The market is susceptible to even the slightest fluctuations: competition among landlords is intensifying, tenants are becoming more discerning and confidence only comes through a clear strategy. Today’s financial realities show that personal finance management is becoming increasingly crucial. The ongoing pension reforms in Lithuania indicate that relying solely on the pension system is no longer sufficient – to ensure a dignified retirement, additional income sources are needed. It means we must not only think about how to get by today, but also actively plan for our financial future.
When choosing a property for rental, it’s essential to visualise not just the numbers but also the person who will live there. Are they looking for a quiet neighbourhood? Do they need quick access to the city centre? These answers not only help in planning returns, but also in selecting the right tenant type and shaping effective communication with them.
A rental property should be viewed as a financial instrument. Its attractiveness primarily depends on its versatility, the liquidity of the location and the potential return on investment.
Citus analysts calculate that the rental market in Vilnius currently yields an average annual return of 5%. However, in some districts or developments, this return can reach 5.5–6%. The return rate is calculated by dividing the annual rental income by the total investment amount.
Location has the most significant impact on returns. Tenants are usually not looking for a view from the window but for convenience: how many minutes it takes to commute to work, proximity to public transport, and whether there are nearby shops, nurseries or gyms.
According to data from Citus, the most expensive districts in Vilnius currently are Senamiestis (Old Town) – approximately EUR 23 per sqm, Paupys (roughly EUR 22 per sqm), and Naujamiestis (approximately EUR 19 per sqm). These are places where everything is within walking distance, and the pace of life is uninterrupted. However, it is also worth paying attention to neighbourhoods whose value is rising rapidly. For example, in Markučiai and Žirmūnai, rents have increased by more than 50% over the past five years, and in Naujamiestis, by as much as 58%. It means that districts undergoing transformation often have strong investment potential.
In terms of supply, two-room flats currently dominate the Vilnius rental market, accounting for almost half of the total supply; one-room flats account for approximately 33%, and three-room flats for around 15%. This distribution shows that one– and three-room flats are also worth considering. Their supply is lower, and the rental price can be up to 15% higher. Additionally, they are more attractive to families and long-term tenants, resulting in lower turnover and a more stable income stream.
When buying a property to rent out, it is essential to understand that this is not a personal decision but one that is intended for the market. The property does not have to suit the owner’s taste; it must be attractive to as wide a range of tenants as possible.
The easiest way to set the price is to analyse similar properties in the same area. Secondly, assess the condition and features of the property: a well-maintained, modern property can be rented at a higher price. Seasonality is a significant factor, as rental prices are often higher before September, the start of the academic year, due to increased demand.
Finally, the length of the lease also affects the price: long-term contracts, despite often lower prices, ensure a steady income. Short-term rentals can offer higher prices but with greater risk and potential downtime.
It is often overlooked that one month of an apartment remaining unrented can be more costly than a lower rental price.
For example, if you want to rent a property for EUR 700 per month, but the real market price is EUR 650 per month, a month’s downtime will not only wipe out the rental income, but you will also have to cover the utility bills, which average around EUR 150 per month. By setting a lower price right away, the annual income would have been EUR 7,800; with a higher price and a month of vacancy, it would have been EUR 7,550.
It is essential to consider all the costs involved, including loan interest, property maintenance expenses and long-term value appreciation. Even with a more modest rental return, the investment can still be profitable if the property’s value increases.
A good landlord is not someone who wants to earn as much as possible but rather someone who knows how to forecast, adapt and think ahead. Today’s rental market demands flexibility and prompt responses. But in a way – that’s actually good news.