If you are one of the savvy investors who is looking to snap up a property in Istanbul, whether for applying for citizenship or just for the sound investment options, you may be aiming to rent it out to make it even more profitable in the long run. 

Now buying a property in Istanbul on its own is a high-yeilding venture, as property prices in the city increased a staggering 178% between 2020 and 2021, and are set to continue to grow. But you can take that profit margin even higher by renting it out until the best time to sell comes around, and we are here to help you do just that. 

Istanbul is a colossal city, a global hub since medieval times; the city is situated on two continents and hosts about 16 million residents. That is almost twice as many inhabitants as New York and three times as Madrid proper. It operates on a massive scale and hence requires investors to put in adequate forethought before venturing into the gargantuan metropolis. 

So, if you are looking to buy a property and rental income is important, you need to look into more than just the property itself. Issues such as location, quality, access to transportation, and even the type of resident you’ll rent to are just some of the issues you have to take into consideration to maximize your profit margin. 

Average rental income in Istanbul

Now, Istanbul as a whole is a great place to make an investment. The bustling city continues to attract new business and more expats, meaning the demand for high-quality living quarters is soaring at a pace that supply is struggling to keep up with, as evident by the 11.5% year on year (YoY) increase in property sales within the city. 

This imbalanced supply-demand ratio has created an inflation bubble in which rental prices have skyrocketed. Not so great news for renters, true, but a good opportunity for those looking to rent out their property.

The average increase in rent throughout Istanbul increased a whopping 80% between 2020 and 2021. And while rent in city center locations is about 89% higher than the city average, the return on investment (ROI) is not necessarily much better, as buying properties in those locations can cost more than buying on the outskirts of the city. 

A game of numbers

The ROI percentage makes the biggest difference when deciding where to buy and rent a property in Istanbul. Rental averages can range between 2-4.7% throughout the city, and these are just averages; some properties can get ROI anywhere between 8-10% if all the circumstances are right.

Now, one may assume that high-end neighborhoods may yield a higher ROI because they demand a higher rent, which is not always necessarily true.

Just take a look at the highly-in-demand Bebek neighborhood in Besiktas, which is located in one of the economic and touristic centers of the city. Bebek boasts one of the lowest average rental ROI ratings in the entire city at 1.93%. In the neighboring Levant, however, that average goes up to 2.81%, while maintaining that aura of luxurious living. Both boast pricier real estate, but one certainly comes on top in terms of ROI.

If you want to shift to a more commerce-oriented hub, Sisli hosts the Meşrutiyet neighborhood, home to the city’s highest ROI average yield at 4.62%. 

The Anatolian neighborhood of Kadikoy, which is a great touristic destination and one of the hippest neighborhoods in the world, offers average rental ROIs between 3.26-4.04%. Its brand also allows you to sell the unit easily.

Going to the outskirts of the city is also an option. Istanbul, being one of the largest cities in the world, and one of the oldest global economic and political powerhouses, has expanded over the centuries in all directions. It has become a poly-centric city with over 30 major urban hubs, so even if you venture far East or West, you’ll find areas that are self-sufficient. 

The area around the old Ataturk Airport is a prime example, is now being converted into a major residential and commerce hub, with the seaside neighborhood of Bakirkoy one of the leading locations, boasting rental yields between 2.02-3.56% on average. 

But that doesn’t mean you should just venture out anywhere, as some newer areas which still lack sound transportation, such as the Northern Sariyer district, can be a gamble with rental ROI ranging from 1.81-3.24%.

So, how do you decide on where to buy property to maximize rent yields in Istanbul? Here are a few things to consider.

Long-term VS short-term rentals

Long-term rentals yield lower ROI as you are renting out residents who plan on sticking around. This may prove less hassle if you pick the right area and the right tenant but usually results in lower ROI as they pay in a yearly or semi-annual lump sum amount. 

Long-term rentals usually take place in central business districts, such as the Levant or Esentepe. A great way to decide between districts is by office vacancy rate, as it gives you a strong indication of whether demand for housing will increase or not, and what type of resident you can expect depending on the types of companies opening. 

For example, the Levant has a tiny Class A office vacancy rate of only 5.1%, while Class B offices are also scarce, with a 17% vacancy rate throughout the neighborhood. Esentepe, on the other hand, boasts a staggering class A vacancy rate of 28%, and a Class B vacancy rate of 7.5%.

Renting long-term to expats is also an option, and getting those working high-income jobs can not only get you a better return, but will minimize the risk of them subletting to a roommate to cut down their expenses, hence maintaining the quality of your property as well as abiding by the compound or building rules. 

Short-term rentals require higher follow-up and active management on your side, but demand higher amounts from renters, which means higher ROI. You can, of course, work that through a property management team or the office of the developer who sold you the project, so they take care of renting out your property and take a small cut out of the return, making it extremely profitable and hassle-free. 

Short-term rentals should be in highly desirable locations such as Taksim, Sultan Ahmet, Uskudar, or otherwise. Strategic locations will maximize your ROI while giving you the option to switch things up later, for example, shifting it to an Airbnb rather than renting it out directly. 

Transportation

Istanbul has one of the best public transportation systems in the world, boasting road, railway, and seafaring systems to get people around the metropolis. 

Finding a property near a Metro station or bus stop, two of the most dominant types of public transportation, can boost your rent yields and help you find tenants much more easily. It can even make up for high commercial vacancy rates as people will have a simple route to work even if it is in a different urban center. 

It also connects your property to high-demand activity areas, which is crucial if you are looking to rent short term residents.

It’s not only about business

Another rental solution could be renting out properties near university campuses, this way, you will have an endless flow of potential tenants, but you will be dealing with students rather than high-earning tenants.

You can offset the lower rental yield by purchasing various smaller, cheaper units and renting them out simultaneously. This may seem like a headache, but many universities or property management offices would be eager to take over that job for you in return for a small amount of the rental fee. 

A city of opportunity

Istanbul is a massive city full to the brim with investment opportunities. But as much research as you do, the best way to find that optimal investment option is getting advice from a local expert with an excellent track record. That is where Smart Citizenship comes in, as our veteran team and ideal projects provide you with the best possible ventures that can transform your life and get you an above-average return. All you need to do is contact us today.