The market has never been hotter
With the trend of concentrating on finding jobs in urban areas and large cities, the demand for housing is also increasing. Meanwhile, with the supply of low-cost apartments being extremely scarce, many people do not have enough financial capacity to buy mid-range apartments. Therefore, the rental market with products such as apartments and serviced apartments serving workers with incomes of around 20 million VND is always in a state of "no rooms available".
Even during the period when the "wave" of returning premises swept through Ho Chi Minh City, causing many places to have to hang "for rent" signs, many offices fell into a state of vacancy, the rental apartments still increased slightly in price. The second quarter report of 2023 of Batdongsan.com.vn also showed that the growth rate of profit margin (including price increase rate + rental yield) when investing in the apartment segment is increasing by 97% compared to the beginning of 2015, more stable than other investment channels such as stocks, gold, savings or foreign currency...
Serviced apartments are attracting many people who do not have the finances or need to buy a house.
According to the survey, many serviced apartment buildings in central districts of Ho Chi Minh City such as Phu Nhuan, Binh Thanh, Tan Binh, District 10, District 11... are having occupancy rates of over 80%, even some projects have reached 100% occupancy rates. The occupancy rate of small-sized serviced apartments in Ho Chi Minh City has increased sharply in recent times and tends to increase in the summer months when students prepare for the school year.
Faced with this trend, while waiting for the economy to improve, many building owners who used to operate as office or hotel rentals have changed direction and are in the process of renovating them into serviced apartments. These studio-style serviced apartments are often rented with full furniture, with prices ranging from 6-12 million VND/month, depending on the area.
With a smaller area than a normal apartment, this type has the advantage of being cheaper and closer to the center. The recent appearance of serviced apartments has become a competitor to investors who buy apartments in the suburbs for rental investment.
Many building owners combine business offices on the ground floor and apartments on the upper floors.
Some brokers said that many people are willing to trade off area, ventilation and infrastructure facilities to choose to rent serviced apartments near the city center instead of suburban apartments at the same price. Therefore, more and more buildings are being converted to this model for rent, bringing in cash flow instead of leaving the entire office building empty waiting for tenants.
In addition, some building owners have combined office and headquarters rental on the 1st and 2nd floors of the building, while the upper floors have been renovated into serviced apartments for rent with many types from mid-range to high-end, with different areas and amenities.
Need to carefully calculate investment costs
According to research, the income from renting serviced apartments is not low, but it is highly stable. Compared to normal rooms with the same area, the rental price of serviced apartments is usually at least 1.5-2 times higher per room. Especially for investors who know how to take advantage of space, increase utilities and appropriate services, the price can increase even more.
However, the management and operation, and calculation of revenue and expenditure for this type of serviced apartment will be more complicated than for cheap rental rooms. Business people must know how to manage systematically and closely from the contract stage to the operation and advertising stages to optimize revenue when investing in this type.
Because, although at present, serviced apartments are very popular and sought after by many people. But some investors have suffered losses when converting to this type. Like the story of Mr. Ngoc Anh (Binh Thanh), who converted his hotel model to renovate into serviced apartments for rent.
In the beginning, due to not knowing how to manage the long-term rental model, along with advertising to the wrong target audience, along with the pressure from a loan of nearly 2 billion VND to renovate the model, he was miserable for nearly 1 year of conversion. After more than 1 year of suffering losses, with the support of friends to find the smoothest way to operate the rental, Mr. Ngoc Anh's serviced apartment complex was 80% full, bringing in a monthly revenue of nearly 300 million VND.
Hotels and office buildings have the advantage of having underground parking, elevators and fire protection systems in place.
However, not everyone is so lucky, like the case of Mr. Hieu (Binh Tan), because he did not understand the market well, he and his friends pooled capital to rent many buildings to renovate them into serviced apartments for rent. However, due to the large investment capital and bank loan interest, the serviced apartments Mr. Hieu rented were not competitively priced compared to apartments in the same location.
While in Binh Tan, some apartments of over 50m2 are being rented for around 7 million VND/month, Mr. Hieu's serviced apartment is being advertised for rent at 6 million VND/month. When including service fees, electricity and water at higher prices than apartments, the competitiveness of this type is lost, making it impossible for him to fill his apartments more than 60% for many months. This has led to an increasing debt burden because the income can only cover expenses, interest and rent.
However, it has been noted that in this area, many serviced apartment models are attracting many tenants with occupancy rates always close to 100%. Mostly serviced apartments but with affordable prices, rental prices range from 4-5 million VND/month, significantly cheaper than apartments in the same area.
With the potential for high profitability if operated well and with careful cost calculation, the serviced apartment model is increasingly appearing. Among them, many hotel owners and office building owners for rent have not been able to bear the situation of no revenue in the past due to many factors. With the advantage of existing buildings, these will be strong competitors in the rental market in the coming time when they can cut down on the cost of renting the building.
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