Apartment for student rental as an investment in Kraków, a complete analysis for investors thinking long term

Apartment for student rental as an investment in Kraków, a complete analysis for investors thinking long term

Student rental is one of the most classic forms of real estate investment in Polish academic cities. In Kraków, as the second largest academic center after Warsaw, this segment has particularly deep roots and remains an attractive option for investors thinking long term. At the same time recent years have introduced significant changes to this market that cannot be ignored when planning a new investment. Let us look at this issue with concrete numbers and in the full context of today’s realities.

Let us start with the scale. Kraków receives about 130 thousand students per year. The Jagiellonian University, one of the oldest in Europe, has about 35 thousand students. The AGH University of Science and Technology has another 30 thousand. The University of Economics about 16 thousand, the Kraków University of Technology 14 thousand, the Agricultural University 8 thousand. Add to this artistic, medical and private business universities. In total, more than 25 institutions that generate an uninterrupted stream of young people looking for accommodation.

Student rental has two main formats. The first is renting the entire apartment to a group of students who organize themselves in the rental. The second is room by room rental, in which the owner enters into separate agreements with each tenant. The second format is more profitable but requires much more management. In Kraków both forms coexist, although in the investment segment room by room rental dominates due to better margins.

Concrete numbers. A three room apartment of 55 to 65 square meters in a location attractive to students costs today in Kraków 700 to 950 thousand zlotys. Rented by rooms, with each room for 800 to 1300 zlotys, it generates monthly 2400 to 3900 zlotys. Annually this is 28 to 47 thousand zlotys of gross revenue. After deducting the flat rate rental tax, meaning 8.5 percent up to a threshold of 100 thousand and 12.5 percent above, the building administration fee, minor repairs and a two month vacancy in the holidays, the net most often comes out 20 to 30 thousand zlotys. This is a net yield of 3 to 3.8 percent per year, to which we add the historical property value growth of 4 to 6 percent per year. The real annual result is 7 to 10 percent, meaning clearly more than classic family rental for a similar apartment.

The best locations for student rental are today three areas. The first, around AGH, meaning Czarna Wieś, Łobzów and part of Krowodrza. This district combines proximity to the campus, attractive transport, shops, student restaurants and clubs. The second, around the Jagiellonian University, meaning Salwator, Krowodrza, the areas around Plac Inwalidów and Rondo Mogilskie. Here the atmosphere is more academic in the classic sense. The third, Ruczaj, which has developed thanks to the UJ Third Millennium campus. Here is also located the Third Campus of the University of Economics. Each of these locations has its character, its students and its rates.

What is worth knowing before investing? First, the seasonality of the market. The academic year in Poland lasts from October to June. July and August are classic months of break in which some apartments stand empty. Students who sign 10 month contracts treat holiday vacancy as obvious. Some owners prefer 12 month contracts with a lower rent, some accept vacancy in exchange for higher in season rates. Second, the student profile. Today an increasingly large share is made up of international students, especially from Ukraine, Belarus, the Balkans, Spain and Italy. These groups expect a higher standard, fast internet, listing descriptions in English and transparent contracts. Third, competition from private student halls. In recent years several large private student halls have appeared in Kraków, such as Basecamp, Student Depot, Living Lab, which offer a high standard, access to shared spaces and full equipment. For classic apartment owners this means the need to raise standards to compete effectively.

What works today in the student segment. Three and four room apartments with separate bedrooms of at least 8 to 10 square meters, with a functional common part. Full furnishing with desks in each room, beds, wardrobes, lighting. Full appliance equipment, meaning washing machine, refrigerator, dishwasher, stove, microwave. Fast fiber internet. Air conditioning is today increasingly expected, especially in south facing units. Keyless locks, meaning smart locks, make tenant changes easier to manage.

Risks that should not be underestimated. First, higher tenant turnover, meaning on average 1 to 2 changes per room during the academic year, plus full replacement after its end. Second, greater wear of the apartment, meaning more frequent minor repairs and the need for refreshing during the holidays. Third, conflicts between tenants that the owner sometimes has to resolve. Fourth, the risk of non payment, although in the student segment parents are often guarantors, which reduces the problem. Fifth, regulations. Room by room rental is legal in Poland, but it requires carefully constructed contracts, preferably in the form of a special purpose rental agreement that protects the owner.

For whom does this segment make the most sense. First, for experienced investors who are ready for greater involvement. Second, for families who buy an apartment with their own child going to university in mind, with a plan to switch to rental mode after graduation. Third, for those using a professional management agency that for 8 to 15 percent of monthly revenue takes over full rental management. Fourth, for investors who think long term, are ready to hold the property for 7 to 15 years and value higher returns despite greater risks.

At Eternel we have experience both in identifying the right locations for student rental and in managing properties in this segment. We help clients prepare an apartment for room by room rental, design the layout, choose equipment, set a pricing strategy and manage contact with tenants. For investors who do not live in Kraków or do not have time for daily matters, we offer full management, thanks to which the investment becomes practically passive. Student rental in Kraków still pays off, but it requires informed decisions and solid preparation to deliver the expected results.