What Are Micro-Apartments?
A micro-apartment is simply a very small apartment, often with high ceilings, with an open floor plan. They can be anywhere from 100 to 500 ft.² of living area, but they are typically around 350 ft.². They are usually located in larger cities where real estate is expensive and in short supply, and they typically include a bathroom, a kitchen area, and spaces to sit and sleep. Tenants often have space-saving furniture such as a Murphy bed or futon, ottomans with storage, foldable chairs, stackable furniture (nesting tables), a foldable ironing board, and small or hidden appliances. Some spaces are used for more than one purpose. An example of this is a Murphy bed that gets folded up in the morning and replaced by a couch throughout the day. The outside areas of micro-apartments often have communal areas that might include a patio, gym, swimming pool, or lawn.
Reasons People Live in Micro-Apartments
More Affordable
There are many reasons people choose to live in smaller micro-apartments. If only one or two people occupy them, it is much more affordable than renting a full-sized apartment. Even though the price per square foot is higher than in an apartment, the total price is less and affordable for one or two people. Especially in big cities where rent is normally high, a cheaper, smaller place is an attractive option that will allow someone to still live in the city.
Frees up Money for Other Activities
Many people in recent decades have grown accustomed to going out to restaurants more often, doing activities that didn’t exist in previous decades, and traveling. Living in a micro-apartment allows people to spend their money participating in these activities instead of paying rent for an expensive apartment.
Leaving a Smaller Footprint
As the world becomes more crowded and more resources are being depleted, concerned people around the world become worried about the dangers of excess pollution and climate change. One solution to help ease these potentially damaging effects of the Earth is practicing minimalism and using as little of the Earth’s resources as possible. A micro-apartment doesn’t require as much electricity, gas, or materials for construction as a larger house or apartment would. In addition to recycling and driving electric cars, living in a micro-apartment is one way to limit the usage of natural resources while “leaving a smaller footprint” on our planet.
Is It a Good Idea to Invest in Micro-Apartments?
The purpose of this blog is not to offer investment advice, only to share knowledge that is already available. We’ll tell you a few facts about a current trend, then you’ll have to decide if an investment is a good idea. Having stated that, let’s take a look.
Micro-apartments might be a fleeting trend, but they seem to be growing in popularity – at least in larger cities. They are cheaper than apartments, they are usually nearby popular downtown areas, and millennials like them for the following reasons: 1) Millennials haven’t accumulated much “stuff” and don’t need much space. 2) Millennials are delaying marriage compared to previous generations, so they are still single. 3) Millennials would rather use their money for travel and various forms of entertainment. 4) Millennials typically haven’t accumulated enough wealth to purchase a permanent home. 5) Most millennials are making less income than previous generations in addition to trying to repay education-related debt. 6) Micro-apartments are close to work and school. 7) Roommates aren’t necessary, so tenants can finally live alone, maybe for the first time in their lives.
There are professionals and investors in the real estate industry who believe micro-apartments will be more than just a trend. Whether or not micro-apartments stick around remains to be seen, but they are making an impact in certain areas of the real estate market, and they are catching the attention of investors around the globe.
Benefits of Investing in Micro-Apartments
Location, Location, Location!
To start, micro-apartments are usually in really prime locations. And everyone knows the “location, location, location” cliché. A thriving industry could drive working-class tenants making nice wages to rent long-term and live in micro-apartments. As mentioned earlier, micro-apartments receive more per square foot than most other kinds of homes.
Multiple Tenant Options
Millennials are surely the target tenants for micro-apartments, but there are other groups that are attracted to them. Students attending college, for example, often don’t have much need for lots of space, and can typically afford micro-apartments. These tiny options are also very appealing when they are close to campus and/or nightlife.
Other interested groups include single or married seniors who have downsized and don’t need much. Anyone single would also be a good candidate due to the simple and inexpensive lifestyle that is associated with living in a micro-apartment.
Travelers who would rather stay in an Air B&B type of place as opposed to a hotel are also good candidates to temporarily rent out a micro-apartment. An investor could charge much more per night for a short-term renter than they could for a long-term renter. Travelers would also enjoy the proximity to downtown with restaurants and pubs.
Lower Investment Costs
Because of the significantly smaller size of a micro-apartment, they don’t cost much to purchase. If someone just starting out in real estate investing wants to purchase just one micro-apartment, it would be substantially cheaper than purchasing a full-sized apartment or house. If they see that one working out, they could consider investing more money on more units and enjoy greater profits. And, again, because the price per square foot to rent is higher than normal, there is a good ROI (return on investment) potential.
Risks of Investing in Micro-Apartments
Investors and developers should know they cannot just make a bunch of plans and start building these micro-apartments everywhere. There are rules and zoning apartments that might prohibit that type of living establishment. Some places won’t allow such a small apartment, and some places don’t have enough parking to handle what would be necessary. Also, lenders often want more money down for such an endeavor, especially because there is not much data available on the soundness of an investment of this kind. Then there is always the risk of a couple who intentionally or unintentionally starts a family and needs more room, or becomes a family of three in a micro-apartment that only allows two or fewer tenants.
If the idea of investing in micro-apartments appeals to you, do your homework and research all you can. There is a lot of information on the Internet to help you decide for yourself if purchasing a micro-apartment is a sound investment. Also, speak with local real estate professionals in your area and get their opinion on what might be needed to make such an investment.