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Shoebox apartment, often refer to as “Mickey Mouse”, refer to resident apartments that is below 500sf of size. Since its being introduce sometime around 2011, it has been quite popular for investors who are looking for rental yield and also often low quantum. As the sizes often range between 3xx to 4xxsf, the absolute quantum often range from 5xxk to 7xxk.
A typical shoebox apartment has all that is required. Living room, Master room, attached toilet and even kitchen. It is like a luxury hotel room with the additional of a living room and also kitchen.
Pros of Shoebox Apartment
- Affordability: A shoebox apartment is designed with affordability in mind. As the sizes are often about 3xxsf to 4xxsf, the quantum is often about 5xxk to 6xxk. It appeals to those who are more price sensitive.
- Good Rental Yield: Will you pay $500 more for a 1 bedroom at 400sf versus a 600sf? But the price is 50% higher if based on same psf.
- Easier to maintain: As the unit sizes are smaller and often with just 1 toilet, it will be easier to maintain.
- Effective layout: As you can see from the above sample of a floor plan below 500sf, the layout often is effecient and well planned. Decent size for living room and even master room can fit a king size bed.
Cons of Shoebox Apartment
- Maintenance Fee: Maintenance fee are decided by unit type and share value, follow by size. Therefore, a 400sf and a 600sf are paying same maintenance fee.
- Lower Capital Gain: As sizes are often tie to psf, a 10% rise in capital gain barely enough to pay for stamp duty. E.g. A 10% rise in capital gain for a 500k property is 50k, while stamp duty is at $9,600, lawyer fee at $2,500. Profit is less than $40k.
- Higher cost Per Square Foot (PSF): Smaller unit although smaller quantum, but often tie to higher cost PSF.