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What Are Micro Apartments?


Apr 22, 2020 by Matt Frankel, CFP

With rent prices soaring in some of the most desirable real estate markets, one solution to make things more affordable for young, single professionals has been to make smaller and smaller housing units. Known as micro apartments, these tiny rental units are often located in the most desirable areas and cram an entire home's worth of amenities into a very small space.

Like any type of housing, micro apartments aren't a great fit for everyone -- not even single 20-somethings who work in cities. Here's an overview of what a micro apartment is, the pros and cons of living in a micro apartment, and whether real estate investors should try to get in on the action.

What is a micro apartment?

Think of micro apartments (also known as micro units) as the tiny houses of the apartment world. Micro apartments are housing units that are even smaller than the typical studio apartment, generally measuring about 200 to 400 square feet in size, although some could be even smaller than this range.

Micro apartments aim to make the most efficient possible usage of a small space, cramming a sleeping area, kitchen, bathroom, and functional living space into a space the size of the average American master bedroom. Some are essentially just a private bedroom, with dorm-style shared bathrooms, kitchens, and living areas.

While micro apartments appeal to several demographic groups, they are most attractive to younger people with jobs in high-cost urban areas. While they aren't exactly "affordable" by most definitions (it's not uncommon for micro apartments to exceed $2,500 in monthly rent), they are certainly attractively priced when compared to alternatives with more square feet.

Typical features of micro apartments

There are many potential configurations and layouts of micro apartment units. Some buildings are separated into micro units that are entirely self-contained. Others are built as "suites" with four or five private bedrooms sharing common kitchens and bathrooms. Whatever the case, there are a few common characteristics you're likely to find in a micro apartment building and its units.

  • High ceilings: One of the most effective ways for a real estate professional to sell a space with small square footage is to make it appear larger than it is. For this reason, developers often incorporate high ceilings when designing micro apartments.
  • Large windows: Another design element that can give the illusion of more square feet is natural light, so many micro apartments have big, bright windows.
  • Common areas: While most apartment buildings have common amenities like fitness centers and laundry rooms, they are especially prevalent in micro apartment buildings. For example, community rooms and roof decks are often incorporated to increase the effective living space. Many have storage areas where residents can stash some of their belongings. Some micro apartments even have shared, dorm-style kitchens and bathroom facilities.
  • Lofted or fold-up beds: It's quite common to see space-saving furniture designs in micro apartments, especially when it comes to beds. The average queen bed takes up nearly 35 square feet of space, so by using a loft or fold-up bed design, it's possible to use that space for other purposes.

Advantages of living in a micro apartment

To be sure, there are some good reasons you might want to live in a space about half the size of the typical American studio apartment. Just to name the most common:

Community

I mentioned that micro apartments have tons of common spaces, and many are essentially like dorms for people who are slightly older than college age. This typically creates a more tight-knit sense of community than you're likely to find in a standard apartment building.

Affordability

A micro apartment located in the most desirable area of a major city isn't likely to fit the traditional definition of affordable housing. However, it's likely to be more affordable than the alternative. Micro apartments are typically $500 less than nearby studio apartments, and the savings could be even greater in a dorm-style micro apartment community, so this adds up significantly over the course of an annual lease.

Location

Micro apartments are generally located in high-cost urban areas, with the idea that young professionals are willing to deal with smaller spaces if it means they'll be in the center of the action. Micro apartment buildings tend to be in prime locations, and location is the number one factor cited when micro apartment tenants are asked why they chose their housing units.

Drawbacks to living in a micro apartment

Obviously, micro apartments aren't right for everyone. If you're used to having lots of space, want to be able to entertain guests comfortably, or don't mind paying a bit more, micro apartments might not be the best choice for you. Here are just a couple of the potential drawbacks to consider:

They're tiny

This is the obvious disadvantage to choosing a micro apartment, but it's important to consider what this really means. It could be difficult to find space for all of your day-to-day essential items, and micro apartments can feel cluttered very quickly if they get messy. It can also be tough to have guests over without feeling cramped. Most micro apartments aren't a good venue for having four or five friends over for dinner, for example.

They're easy to outgrow

Most people who live in micro apartments are single people in their 20s. These units are likely to be too small for even one other person, let alone for a family. As soon as you find yourself in a serious relationship, or even after accumulating a year's worth of "stuff," you could need to upgrade to a more spacious living arrangement.

Can you invest in micro apartments?

As of early 2020, there aren't any major real estate investment trusts (REITs) specializing in micro apartments, although it's certainly possible that some of the larger REITs that own urban apartments could add micro apartments to their strategies.

For the time being, the only way to invest in a micro apartment is to buy a small unit for the purpose of renting it out. However, like with all real estate investments, there are pros and cons involved with choosing this route.

On the positive side, a micro apartment is likely to be a more affordable way to invest in real estate in a hot market than a full-size studio or one-bedroom apartment. With strong job growth in urban areas and a clear trend toward urban living for 20-somethings, you're likely to have plenty of demand.

On the negative side, because it's so easy for a tenant to outgrow a micro apartment, it's reasonable to expect your unit to turn over more often than a traditional apartment would.

The Millionacres bottom line

A micro apartment can be a great living arrangement for a young professional, or someone of any age who simply values location and community over an abundance of private space. From an investor's standpoint, micro apartments can be an excellent way to capitalize on the desire of younger Americans to live in the middle of the action, and at a lower cost than the alternatives.

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