Investing in a Mixed-Use, Full-Service Apartment Model in Greece
Greece’s urban centers, such as Athens, Thessaloniki, and Heraklion, offer exciting opportunities for real estate investors. A mixed-use strategy—converting a building into serviced apartments for both short-term and long-term rentals—provides a balanced approach to maximize returns while reducing risks associated with seasonal demand. Here’s a detailed guide with indicative numbers and examples to help you evaluate this opportunity.
Investment Opportunity Overview
1. Mixed Rental Demand
- Short-Term Rentals: Tourism in Greece continues to thrive, with over 30 million visitors in 2023. Many prefer serviced apartments for their flexibility and local charm over traditional hotels.
- Long-Term Rentals: Growing demand from digital nomads, expatriates, and corporate travelers who seek high-quality, fully furnished apartments with hotel-style amenities.
2. Competitive Real Estate Market
Greek real estate prices are more affordable compared to other EU capitals, creating a favorable environment for investors:
- Athens: €1,300–€3,500 per square meter (indicative average, depending on neighborhood).
- Thessaloniki: €1,000–€2,500 per square meter.
- Heraklion/Chania: €900–€2,000 per square meter.
3. Benefits of the Mixed-Use Model
- Diversifies income streams, ensuring year-round revenue.
- Balances higher short-term rental yields with the stability of long-term leases.
Financial Model: Indicative Numbers and Examples
The following example assumes the purchase and conversion of a 1,000-square-meter building with 15 units. Actual numbers will vary depending on location, market conditions, and investor decisions.
1. Building Acquisition and Renovation
- Purchase Price: €1.2M–€2M (indicative average for central locations).
- Renovation Costs: €600K–€900K (€600–€900 per square meter, reflecting mid-to-high-quality upgrades).
- Operational Setup: €200K (furnishings, smart systems, and shared spaces).
- Total Initial Investment: €2M–€3.1M
2. Rental Allocation and Revenue Potential
- Short-Term Rentals (10 Units):
- Average nightly rate: €120 (indicative average for midrange serviced apartments in central urban areas).
- Occupancy rate: 70% (approximately 255 nights per year).
- Annual Revenue per Unit: €30,600
- Total Revenue (10 Units): €306,000/year
- Long-Term Rentals (5 Units):
- Average monthly rent: €1,200 (indicative average for fully furnished, centrally located apartments).
- Annual Revenue per Unit: €14,400
- Total Revenue (5 Units): €72,000/year
- Combined Annual Revenue: €378,000
3. Operating Costs
- Maintenance and Utilities: €50K–€70K/year
- Staffing (cleaning, concierge, management): €40K–€60K/year
- Marketing and Online Platforms: €20K–€30K/year
- Total Operating Costs: €110K–€160K/year (indicative range based on industry averages).
4. Net Income and ROI
- Net Income (Indicative Range): €218K–€268K/year
- ROI (Initial Investment of €2M–€3.1M): 7%–13.4%
Why the Mixed Model Works
1. Optimized Revenue Streams
By blending short-term and long-term rentals:
- Capture high nightly rates from tourists during peak seasons.
- Maintain steady monthly income from long-term tenants during slower tourism months.
2. Year-Round Occupancy
The mixed-use model helps reduce vacancy risks by targeting diverse customer segments.
3. Scalability
This flexible rental approach allows adjustments to unit allocations based on changing market dynamics.
Strategic Insights for Investors
1. Location Matters
- Short-Term Rentals: Target tourist-heavy areas like Plaka or Kolonaki in Athens or Old Town Heraklion in Crete.
- Long-Term Rentals: Focus on business districts, expatriate communities, and tech hubs.
2. Cost-Effective Renovations
- Invest in durable materials and modular furnishings to reduce costs while maintaining quality.
- Incorporate universal design features that appeal to both rental types, such as modern kitchens, high-speed Wi-Fi, and efficient climate control.
3. Dual Marketing Strategies
- Use platforms like Airbnb and Booking.com for short-term rentals.
- Partner with relocation agencies and businesses for long-term tenant referrals.
4. Operational Efficiency
- Implement smart technologies for energy efficiency and remote management to reduce ongoing expenses.
- Standardize cleaning and maintenance processes for cost-effective operations.
Challenges and Mitigation Strategies
1. Regulatory Compliance
- Work with local experts to understand zoning laws, short-term rental regulations, and tax implications.
2. Seasonal Tourism Trends
- Adjust unit allocations between short-term and long-term rentals to align with seasonal demand.
3. Competitive Market
- Differentiate your offering with unique features such as concierge services, local partnerships, and high-quality interiors.
Conclusion
This example demonstrates how investing in a mixed-use serviced apartment building in Greece can yield attractive returns while diversifying risk. By balancing costs, targeting high-demand locations, and offering dual rental options, investors can achieve a net ROI of 7%–13.4%. While these numbers are indicative averages and subject to variation, they highlight the strong potential for sustained profitability in Greece’s growing real estate market.