Want to invest need at least 1.5 billion dong?

Many real estate segments remain sluggish, but apartments in Hanoi have seen a steady increase in prices, maintaining an annual increase of 13%. The average rental price of apartments in Hanoi increased by 4.5% over the past year.

Mr. Tran Quang Trung, Business Development Director of OneHousing, said that investing in apartments for rent in Hanoi is still an attractive investment channel at this time.

Apartment for rent with high profit, minimum investment required is 15 billion VND, image 1 — Mr. Tran Quang Trung, Business Development Director of OneHousing. (Photo: ML)

As bank interest rates decrease and many policies promote recovery, the real estate market begins to welcome capital flows again. Investors are placing a large proportion of capital flows in the rental real estate channel. In your opinion, what is the reason to believe that this investment channel will bring profits in the long term?

- According to the 2019 population census, the capital's population is expected to increase by about 200,000 people each year, equivalent to a large district. Most of these people rent houses, creating high demand for rental housing in Hanoi. Also, as of 2019, Vietnam has about 120,000 foreign workers working and this number grows by an average of 17% per year.

The average apartment rental price in Hanoi is about 10 million VND/month, an increase of 4.5% compared to the same period last year. It is clear that the output of the apartment segment always has a bright opportunity because the supply is less than the demand.

Apartments are having good rental demand, however there is still a view that buying apartment real estate is a negative asset and will gradually lose value in the future. Do you agree with this view?

- An investor in a rental apartment is concerned with two issues, one is whether the capital cost can increase in the future, the second is how the rental cash flow is. Regarding the price and price increase margin of the rental apartment type, Hanoi apartments have the highest rental profit margin among real estate segments.

In Hanoi, the profit from renting apartments in 2022 is 4.4%, 1.7 times higher than the rental rate of street-front houses. In the West of Hanoi alone, the rental profit ranges from 5% to 6%.

With this rate of return, the apartment owner avoids inflation of about 4 - 4.5%/year if he keeps cash, and also profits from the percentage of capital appreciation in the future. For example, in Hanoi, from 2018 - 2022, apartment prices increased by an average of 13% per year.

According to your observation, in Hanoi, which areas have good rental potential? Why?

- The Western area is attracting a large number of tenants, notably the buildings in Vinhomes Smart City, with a rental yield of about 5.5%, higher than the average of the entire market (about 4.4%). This shows that the rental cash flow of this metropolis is higher than other projects in the area.

The reason why the Western region has good growth is related to the following factors: first, the State is approving all agencies, ministries and sectors for the Western region. The US Embassy area with an investment of 1.2 billion USD on Pham Van Bach Street was also started in April 2023. In the future, representative offices of units related to the US will be formed, focusing on this area.

In the West, some of the most sought-after projects in the rental segment are in this area. Many foreign tenants are willing to spend $1,000 - $2,000 for accommodation, which is not a big deal.

Usually, the area where foreigners rent will have good rental prices, which means that the price level in that area will increase. And when the rental price increases, it means that the real estate price there will also increase, that is the logic of residential real estate.

Apartment for rent with high profit, minimum investment required is 15 billion VND, image 2 — To invest in apartments for rent, customers should also have a minimum equity capital of 1.5 billion or more. (Photo: CP)

The financial capacity of investors is different. In your opinion, which type of apartment is easiest to rent? How much capital does an investor need to invest in an apartment for rent?

- Studio and 1-bedroom apartments for young singles and 1-bedroom + 2-bedroom apartments will be suitable for a large number of tenants, which are families with spouses and small children. As for the upper class, for example, senior experts, counselors or CEOs of companies who bring their wives and children to work, they are willing to choose to rent villas, penthouses... To invest in apartments for rent, customers should also have a minimum equity of 1.5 billion or more. Depending on the value of the apartment and the different investment in rental furniture, the equity will also be different.

Among the forms of real estate investment, such as surfing or long-term holding, why is investing for rental the most suitable at this time, sir?

- I think this is still a story about customer expectations at each point in time. A smart investor will know that instead of putting eggs in one basket, they put eggs in many baskets, they will have to have long-term investment real estate products so that in the future they can only make profit from capital appreciation. But with this type, investors must buy real estate at a good price, with clear legal status.

As for those who own a number of rental properties with monthly cash flow, they have very clear purposes, such as: to get money for their children's education, or monthly spending money when they retire, travel... There are also those who have a very methodical investment mindset, which is to build a chain of apartments in many projects; each project has about 3 - 5 apartments to bring in a monthly cash flow of up to 300 - 500 million.

In real estate investing, it is ultimately all about asset value. Any property that generates cash flow is real estate. So, it doesn’t matter how much you own, what matters is how much cash flow your property generates for you.

Thank you for the conversation!

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