Picture an investor with a set budget and two options on the table. The first is a spacious three-bedroom apartment in a sought-after part of Nicosia. The second is a pair of one-bedroom flats in a good area a little further out. The total cost is about the same, but the two choices lead to very different experiences over the next ten years.
There's no universal winner here. The right choice depends on what you want the investment to do for you and how much involvement you're willing to have.
The case for two smaller properties
The biggest advantage is spreading your risk. With one property, an empty month means no income at all. With two, if one tenant leaves, the other is still paying.
Smaller units also tend to appeal to a wide pool of tenants: young professionals, couples and people new to the city. Demand for this kind of property is often steady.
Two properties also give you flexibility later. If you need cash, you can sell one and keep the other. With a single larger property, it's all or nothing.
The downside of owning two
Twice the properties usually means twice the work:
- Two tenancy agreements.
- Two sets of repairs.
- Two buildings with their own common expenses and management committees.
- Two sets of purchase costs, such as legal fees and transfer fees.
Smaller flats also see more tenant turnover, and every change of tenant brings cleaning, minor repairs and possibly a gap in rent.
The case for one larger property
One property is simpler to own. One tenant, one building, one set of paperwork. Larger homes in prime locations often attract tenants who stay longer, such as families settling in an area for their children's schools or professionals on multi-year contracts.
Well-located larger properties can also hold their appeal better over time, because the supply of good family homes in established areas is limited. And if you ever plan to live in the property yourself, or pass it on to your children, one quality home may suit you better than two small units.
The risks of putting everything in one place
The flip side is concentration. If the tenant leaves, your income stops completely until you find a new one. If the area changes or a problem appears in the building, everything you've invested is affected. The pool of tenants for higher-priced rentals is also smaller, so finding the right one can take longer.
Questions to ask yourself
- Do you want steady income, long-term growth, or a mix of both?
- How much time do you want to spend managing tenants and repairs, or will you use a property manager?
- How will you finance the purchase, and what does your bank say about one loan versus two?
- Might you need to sell part of your investment in the coming years?
- Could the property serve a personal or family purpose later on?
Your answers will usually point you in one direction more clearly than any general rule.
Get the numbers right before you decide
Compare both options on the same basis: realistic rent, common expenses, maintenance, purchase costs, financing and periods without a tenant. Speak to your accountant or tax adviser as well, since the tax treatment of your rental income and future sale can affect which option makes more sense for you.
If you're weighing up an investment, G&P Lazarou Estate Agents can help you compare properties, rental demand and locations so you can make an informed decision. Get in touch through gplazarou.com or call us at +357 22024949 and one of our consultants will contact you.
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