This article was posted on Lrytas.lt
If a few years ago, when choosing a rental property, the main criterion was probably location, location and location again, nowadays interior solutions are at the top of the priority list. With quality interior design, older apartments are often rented out within a day, and the price is not inferior to new-build apartments, and sometimes even surpasses them.
The rental market is changing
Gustas Germanavičius, the founder of the crowdfunding platform "InRento", confirms that Lithuanians are more and more likely to spend money on a well-furnished apartment, both for permanent residence and for rent, and are often willing to overpay if the interior of the apartment really impresses them.
In the big cities, especially in Vilnius and Kaunas, where the rental market is the most vibrant, there is still a large number of old-built flats, including dormitories, especially in attractive locations. Many of these apartments are furnished in a modern way, often with the help of interior designers, which is hard to believe when you look at the facades and common areas of such blocks.
"It is important to underline that those who invest in real estate and spend money and time on interior design can get quite attractive rental returns. Tenants are still not interested in the facade or the condition of the common areas that much, as in the interior of the apartment, where they spend most of their time – they buy a nice view and a feeling of coziness," commented G. Germanavičius.
He also said that when looking for a place to rent, it did not make much difference how far one had to drive to work or to an educational institution, especially if the apartment was furnished to a high standard and the rent was affordable.
As Diana Ginaitienė, interior designer at DG interjeras, commented, the buy-to-let investments have been on the rise of apartments of longterm and shortterm rent investments. As far as investment housing is concerned, it is currently popular to convert old-built premises into attractive, new homes for rent or sale.
"Of course, it takes a lot of effort to bring old premises back to life. Sometimes it requires major renovation, new furniture, and in some cases redesigning the space to make it livable. Of course, these investments come at a cost, but they undoubtedly allow the investor to create an attractive property on the market, which is likely to yield a higher return than other properties on the market at the time," shares D. Ginaitienė.
The interior designer gave a concrete example: a project in Švitrigailos Street, an attractive location in Vilnius. It is an old house where the rooms have been converted into new dwellings. On one floor there are 10 new rooms for rent. They have everything a modern person needs: a private bathroom, a spacious wardrobe, a kitchen and a living room area and a bedroom.
This project was funded on the InRento platform a year and a half ago. During this period, investors have been receiving a steady monthly interest rate, with annual returns currently ranging from 8.98% to 9.58%, depending on the amount invested.
Some of the premises have been successfully sold and the investors have been reimbursed a part of the loan and paid additional capital gains accordingly. As far as the rent of this project is concerned, it can be emphasized that the rent per sqm has been raised to A+ class level, which is a really great achievement," said Gustas Germanavičius, CEO of InRento.
The popularity of non-standard housing is growing
"As tenants' preferences and lifestyles have changed, non-standard housing, such as Co-living projects, is becoming more popular. Typically, larger buildings have studios and other common spaces of 18-20 square meters. Tenants live in modern housing for a relatively low total rent. It is cheaper and easier for the owners of such projects to manage a few dozen or a few hundred apartments", and you can find similar projects on the InRento platform", commented G. Germanavičius.
Property developers often acquire only part of a building or several floors of a building when implementing community living housing or loft projects. Thus, although the idea of providing quality housing in former production or public buildings sounds really attractive, project owners are usually faced with the indifference of neighbors on the other floors to renovate the facade.
Other owners often think that renting out the space in its current state generates a higher return and are satisfied with that, but do not consider that renovating the facade could significantly increase the value of the property.
"I think that in Vilnius Naujamiestis, in the central part of the capital, in Žirmūnai, Naujininkai, Šnipiškės, there is a lack of awareness among residents and investors, and a lack of initiative from the municipality, but I have no doubt that sooner or later, facade renovation initiatives will start. When the facades are renovated, the residents or tenants will probably have to pay for years for the work carried out. The question is, how would this change the rental return? Each case has to be assessed on its own merits, but it is important to remember that while the immediate return may be negatively affected, in most cases owners would generate a higher return on the realization of the asset – a capital gain".
For many years now, property developers have been stressing that there is a shortage of landplots for new construction in Vilnius, and that conversion and renovation are inevitable processes, especially in attractive areas of the capital.
Project at the start of funding:
The project is now:
Lack of luxury housing
In the expert's opinion, in the future there will be a growing shortage of middle- and upper-class housing, which dominates in the central part of the capital, but of truly luxurious properties, which are already in short supply today.
Rental professionals point out that the rental price of penthouses, multi-storey apartments with an area of more than 200 sqm, at least for the time being, has no rational explanation and is really difficult to predict.
"Renting a luxury property in particular can generate even higher returns simply because there is a lack of supply. People return from the US or other economically strong countries, as well as professionals in the technology or financial sectors, Lithuanians who live abroad and come back to Lithuania for a few months. Exceptional apartments can be rented for as little as EUR 10,000 per month".
On the InRento platform, you can invest in buy-to-let projects with an investment of EUR 500 or more. The platform for crowdfunding in real estate rental projects stands out compared to other crowdfunding platforms operating in Lithuania. According to the official Bank of Lithuania 2022 statistics, there has not been a single late project and late or defaulted project number remained at 0.