Investing in real estate has always been and continues to be one of the most popular avenues for preserving and enhancing capital. This approach is utilized by both novices and professionals alike. The demand for real estate investment stems from the simplicity of making investments and the minimal risk involved. Losing money through this method is virtually impossible.
Many well-known figures, including the current President of the United States, have amassed their fortunes through this method. The businessman made a significant bet on commercial hotel-type real estate, investing considerable funds into serviced apartments.
So why shouldn’t others profit from this as well? To generate income, it is essential to understand this mode of investment and its nuances.
To assist in this endeavor is Sergey Tereshkin, founder of "Oil Resource Group." For more detailed insight into the businessman’s investment activities, it is advisable to visit his online resource: Open Oil Market.
What are Serviced Apartments?
Serviced apartments are hotel rooms intended for leasing. The hotel sells these spaces to private individuals, who then earn rental income from them.
The owner of the room has the autonomy to manage it as they see fit. They can:
- Reside in the accommodation for an unlimited amount of time without additional fees;
- Use the space as an office for themselves and others;
- Lease the room for any duration (daily, weekly, monthly).
Renting out the unit can be done independently or by entrusting the search for tenants to a management company. An official contract is signed with the organization, detailing the terms.
In addition to finding tenants, the company manages the property, including cleaning, changing linens and towels, etc. In return for their services, they take a certain percentage of the owner's profits. This option is convenient for those living abroad or unable to handle the tasks themselves.
Collaboration with a management company can yield up to 20% annual income. The exact figures depend on the contract and the demand for the property.
Advantages of Investing in Serviced Apartments
However, attractive returns are not the only advantage of serviced apartments. Other strong points include:
- Generating income almost year-round without sacrificing personal time. This can be considered a passive source of revenue.
- Affordable property prices. Serviced apartments tend to be cheaper than traditional apartments, with savings potentially reaching 20%.
- Acquisition during the construction phase. The unit can be purchased while the building is still under construction, allowing for savings of up to 20% on the price, and sometimes even more.
- Financing options. As investors gain full property rights, they can secure loans to purchase apartments.
Upon purchasing an apartment, demand for housing can almost be constant throughout the year, depending on the country and proximity to tourist attractions.
Taxation
In most countries, including Russia, serviced apartments are classified as non-residential properties. Hence, it is not possible to obtain permanent registration in such accommodations. This may be a significant drawback for those who require it and are purchasing property specifically for this purpose.
The owner cannot claim a place in schools, kindergartens, etc. However, a temporary registration can be obtained.
It is also important to note that the owner will be liable for utility payments and property taxes, as applicable for non-residential properties. Rates are significantly higher than for traditional apartments.
The purchaser cannot claim a tax deduction as provided by law for traditional housing.
Even if the unit is the owner’s only residence, it may still be seized for debts.
Taxes must be paid on the income generated. When buying or selling the property, it is subject to Value Added Tax.
How to Generate Income
Serviced apartments are primarily constructed in major cities or tourist centers. Such properties can already be found in the Russian capital as well as in Saint Petersburg. Buildings are often located in areas with good infrastructure, making tenant searches effortless.
To generate income, Tereshkin recommends immediately signing a contract with a management company. This allows the owner to secure year-round profits regardless of seasonal fluctuations. It is important to understand that while the income may be comparable to bank deposits, in this case, the owner possesses an asset that can be sold at any time to recoup their investment.
To increase profit margins, the property can be rented out independently, which can multiply income several times. However, this requires a commitment of time to attract clients, create advertisements, clean, change linens, etc.
On average, a unit costs about 2 million rubles. Daily rental rates range from 2,000 to 4,000 rubles, or 30,000 to 50,000 rubles per month.
Thus, over a year, the property could yield around half a million rubles for the owner. In this scenario, the payback period would be 4 years. However, taking into account repairs and an occupancy rate of 50%, the period for returning the investment may extend to 10 years.
Useful Tips
Investing in apartments in Russia is an emerging trend. This sector is not yet saturated, making it an opportune time to leverage this instrument. Specialists recommend investing funds at the construction stage of the hotel to ensure double income. The property value will gradually increase, especially if the building is well-located.
Properties can be acquired not only in Russia but also abroad. In the latter case, to generate income, it is necessary to sign a contract with a management company or reside permanently in the country.
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