Split & Rent
An Italian finance professional, based in London, asked us to find new residential properties to be added to his own real estate portfolio, showing a significant rental yield in a promising location of Milan
The investor just received a year-end bonus of little less than 1 MLN EUR that he decided to invest in Milan, his city of birth, choosing residential units that could be rented out to foreign students. The professional was already one our clients with more than 20 flats managed by us in the city. The minimum rental yield required was 6%.
We are very active, as property managers of hundreds of residential flats, in the main areas around the best universities of the city and in the most central locations. It’s very difficult to find properties for sale with rental yields above 4% in the current market environment, that’s why we understood we needed to “think differently”.
We decided to look for distressed sellers, in this case a bank, in areas of the city centre where the interest from retail investors (particularly from the south) was still very low: we found Fondazione Prada. The area is at a short distance of the metro station – yellow line – of Piazza Lodi, perfect for Bocconi students and foreign students moving to Duomo, like Istituto Marangoni ones.
Piazza Lodi is between Porta Romana, one of the most sought after areas of the city centre and Corvetto, an area where prices are very low and criminality is still an issue. The investment idea was to bet on an area that will profit the most from the Olympics in 2026 as there will be built a brand new district for work and live “Scalo Porta Romana”.
The property was an office, at the first floor, of little less than 300sqm, the price we bought it for was little less than 2000 EUR per square meter.
We managed to create three two bedrooms flat, each of little less than 100 sqm, ideal for the current market environment where one bedrooms and suffering a little and everybody is looking either at studios or two bedrooms.
The materials and furniture used were higher standard, this due to our belief that the quality of the finishings would be a definitive asset in the first years to attract people to the area.
Let’s sum up the economic parameters of the deal:
Asset cost: 600k EUR
Renovation and furniture cost: 300k EUR (1000 EUR / mq)
Prices at which properties are rented at (1500 EUR + building charges : 1400 EUR minimum rent and 1600 EUR max)
ROI = (1500*3)*12/(600,000+300,000)=6,00 % (exactly as requested by the investor)