Over 3% rental return rate, is investing in old and dilapidated properties really reliable?

Ask AI · What hidden costs and risks should be cautioned against when investing in old, dilapidated properties?

All major cities across the country are reporting influxes of investors into old, dilapidated properties. In Shanghai, transactions of second-hand homes under 3 million yuan account for 72%, and in Beijing, the proportion of similar-priced listings has surged from 23% two years ago to over 46%. The core reason is that prices have fallen to a point where rental yields start to outperform bank deposit interest rates. For example, in Jing’an, Shanghai, an old, dilapidated property of 99 square meters sold for 3 million yuan with a monthly rent of 3,000 yuan, giving a rental yield of 3.6%, which is indeed more attractive than a 1.9% fixed deposit at the bank. More importantly, the government has stepped in to acquire and stockpile these assets, providing a safety net. As a result, many investors are rushing in; in Tianjin, someone bought 7 units for 3.5 million yuan, and in Chengdu, someone else purchased 8 units for 3.3 million yuan, all aiming for rental income.

Hangzhou is no exception. Every March, old, dilapidated properties experience a small spring market. This year’s standout is Desheng New Village, where transaction volume in the first 20 days exceeded the highest monthly total of last year. The reason is simple—prices have dropped. Last year, the average price was 22.4k yuan per square meter; this year, it’s only 19.6k yuan per square meter. It’s said that 70% of buyers are out-of-town investors purchasing to rent out.

But is it really as profitable as imagined? Let’s do some quick calculations: a recent deal involved a 49-square-meter dormitory at Hangzhou Gas Plant, sold for 1 million yuan. Assuming rent can reach 3,000 yuan per month, the gross return exceeds 3%. However, after deducting vacancy periods, renovation costs, and interest expenses, the actual return is significantly lower. Moreover, with property prices still on a downward trend and rents further decreasing, there’s no guarantee that a 3% return can be maintained—no one can promise stability.

There’s also a mindset that warrants caution—speculating on demolition. Last year, a friend bought an old, dilapidated property in Xihu District, thinking prices had bottomed out, planning to rent it out and wait for demolition. But this year, after finding a girlfriend and needing money for a wedding house, he realized the property’s value had dropped even further, losing over 200,000 yuan. The demolition didn’t happen, and his capital was lost first.

Therefore, although old, dilapidated properties attract attention, they are not necessarily good investments. Don’t just focus on rental income calculations, and don’t bet on low-probability demolition events. The market is still volatile—calculate costs carefully, leave a safety margin, and then decide whether to enter.

Reporters: Wang Jiajun, Wu Jiayi Video: Lan Junzi

Editor: He Fangkui