Investments in tenements – is it worth it?

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The dream of making it on the real estate market prompts many wealthy people to invest their savings in old tenement houses. This applies mainly to large cities and is calculated on the rapid increase in value of the property after renovation. What are the prospects of such investments?

Investments in tenement houses: why can it be profitable?

Of course, this type of investment has both supporters and opponents. First, it is necessary to present arguments of those who see in such investment a great opportunity.

Arguments in favor of investing in tenement houses

Such properties are invested in because of:

  • unique style and atmosphere – old tenement houses have a unique style, which is hard to find in modern buildings. This is a good offer for people who want to have a stylish apartment or arrange an office or service point in such interiors. Their characteristic features are spacious interiors, high ceilings and large windows, which can be used to create various arrangements. Also the building itself is usually decorated with interesting details, has a characteristic courtyard and staircase. It is hard to deny its climate;
  • location – tenement houses located in the centers of the largest cities are especially valued. Their advantage is a good location which saves time on commuting to work;
  • details – old stoves, beautiful door and window woodwork or valuable parquet flooring, although certainly damaged by the passage of time, after renovation may be real ornaments of the interior;
  • price – the price range of apartments in tenement houses is very large and sometimes you can benefit from that. You just have to remember that cheap purchase of a flat and expensive sale after upgrading its standard is only a part of the truth about investing in a tenement. Do not forget about the cost of renovating the property itself, which can be very high.
Photo: Pasja1000/Pixabay

Premium market and investing in apartment buildings

People who invest in tenement houses count on quick increase in value after renovation. However, introducing premises to the premium segment requires huge costs, modern solutions, stylish arrangements or installing an elevator. Prices of premium apartments in renovated tenements are much higher than the average, especially in Krakow, Wroclaw and Warsaw. Stylish buildings with beautiful elevations are often chosen as the headquarters of companies, hotels, offices, restaurants or places for apartments for rent. Apartments in such places are also eagerly bought by individual investors who have adequate funds at their disposal and want to combine comfort with an interesting style.

Premium market – prospects

The premium market is still developing strongly. According to High Level Sales & Marketing, 1,026 apartments were sold in the seven largest Polish cities in 2019, which translated into a total of PLN 1.82 billion in volume terms. This is 35% more than in the previous year. Also the first months of 2020 brought growth, although the second quarter weakened due to the pandemic. Still, sales are expected to grow in the long term.

What are the barriers to investing in townhouses?

Two types of barriers in particular discourage entry into the real estate market:

  • the complicated legal status of the property – it is rare that a townhouse can be purchased on the basis of the co-owners’ agreement to sell the property. The most profitable, but arduous and uncertain, way is through a gradual purchase of shares from those who own shares. There is no certainty that such action will be successful,
  • the need to have a large capital – it is not only the cost of the property itself, but also the estimated expenses for its renovation. As a rule, we will pay less in small and medium-sized cities, and the most in the largest ones, where, however, bringing the premises to a premium level can bring the greatest benefits
Photo: Passion 1000/Pixabay

Prices

Here are some data showing the prices in the townhouses market:

  • 600 – 700 sqm of an object in a medium-sized city before renovation is an expense of PLN 1.5 – 2 million (WGN data); in large cities, prices can be many times higher,
  • 500 m2 of a historic tenement house in Gdańsk (Old Town) after renovation costs PLN 14 million,
  • 2000 m2 of a building in the Old Town in Wrocław costs PLN 15 million after renovation,
  • prices per sqm in Warsaw start from 10 thousand PLN but they often reach over a dozen thousand PLN (higher standard),
  • in Łódź the price per sqm of an apartment is much lower, starting from 6 thousand PLN
  • in Cracow’s Old Kazimierz district, for an apartment of 120 sq. m., one can even pay PLN 2.5 million.

Examples of investments in tenement houses: Wilcza Street in Warsaw

It is worth mentioning the cases of successful investments in tenement houses which not only significantly increased their value, but also changed their face and became prestigious places. A good example are the tenement houses on Wilcza Street in Warsaw. It is one of the best preserved streets in old Warsaw with buildings from the 19th century, in which revitalization breathed new life. RealCo Property Investment and Development, in developing the project at 19 Wilcza St., offered customers high-standard apartments that are ready to move in. Buyers do not have to worry about hiring professionals or interior design

photo: Passion1000/Pixabay

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