With a higher return than other types of apartments, studios are attracting many investors, but simulations show that other strategies can be more profitable
The apartment market studio continues to expand in large cities in Brazil. With people taking longer and longer to get married, have children and living alone longer, the demand for properties of up to 40m² has grown a lot in the last 8 years.
To give you an idea, in 2016, 561 studio apartments were delivered in the city of São Paulo. In comparison, by July 2024 this number reached 2,393 units. That is, a 327% growthaccording to data from the Union of Companies for the Purchase, Sale, Leasing or Management of Residential or Commercial Properties (Secovi).
In general, the profile of studio residents is people aged 20 to 39, who live alone. Therefore, they do not need such a large space.
On the other hand, they are looking for a property that is well located, furnished, with various amenities, but without having to worry about managing it all.
Therefore, the studios' proposal is to offer these people housing that, in addition to the apartment itself, can provide cleaning services, laundry, mini market, gym and parking. In some cases, these spaces also have a masseuse, manicurist, buffet and personal trainer with fees separate from the condominium.
You don't need to be very knowledgeable about the real estate market to realize that studios meet a clear demand for housing. However, interest in this type of apartments has also been growing among investors.
However, the studios may not be the best way to seek profits in the real estate market. With help from Property Calculator and EQI Researchit is possible to discover another strategy that can generate up to 48% higher returns for those looking to invest in the sector.
Discover the investment strategy that can generate 'rent' of up to R$ 4,374.00 exempt from IR
In recent years, many investors have become interested in studios for two main reasons:
- Lower initial investment;
- Return percentage is higher, compared to larger apartments.
For example, with R$ 200 mil It is now possible to invest in these properties. In addition to this, a survey of the FifthWalk showed that the square meter of rent for a studio in the city of São Paulo costs R$78.
Meanwhile, in 2 to 3 bedroom apartments this value is around R$56.05 to R$54.70, respectively.
Thus, while a 60m² apartment can generate a return of 0.45% per month, It is possible to seek higher profitability with the studios. In some cases exceeding 0.70%.
However, this is not the only way to seek profits in the sector…
From a return point of view, another strategy can offer even better returns. I'm talking about real estate funds (FII).
Real estate funds are assets traded on the Stock Market and through them it is possible invest in different properties at the same time.
Many of these funds have a portfolio of logistics warehouses, shopping centers e corporate slabsunder its management, whose return is distributed among shareholders.
In other words, when investing in a real estate fund, you become owner of a portion of several properties and can seek profit both through earningsas for the appreciation of shares of these assets on the exchange.
Furthermore, the initial investment required is much smaller. With just For R$ 1,000 it is possible to create a portfolio.
On the other hand, buying physical properties is still one of the most popular investments among Brazilians. The big issue is that people don't always evaluate the potential return on this type of venture in the way they should. As a result, they end up giving up even more advantageous opportunities within the sector.
In this sense, analysts EQI Research developed a real estate calculator x real estate funds. Through it, it is possible to compare the return between investing in a physical property and FIIs.
Therefore, to understand whether studios are really the most advantageous investment option within the real estate sector, we carried out the following simulation:
Based on websites specialized in this type of business, we found the following offer: a studio de 33m² in the neighborhood of Vila Olímpia, SPsold by R$ 486 mil.
According to information on the website, the property has a potential profitability of 0.76% per month.
Check it out:
Therefore, considering the data from the website, we used the real estate x FII calculator from EQI Research to compare investment strategies.
To do this, we took as a basis the initial investment of R$ 486 thousand and considered a monthly return of 0.78% on rent, that is, R$3,790.
By default, the calculator makes a comparison with three real estate fund portfolios, conservative (0.60% per month), moderate (0,80% a.m.) e thrown (0,90% a.m).
It is important to highlight that the simulation does not take into account the potential appreciation of the property or the shares of real estate funds.
The result was the following:
Observing the result provided by the calculator, the return potential of investment portfolios in real estate funds is higher than studio in two of the three scenarios: moderate (+32%) and bold (+48%).
This means that, if instead of the studio, you had opted for one of these two portfolios, you would have had the opportunity to receive a “rent” of up to R$4,374 per month
In the conservative scenario, the profit investment in studio was slightly higher (R$21.25). However, even in this case, the investor who opted for the physical property suffered losses.
Hidden risks of investing in physical properties
In the simulation, the expected return on investment in a studio was R$3,790 (0.78%), but in practice the investor received R$ 2.937,25 (0,604%).
In other words, by opting for the studio strategy, the investor ended up “losing” 22.5% of profitability.
This happens because, the income generated through rentals is taxed according to the regressive table of Income Tax.
Meanwhile, although the return on the conservative FII portfolio was initially lower compared to studios, the entire profitability went into the investor's pocket, no discounts.
It turns out that, unlike the rental strategy, those who invest in real estate funds have exemption from Income Tax on the payment of dividends. And this tax advantage ended up placing the conservative portfolio very close to the studios' returns.
In the case of the moderate and bold portfolios, in addition to offering higher returns, the profitability of these portfolios were percentageally more interesting due to the tax benefit.
But this is just one of the risks of investing in physical real estate.
Although it is considered a conservative strategy, investing in physical properties can have other risks. Studio apartments are also subject to devaluation, especially related to demand in the region.
Furthermore, in the case of studios, for example, experts explain that, as they are a young audience, in a phase of many changes in lifeinvestors may be affected by greater turnover. Which implies the security of a recurring monthly income.
Finally, they also highlight that, in the studio segment, new businesses take time between 18 and 24 months to stabilize and that it is only possible to measure the return more precisely from the 3rd year onwards.
In the case of real estate funds, the risk that scares investors the most when it comes to investing in real estate on the stock market is the volatility of prices.
In fact, real estate fund shares are subject to fluctuations and past returns are not guarantees of future returns.
However, when an investor comes to the conclusion that the real estate fund is not bringing the expected return, he can dispose of the asset in a few minutes by sending a sell order. In the case of physical property, this negotiation can take months.
Furthermore, when buying shares in an FII you can monitor the asset's performance daily and, in many cases, prepare for receive dividends the following month.
Another positive point is that the properties that make up a real estate fund's portfolio are managed by professionals with great expertise in this sector and who work to ensure that shareholders will not be impacted by factors such as default, property depreciation, among other risks.
Finally, it is possible mitigate risks investing in a balanced portfolio of real estate funds.
FREE: test the calculator now and find out which investment is most advantageous for you
As I showed in the simulation, it is possible to invest in conservative, moderate and bold real estate funds. The return in each of these categories tends to be proportional to the level of risk assumed by the investor.
However, by combining real estate funds with these three profiles, the investor can reduce portfolio risk and at the same time achieve a potential return that, in many cases, can be superior to investment in studios.
And you can compare the profitability between real estate and real estate funds yourself, as EQI Research released access to the calculator 100% free.
To download the calculator To compare the profitability potential of other types of properties with FIIs, simply click on this link or the button below and follow the instructions.