Häid jõule, everyone!

So I am in need of a reality check about investing in real estate in Tallinn (or any other bigger city like Tartu and Pärnu, for that matter). I’m a german guy with a steady income (living in Germany though) and could provide a downpayment of about 30k. I keep reading that buying an apartment for investment is not the best idea at the moment. At the same time, I feel that apartments that I can afford (up to 200k, assuming 15% downpayment) are indeed an ok investment to do. See the following example, which should really only be an example:

Let’s say I buy [this apartment in Kristiine, Tallinn](https://www.kv.ee/see-toeline-linnainimese-kodu-tostab-sind-korguste-3355405.html#modal) and assume the following numbers:

* Total Price 200 000 € (185 000 € price of apartment + 15 000€ for furniture and kitchen)
* 30 000 € (15%) downpayment
* loan period of 25 years
* interest on loan is 2%
* results in a monthly payment of 721 €
* total area is 57.1 m², 2 rooms
* built in 2021

Let’s also look at [this apartment that seems to be in the same building](https://www.kv.ee/kristiine-linnaosas-asuvas-torn-korghoones-on-uuri-3357253.html), but furnished:

* Total area 38.5 m², 2 rooms
* 650 € per month
* seems like you can ask about 15.5€ per m² for a furnished 2-room apartment in this building

So doing basic math, I combine the total area of the apartment for sale and the price per m² for the apartment to rent, I get 57.1 * 15.5€ = 885€ that can be asked as monthly rent. Makes a profit after loan of 165€. So, in total, it would be possible to pay off the apartment by renting it out alone, even after a tax of 20%. Considering the fact that I’ll only be 55 in 25 years, I’d be looking at a nice little passive income in the last third of my life if that apartment is paid off.

I am aware that I’d have to pay for a house insurance, broker and set aside money for emergencies and to keep the place in shape. But considering the fact that someone else basically pays my retirement fund and that the property will probably rise or be stable in value, I can live with that.

So, where’s the flaw in my logic? Are apartments in Estonia being estimated only as profitable when they pay itself off within 15 years? In Germany, the rule of thumb is that if an apartment pays off in under 30 years, it’s still considered a reasonable investment.

BTW I’m in Estonia at least twice a year so I really wouldn’t mind coming here more often. I have good contacts to Estonians who would be willing to help translating stuff.

15 comments

  1. This question really isn’t specific to Estonia so you’d get better feedback on r/investing or the like. That being said, all the [classic principles apply](https://www.investopedia.com/investing/reasons-invest-real-estate-vs-stock-market/): compared to stocks, real estate is expensive and illiquid, but at the same time can offer passive income and tax breaks, depending on where you’re taxed. Historically, real estate hasn’t matched the returns of investing in stocks, but historical data doesn’t predict the future. Owning a single apartment as an investment carries higher relative risk, if you were to own multiple then you’d reduce that risk considerably. As always, the question whether something is a good investment or not depends on what you’re comparing it to and what your goals and risk tolerance are.

  2. I don’t know the market that much, but I would guess the 650€ offer is on the high side. There are bigger apartments in the same area that are going for 600-750€ (similar to the apartment you are looking).
    Also, this apartment complex you linked has a tough time selling these apartments for some reason, this might be worth looking in to.

  4. Since your living in Germany, also consider that you’ll prop have to pay someone to take care of it for you.

  5. An energy class C apartment as an investment to the distant future??? I guess that is better than energy classes D-H.

  8. Owning rental unit in Tallinn while living in Germany is going to be headache. I rent out two properties in Tallinn, most of the year I’m out of the county, it is a headache. I have local friends who can take care of minor issues with tenants, but if anything more serious happens, and it does happen, non payment for example, you are going to do lots of running around. Travelling from Germany to take care of one rental property doesn’t make sense.

  9. First of all, you will never ever get 850 euros rent for 46 squaremeters. There are plenty of people living in tallinn, who earn less than that for a full time job. The 5k salary programmers already have real estate of their own.

    Second of all, why invest in the already huge bubble of estonian real estate market. It surely is going to burst rather sooner than later, because real estate is not affordable even for higher middleclass (in tallinn at least)

    And this brings me to the third point. Investing i real estate is making homes unaffordable for regular people. So better invest in estonian companies, not the real estate.

    Auf wiedersehen!

  10. An investment with a return on 0.1% a year is not a good idea, add to that that Tallinn real estate prices from 2007 to now have grown by 50% only (we might be at the top of the bubble again) so in a best case you will make 0-10% increase in the value per year, so let’s take the middle road of 5% + 0,1%, that’s 5,1% return BUT you will lose money on repair funds, insurance, repairs (you need to hire someone all the time since you are not here), any month not rented will lose alot of money for you.

    Also as mentioned real estate is not liquid, if you need to sell at a bad time (you will have couple of those years after every 10 or so) you might sell at a loss. If you have other assets this point is mute.

    In real estate you would want atleast 15% + return per year.

  11. I think you can get better advise in [a real estate investing group ](https://www.facebook.com/groups/Kinnisvarainvestorid/?ref=share).

    I would recommend buying a bigger apartment near a university, if you want a stable income from renting out. I have an apartment in a new building near Taltech & Tehnopol and rent prices here are surprisingly high although it’s the end of Mustamäe. It is quite usual to rent out separate rooms and you can get 300-400€ per room, like in our building.

    Having lived in Tartu, rent prices near uni buildings are as high as in Tallinn, but apartment prices are lower.

  12. It might be hard to rent out apartment in skyscraper for locals. Culturally not as accepted and for this money can find better solution.

    I also highly recommend to read about Endover before buying house in any of their developments.

  13. Also, the 2% loan rate is offered for those who buy home for themselves. Idk know how its regulated thou – maybe it isnt. The real estate bought as investment usually gets about 4% interest rate on the loan. If i had 200k to spend on real estate, i would buy a couple of flats in the commie blocks in Tartu and rent them out to students. You can rent them out for 300-400€ per month very easily without doing any extra work to it. And if the time comes, you can also sell them fast. Theres a very large cap between cheap and expensive rentals so you’ll have to wait a long time to find someone willing to pay 800-1000€/per month for rent, but youll have a queue of people willing to pay 350€/per month.

  14. I,m gonna be real straightforward with you.
    I really really really hope you fuck off and shove that investment plan up yours. People are already miserable because real estate in Tallinn(not so up to date with the rest of Estonia, since i live in Tallinn) is unaffordable for most estonians. The fucking prices are through the roof, apt choice is ridiculously shitty and everybody is a fucking investor all of a sudden shitting over the market and buying up appartments, because they all need 4 apartments under their asses, for INVESTING. Leaving lots of normal people without a chance to own a home. Fuck you and fuck all the landlords and investors.

  15. I agree that it’s not the best idea with current market. Properties are overpriced here and rental income is laughable, I’ve got 2 apartments in Tallinn and I know by myself what I’m talking about. Check western countries with universities and 2nd hand apartments with normal prices @, income will be 3-4x times the investment in Estonia.

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