Income Properties: Can we Start Looking at Residential Investment Yet?
Unlike the commercial market, residential properties are less likely to be considered as prime investment opportunities and in very rare circumstances can be viewed as potential income properties. This is largely due to multiple risk factors. First, the risk incurred by the length or timeframe of standard residential tenancy agreements. Second, the higher risk of periods of inoccupancy. Third, the legal cap or ceiling for rental rates of residential properties. And finally, the risk of asset depreciation, which is more likely to happen in residential market due to urban demographic changes.
However, to balance the risks, there are also multiple advantages of investing into residential properties. First, residential properties can be a prime opportunity of investment for small or first-time real estate investors that can intelligently capitalize on urban development and population growth in cities. This is applicable in Cairo, where population density and demand for residential rental properties is forecasted to ensure all rental caps are lifted, increasing all rental prices according to demand rates. Second, in Megacities such as Cairo, where rental values for residential prices are expected to increase in response to demand, residential investment can eventually become a valuable income producing investment.
Finally, residential properties in prime locations such as on beach fronts or within close proximity to expat industrial or business parks and universities can easily be targeted by expat communities as well as tourists. In these cases, the incoming foreign demand would ensure rental values can be relatively higher due to catering to expatriate or foreign demand, while the location would ensure consistent asset appreciation.
For further guidance on residential investment and when to start, consult our investment advisors at B2B to understand the full scope of our services and how we can help guide your investment choices today to guarantee your future income.