We are building smaller homes and asking more dollars for our tiny properties. It’s a strange contradiction, isn’t it? Those who want to live simple lives have to pay more for the benefits of living in a studio apartment. For real estate investors who are just starting out, studios are safe long-term investments because this kind of real estate will always be in high demand. The average size of new apartments in the US was 941 sq. ft. in 2018, according to RentCafe®. Studios are shrinking the most, as lots in good locations are not only hard to find but also smaller. So investors have to build tiny units in order to maximize their profits.
When thinking about the market for studio apartments, there is no shortage of buyers and renters: students, newlyweds, singletons, temporary employees, even seniors – all of them seem to appreciate the benefits of living in a studio apartment.
What is a studio apartment?
It is somewhere between an RV or a micro-apartment and a one-bedroom unit, with an average size between 500 and 600 square feet, although they can be smaller or larger, depending on the region. For example, the largest rental units in the US are to be found in Tallahassee, FL, while the smallest units are in Seattle, Chicago, and Manhattan, New York. According to an Urban Land Institute report, about half of all residential buildings built between 2012 and 2013 were studio and one-bedroom units, and the upward trend is maintained as most first-time homebuyers ask for affordable housing.
Studios are like hotel rooms with a kitchenette. Usually, dry walls divide the gross living area, but many prefer an open space. One corner may serve as a cooking station. The opposite one may be reserved for the bed, while the remaining space is a living room. The bathroom is usually small and is more likely to have a shower, rather than a bathtub. Some studios may even have a balcony. Being so desired mainly for their cheap maintenance, it is not easy to find a studio for sale on the big listing websites. However, most real estate agents have access to the MLS where they can spot and secure one for you if you so desire.
Studio apartments are also known by different names such as bachelor apartments or efficiency apartments. When searching for a studio or efficiency apartment, look carefully at the description, because most agents think that an efficiency apartment is smaller than a studio. However, both host only one person. That is why you will find plenty of studio apartments around universities, covering the need for student accommodation.
Are studio apartments cheaper?
It depends on the market you refer to. In a real estate bubble, your dollars can’t buy you much real estate. While in San Francisco you may only purchase a studio apartment with your monthly income, in Florida you may qualify for a mortgage that allows you to purchase a single-family house. When a geographical region is very attractive, real estate prices are soaring. So in terms of cost per square foot or market value, studios are not cheaper than other types of housing but are cheaper due to their smaller gross living area.
And now we approach one of the main benefits of living in a studio apartment – the smaller cleaning surface. You can clean the whole apartment in less than 10 minutes. So, no need to invent stupid excuses for not having your friends over for a movie or game. It is so easy to maintain!
Then, the HOA fees are usually calculated based on the square footage of the properties in a building. If all units are studio apartments of the same size, then the HOA fee will be the same for all homeowners. But it is obvious that a small studio apartment costs less to maintain than larger units. Insurance will also cost less. Property taxes will be more bearable, too. The interest paid on the mortgage will be smaller since the loan amount is small. Overall, studio apartments are quite cheap and affordable.
Studio apartments are cheaper to renovate and remodel to keep up with interior design trends: a bathroom remodel costs a lot less since the surface that needs to be covered requires smaller amounts of tiles and also fewer working hours. No need to paint all the walls to give the whole place a new feeling, either. It’s enough to change the accent wall, the drapes, and maybe move the furniture around. You’ll fall in love with your home again and again. Beauty is in the details!
Who is more likely to embrace the benefits of living in a studio?
