Why is it worth investing in premium real estate?
Rafał Lewandowski, an experienced expert and Partner at Lions Estate, whose knowledge of the real estate market is appreciated by clients cooperating with him - often for many years -, explains.
The situation on the modern real estate market (not only premium) can be described with one word – boom. The boom continues. The main reasons for this state of affairs can be seen in the relatively high level of inflation, combined with almost negative interest rates. The combination of these two factors means that keeping cash in the bank is no longer profitable, and the purchase of real estate appears to be the safest capital investment or even an investment with a reasonable rate of return. In addition, not every investor wants to invest their money in assets that they do not fully understand (e.g. in cryptocurrencies or the stock exchange). Real estate is tangible, measurable and safe assets. Although this does not mean that by buying each of them, the profit will be guaranteed. In the current dynamic market it is not difficult to make investment mistakes, so it is worth using the help of experienced specialists.
On our blog, we have repeatedly mentioned the benefits of working with a specialized agent both when selling real estate and when searching for purchases. Selling real estate on an exclusive basis and conducting dedicated searches are two directions in which the industry will invariably follow and develop. At this point, it is worth asking yourself whether buying real estate for your own needs is different from investing and can these two things be combined?
The purchase of an apartment or house for one’s own needs is significantly different from such an investment transaction. In both cases, hiring a specialized broker to look for will bring numerous benefits. Time saving, A-to-Z consultancy in the transaction process, support in negotiations and access to Off-Market offers, which are not officially available on the market, are the added value appreciated by an increasing number of customers. When investing in the stock market or in works of art, using the support of a broker / dealer is obvious. The premium real estate market in Warsaw is also slowly maturing to such an expert approach.
Purchase for your own needs…
At Lions Estate, we conduct dedicated searches for our clients’ own needs – we focus on listening to their needs and understanding what they are motivated by. Criteria such as: type of real estate, area, location, number of rooms and finally the budget are applied to the map of Warsaw and the surrounding area, and then we consider them in the context of the supply of offers currently available on the market and those Off-market.
We also try to propose alternative directions – e.g. non-obvious locations or types of real estate, and sometimes also make our clients’ expectations real. The latter is one of the most difficult aspects of a real estate agent’s work, but the final effect brings a lot of joy and satisfaction, and very often helps make dreams come true. Such a dream property will not necessarily generate very high rental income in relation to the purchase price, or be very liquid when resold.
Our recent transactions in super-premium buildings such as Cosmopolitan, Złota 44 or the emerging Emilli Plater Residence fit into this trend. Wealthy clients met their housing needs by buying another property for their portfolio – a bit like a “second home”. From an investment point of view, it is an excellent protection of capital. However, deriving income from renting such a luxury real estate or its quick speculative sale will not be the main goal of the above-mentioned VIP clients. Although, in the perspective of years, the sale of such a property will most likely generate a profit.
…and for the investment.
In strictly investment terms, the entire search process looks similar only on the surface. Focusing on top apartment buildings, meticulously restored historic tenement houses or luxurious mansions will not necessarily make the Excel figures indicate a satisfactory rate of return on the lease. Ratio at the level of 5-6% of profit per year – is it even possible on the Warsaw premium market? Absolutely – but the search should be carried out focusing on slightly different factors.
“As a real estate broker who has built his many years of experience in the industry primarily by renting premium apartments and houses for expats (corporate managers / diplomats), I know how to help buy attractive properties for rent. apartments from the premium segment, attractive to the aforementioned expats. They are often located in the vicinity of international schools, with high rental potential (rental price / liquidity) or even long-term leased. “
Recently, I have completed this type of transaction for the Investor – the purchase of a house in Osiedle Konstancja in Bielawa, rented for a long time by the embassy. The property was not officially available on the market, so the client would not find it on real estate portals. At Lions Estate, we are able to provide Buyers with similar quality investment products depending on the size of their portfolios. They may well be smaller apartments that are attractive to rent. Although the rental market for such apartments is currently more difficult due to the shift of a large number of short-term apartments to traditional rental. The rents obtained from the rental of flats do not increase proportionally to the increase in the purchase prices of flats, therefore the role of the broker – an expert on real estate – is now becoming more and more important.
The Covid19 pandemic only intensified the demand for real estate without slowing down the growth of their prices. The average price per square meter in Warsaw has already exceeded the barrier of 12 thousand. per m2. Furthermore. finding an attractive property below the aforementioned average price borders on a proverbial miracle. The number of people actively searching makes the most attractive offers disappear quickly. In these circumstances, we recommend that you commission a specialized expert to search for real estate. We guarantee that the final effect will be much more satisfying than wandering through portals and interacting with a number of random agents. Dedicated searches motivate the professional to make the greatest possible effort, which ultimately pays off in achieving the goal.
I cordially invite you to cooperate with Lions Estate!
Rafał Lewandowski, Partner w Lions Estate