Many potential rental areas

In response to the real demand for housing, affordable apartment projects are developing quite strongly in suburban areas and in the provinces surrounding Ho Chi Minh City. With low prices, these projects have attracted many investors to come here to seek profitable opportunities with little risk.

In the current period, many investors have abandoned the “surfing” mindset and focused on holding for the medium term, even the long term, waiting for real estate prices to increase along with infrastructure development. During that period, many people have chosen to rent to bring in monthly cash flow, to pay for other expenses and increase profits in the short term.

For that reason, in recent times, a number of projects located in areas such as Ben Luc (Long An), Di An and Thu Dau Mot (Binh Duong) have attracted the attention of many investors. In particular, projects located near Thu Duc University Village (Thu Duc City) are always in high demand. According to some brokers in this area, the occupancy rate of apartments in the area is always good, and the group of tenants is also diverse, such as students, families, local workers and even those working in the city center.

“Many people work in the city center but want to have a comfortable, spacious living space at an affordable price, so they choose areas like Di An or the outskirts of District 9 to rent a house. The rental price here is currently fluctuating from 5-6 million VND/2-bedroom apartment without furniture, a reasonable price for families or groups of students,” said a real estate broker in the Di An area.

Accordingly, with the advantage of abundant rental demand, this area is attracting a lot of residents to live here. This leads to the development of infrastructure and the area becoming more and more bustling, making the potential for price increases of apartments here also increase.

With such a rich source of tenants, apartment projects in the suburban areas of Ho Chi Minh City are always different from projects in the city. Because of the difference in exploitable profits as well as the stability of tenants. Even some apartment projects have not yet been handed over but have had many tenants asking to rent. Products such as townhouses and villas in this area have also become attractive to customers, due to the large number of foreign experts working and living there.

According to Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn in the South, the real estate rental market in the provinces near Ho Chi Minh City is benefiting from many new infrastructure policies. When Ring Road 3 and the highways are completed, trading and traveling between areas will become easier, which will spread the population from the center to localities such as Ben Luc, Thuan An, Nhon Trach. Therefore, the demand for rental in places 30 - 40 km from the center of Ho Chi Minh City will be quite potential in the near future.

However, for rental apartments, before investing, investors also need to calculate minus bank loan interest if any, risk costs if the rental is interrupted and maintenance and renovation costs for the rental house when calculating investment profits to make the right decision.

Opportunity for long term investors

Analyzing the investment in the rental apartment segment in the satellite market, Mr. Dinh Minh Tuan said that opportunities are opening up for real estate investors with good judgment and accepting a stable direction in the long term.

Accordingly, the selling price of apartments in the provinces surrounding Ho Chi Minh City such as Long An, Binh Duong or Dong Nai is fluctuating at 1.2 - 1.5 billion VND/apartment with 1-2 bedrooms. The rental price here fluctuates between 6 - 12 million VND/m2 depending on the area and interior. Meanwhile, in Ho Chi Minh City, to be able to exploit the same rental price above, the cost to own an apartment with the same area on average falls around 2-3 billion VND/apartment.

Meanwhile, the rental yield of apartments in the suburbs is from 6-6.5%, while in Ho Chi Minh City, the yield is only around 4.2-4.5%. In addition, in markets where the urbanization wave is growing strongly, attracting foreign investment, and developing large industrial zones. The profit from real estate rental is even better, due to good occupancy and low advertising costs.

In addition to the advantage of generating cash flow from leasing, these products are also expected to increase in price thanks to support policies related to infrastructure and industrial parks. Therefore, many investors have grasped this potential and moved to satellite areas to invest in apartments for the purpose of leasing.

Mr. Dinh Minh Tuan commented that, in ideal conditions, after 2-3 years of investment, the rate of return on investment for rental apartments in the suburbs of Ho Chi Minh City can reach over 30%. However, when choosing an investment project, it is necessary to carefully study the population density of the area, survey the actual occupancy rate and current rental yield of the project because there are projects and areas where the rental yield for apartments is only about 3%.

“If you want to invest in cash flow right away, buying a completed apartment is the right choice. Choose projects that are no more than 5 years old, have not degraded and still have the potential to increase in price. If you need to use financial leverage, apartments that will be built in the future are a good choice because at this time most investors have preferential interest rates, discounts or flexible payment policies. However, you need to choose an investor with a good reputation in committing to the project construction progress. Only when the project is built as committed, will the buyer put the product into cash flow sooner,” said Mr. Tuan.

In addition, this expert also said that it is necessary to consider clear legal factors before investing. This is an important condition to ensure easy borrowing and liquidity. Projects without certificates, although the purchase price is low and the rental yield may be high, are also risky.