Why Invest in a 2-Bed Apartment?

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What are the Benefits of Investing in a 2-Bed Flat?

Changing lifestyles in the UK mean that apartments have become some of the most popular assets for property investment. However, many investors are faced with the dilemma of choosing a 1-bed or 2-bed apartment.

Size is an important factor when making a buy-to-let property investment, and the type of property you choose is key for targeting specific demographics and maximising returns.

Due to the lower price, 1-bed apartments are a great way to start investing in property and an innovative and lucrative strategy for expanding an existing portfolio.

However, for those with the funds to invest in something bigger, 2-bed apartments can offer a range of advantages over smaller flats as buy-to-let investment properties. This article will explore some of the biggest benefits of investing in a 2-bed unit.

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Increased Monthly Income

The apartment size will affect the investor’s ROI, meaning it is typically more lucrative to invest in a 2-bed rather than buy a studio apartment or a 1-bed.

One of the factors determining this profitability is rental income. Higher rents can be earned from a 2-bed apartment than a smaller one. For example, home.co.uk states that the average rent for a 1-bed property in Liverpool is £815, while the average monthly rent for a 2-bed property is £1,104. This typically means a higher monthly income for the investor.

When you compare the property price with the earning potential, 2-beds are the best type of property to invest in for rental yields in many cases. For example, luxury 2-bed apartments in the upcoming Mercantile development in Liverpool offer 6% assured net rental returns. Some 2-bed units can offer a net rental income of £17,097; if you compare this to the possible income for a 1-bed of £11,907, it’s clear that there are significant differences in rental income depending on the number of bedrooms in the property.

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Better Potential for Capital Appreciation

2-bed apartments appeal to both buy-to-let investors and owner-occupiers, meaning they can be easier to sell when the time comes. Past research from Zoopla has shown a clear shift in demand among buyers as apartments become a more popular choice. In particular, demand for 2-bed flats was highest among those searching for an apartment.

This increased demand can make 2-bed properties grow in value faster than 1-bed units. By investing in off-plan property, these capital appreciation gains can be even more significant.

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Stable, Long-Term Tenancies

1-bed flats and studio apartments are popular with single young professionals and students or graduates. This type of residence suits their lifestyle and is seen as a more flexible, shorter-term residence. Of course, the tenant may stay in the apartment for years, but in the long term, they may be looking towards getting a larger apartment with more space or moving in with a partner.

So, while 1-beds are great investments for targeting the young professional demographic, 2-bed tenancies may be longer-term and more stable as they are considered a place to settle down with a partner or family or a symbol of finally having enough success to secure a larger, long-term residence.

Targeting these demographics may lead to longer tenancies and fewer void periods.

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Extra Space

Having a larger apartment can be a great selling point to attract tenants. After the pandemic, many renters are prioritising space and willing to pay more rent to enjoy a more spacious apartment. Some even consider it a necessity to have an extra room for remote work.

The ground rent and service costs are also typically the same in a building regardless of the size of the apartment, meaning you can have the same expenses in return for more space. 2-bed apartments will typically be cheaper from a price-per-square-metre perspective, giving you control over a larger asset for a better price.

Broader Demographic Appeal

As mentioned, 1-bed apartments and studios mainly appeal to young professional renters, which is a reliable and sought-after demographic when it comes to finding tenants.

However, by investing in a 2-bed apartment, an investor can broaden the appeal further. This includes young professionals who want to share the space to cut rent costs. There is a growing trend of renters sharing apartments to save on energy bills, which experienced a sharp price hike in the past few years.

Acquiring a 2-bed unit can also allow for the targeting of couples and families who are looking for an appropriate apartment while they save for a house of their own or those who consider it a long-term apartment to settle down in for the near future.

To learn more about the UK property market, take a look at our dedicated buy-to-let area guides covering topics such as investment property available in Bradford and investment property available in Middlesbrough.

Author

Jessica Ferris

Jessica is a property content writer at RWinvest. Keeping a close eye on the UK property market, Jessica helps our readers stay informed and up to date on the latest market news and statistics.