer necessary.
- Some business offices in the city center have scaled back on their floor space. Less demand for city center flats may result from fewer individuals working in urban areas. The practice of hybrid working, where people work partially from home and partially from the office, is becoming more widespread. The same goes for flexible working, which allows employees to choose how much time they spend in the office each week. Often, newly constructed flats in city centers are small and need more space for working from home. In the so-called “race for space,” some city dwellers emigrated to the suburbs and the countryside to find more space.
- People became aware of the value of outdoor space for health and well-being because of Covid. Outdoor space is uncommon in newly constructed residences in city centers. Many people need easy access to public parks and other outdoor areas.
- Currently, some things could be improved regarding the direction of the economy. There may be less demand for housing in city centers if businesses that employ people there cut their workforces. In certain cities, proposals exist to develop thousands of additional brand-new apartments in the city center. Apartments in these places may be harder to lease due to high levels of new supply and low projected demand. It could imply that their worth has not increased as much as it would have (or they might even fall in value).
- Due to economic worries, apartment developers in the city center might opt to cut back their plans. Supplies could decrease. Future shortages of this kind of real estate may occur.
- Renters and builders compete. In some cities, build-to-rent, or BTR, is growing in acceptance. Large developers and financial entities fund and construct flats to be rented out rather than sold. Build-to-rent apartment buildings give private landlords in the city center additional competition in the rental market.
- Co-living projects, where investors construct towers of studio apartments with shared facilities, are starting to pop up in several city centers. They may increase the level of competition for apartment rentals.
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