For some, studio living is just a phase. For others, a studio is a place where they’ll live to a ripe old age. If today you don’t find studio apartments attractive at all, wait a few more years. Your take might change completely! We would say that studios are more suitable for first-time homebuyers or real estate investors as well as for the last real estate acquisition to serve as a primary residence. The benefits of living in a studio are most appreciated by the following groups:
Immigrants who move to the US
People who move to the US and who would rather buy a property than rent could be more interested in buying a studio. However, they cannot apply for a regular mortgage but may qualify for a Foreign National Loan. Otherwise, they have to wait until they get a green card or bring a cosigner. Most banks do not lend money to non-citizens and to people with no credit history. Unless they are very specialized in a technical job or IT, their income could be low so they would prefer renting a studio. When renting to non-citizens you should check their immigration status because their visa may not allow them to fulfill a one-year agreement. For example, for those entering the US with a B1/B2 visa type, they may stay a maximum of six months, while temporary workers under H-2B visas are allowed to work 10 months and then return home.
Millennials attracted by minimalism
More and more Millennials embrace minimalism. They want to fill their lives with everything but possessions. The benefits of living in a studio apartment are in line with the trend of tiny homes, micro-units, and RVs. The values that youth embrace today are completely different than those of their parents. They value freedom, free time, and mobility. They’d rather have a small place to call home and return to just to take a break from traveling. Bigger homes are filled with unnecessary objects and wide surfaces that need to be dusted off. Don’t you think that this activity steals valuable time? Millennials don’t have time for house chores and they are also very concerned about the environment. They will do anything to reduce waste and will wholeheartedly embrace the idea of living in a studio.
Students are another category of potential buyers. Of course, they should convince their parents that a studio is a great investment first. Whether the student will settle down in that city or will move out, they can still rent the studio apartment, thus paying for itself. In fact, there are plenty of high rise buildings specially designed to meet students’ needs.
Singles in search for a career
Singles advancing their careers and pursuing higher education in different cities are also more likely to choose a studio over other types of dwellings. And they will continue to live in small apartments until they marry or until they get a really good promotion. Moreover, studio apartments offer the flexibility they need. They can work and study in the same place as long as they want without disturbing anyone. Some are night owls, learning better during the night, while others are early birds, preferring to start fresh in the morning.
Although ideal for the lone wolfs and solitary living, this doesn’t mean that studios can’t turn into love nests. Buying a studio, a new family can get a foot on the housing ladder. A young couple who just got married will want to live alone, for sure. But they may only qualify for a small loan amount due to their student loans and misuse of credit cards. In this situation, though, they should better rent a studio and work on improving their credit score by making payments on time. When preparing to build a family, the best thing you can do is to build your credit score in order to qualify for a home loan with a low interest rate.
Short-term or posted employees
Who else might be interested in your studio apartment? Temporary employees or people who travel a lot for their job. All they need is a place to sleep, so instead of staying at a hotel, they prefer to rent a studio. Since they are away most of the time, you can expect minimal damage to your furniture and appliances.
Real estate investors
Studios are also great for short-term rentals through Airbnb or other booking platforms. Low-budget vacationers may opt for a studio if traveling alone or as a couple. But some travelers are willing to pay more to stay in a place with exquisite interior design. If you purchase a studio for this kind of business, learn how to better manage your vacation rental. Build a website for your business, market your property on social media and always go the extra mile for your guests because great reviews are all you need for a good start.
Seniors preparing for retirement
One last group of people who might consider living in a studio are seniors. They might consider this either as a couple or alone, after their spouse had left this world. Moving into a cozy small home will help them get over the loss easier. A dog or another cool pet could be a great companion for them. If you’re renting out to seniors, let them have a pet!
However, seniors might be more likely to buy than rent, especially after selling a larger property. They will use part of the money to pay in cash for a studio, while the remaining difference could be invested in bonds, stocks, and other financial instruments. Seniors in good health and who can cater for themselves might dislike the idea of moving into a senior living facility and will do anything to continue to live independently. Nevertheless, seniors 62 and older could qualify for senior apartments so a studio will make for a gentle transition to assisted living.
In conclusion, the benefits of living in a studio apartment are quite obvious – everything is within a hand’s reach and the maintenance costs are not a rip-off. Would you like to live in a studio apartment? Or are you living in a studio? We would love to find out your pros and cons so please leave a comment.