You bought an apartment for rent and wanted to be rich - you will have to get off your beanbag and go to work

"The metal used in construction has become cheaper again, and this is bad news for hobbyists investing in real estate.

 

Although developers and builders are pulling in a harmonious chorus that apartment prices will not fall, because something has become more expensive, the builders end up running to Norway, it's just that they think that Lithuania is so unique that everything can only get more expensive here, the reality is that problems are coming for people who bought an apartment for investment at the wrong time.

 

This bad news was not brought by the Swedes, Americans or Chinese, whose real estate market is already stagnating and prices are, let's say, undergoing a correction, but by our Lithuanian banks, which are successfully raising interest rates because the Euribor is increasing.

 

"A real example. A person rents an apartment in Santariškės. He receives 560 euros per month from this activity, but his loan payment increased to 750 euros after recalculation. In reality, the amount of apartment rent from this month does not cover the monthly amount of the loan, you need to add your own. 

 

Thus, another Trojan horse appears in the real estate market, the consequences of which are unclear", explains the market participant, who did not want to give his name, and says that rental income is just bare numbers. If the contract is legal, personal income tax (PIT), apartment insurance must be deducted from the income. There is even less money that can be given to the bank.

 

"Two years ago, I calculated myself whether it was worth buying such an apartment, then the prices were much lower, but it turned out that even then the rent barely covered the loan, and if GPM and apartment insurance were excluded, I would have had to add it from my own pocket. And this was at a time when Euribor was zero percent. The hardest thing now is for those who wanted to get rich quickly and bought not one but several apartments," the same person teaches and says that now "the numbers are getting harder and harder to add up."

 

Preliminary loan payment on 150,000 euros loan – 670 euros per month without insurance and GPM. In order for such a business to make sense, you need to rent a home for 850-950 euros, which is difficult or impossible with the rental market's oversupply and falling prices.

 

Another problem is that the housing market is practically dead and there are relatively few transactions. No one knows what the real price is today, because, as the developers say, it is "contractual" and not published anywhere. If there is a correction, people who invested during the peak will not even be able to get out of this activity, because after selling the house, they will still owe the bank. This also happened during the last crisis, when those who could not pay fell into debt. It was impossible to sell and simply forget about the failed investment, because the banks still demanded the rest of the loan.

 

The fact that "apartments for investment" is no longer such a fun investment, as explained by various gurus from the stage, is also recognized by analysts.

 

According to Raimonds Reginis, head of Ober-Haus market research for the Baltic countries, there is currently no panic in the market, there is a mood of anticipation, but housing or other real estate is usually purchased for a longer period of time and you have to accept various market ups and downs:

 

"A rare investor can boast of having entered the market at its bottom and exited at its peak. In any case, we can expect that the overall long-term development prospects of the country or its individual regions will remain positive, so those investing in real estate just need to be interested in this market and avoid an overly aggressive investment strategy, so in the long term, the real estate market should generate positive returns."

 

When buying real estate that will be rented out, you should consider not only your ability to repay the loan, but also other additional costs associated with the new purchase.

 

Estateguru investor relations manager Vaidotas Šumskis reminded that those buying real estate as an investment should also assess the possible financial and time costs of maintaining the real estate. It should also be taken into account that, as the economic situation worsens, the financial situation of tenants also deteriorates, and they may become insolvent, it may take time to find new tenants, rental prices may decrease to such an extent that the rental income received by those who invested in real estate with a loan may no longer be sufficient for the loan to cover premiums.

 

"With rising interest rates, it is more expensive to renovate a depreciated property if you have to borrow for the renovations." After assessing these risks, rising interest rates and significantly reduced rental profitability, it can be assumed that currently investing in real estate with a loan is less attractive than before, so the popularity of other investment alternatives may increase in Lithuania, as investors try to find solutions that provide higher returns," he said.

 

Translated into human language, if a person suffers losses from several properties with the addition of a drop in the standard of living, it can be difficult for him to survive and support his family. All the more so because the economic winter, it seems, is just beginning and there is less and less easy money "out of thin air". People who don't want to lose their wealth will have to go look for additional work or even find a paid job if they didn't have it before.

 

The wave of layoffs sweeping through technology companies will benefit the entire sector - it will stabilize the inflated salaries of IT specialists and allow smaller businesses to hire employees cheaper, says Andrius Bičeika, deputy head of Revolut Bank and member of the board. According to him, the company itself does not plan layoffs, and sees crediting and business services as one of the most important niches for future development.

 

Last year up to 35 percent of all of Revolut's revenue came from cryptocurrency revenue, Revolut founder and CEO Nikolaj Storonskis told Bloomberg. The company allows users to trade cryptocurrencies through the app, and provides these services through third-party intermediaries.

 

This year, since the beginning of the bear market, Revolut has received less than 5% from cryptocurrencies.”