Which Types of Real Estate Bring the Best Return on Investment in Croatia?

Investing in real estate is one of the safest forms of investment, especially in these dynamic and turbulent times. The value of real estate is not prone to rapid fluctuations, unlike, for example, stock prices which are very sensitive to geopolitical events that characterize our era.

Since joining the European Union and especially since entering the Eurozone, Croatia has become a desirable country for investment. Real estate prices are still relatively high and show no tendency to fall because demand still exceeds supply.

Owning real estate is by no means dead capital, especially when we can generate income from that property. In marketing circles, the popular term ROI (English: Return on Investment) is used, which denotes profit relative to the amount invested.

ROI is expressed as a percentage. It is calculated by subtracting the cost of the investment from the total profit earned, then dividing that difference by the cost of the investment and multiplying by 100. The resulting percentage shows how profitable the investment was — the higher the ROI, the better the return on investment.

The amount of return on investment, when it comes to investing in real estate, is influenced by many factors such as location, purpose, maintenance costs, and seasonality.

In the following lines, we will get acquainted with types of real estate that we believe can bring the greatest return on investment.

Apartments for Short-Term Rental in Tourist Centers

The Adriatic coast has been known for its beauty since time immemorial. Looking at the period since gaining independence, Croatia has recorded constant growth in achieving excellent tourist results. Investing in real estate in Dubrovnik and Istria is certainly profitable as it ensures a quick return on investment and efficient earnings.

Besides renting apartments to tourists, income can also be generated by renting accommodations to tourism workers or seasonal employees. The only negative aspect of this type of investment is seasonality, meaning that Croatia still does not have destinations with year-round seasons. Of course, one should also consider the position or location of the property as that will also be an important factor for its profitability.

It is also worth emphasizing that the amount of return on investment depends on how much we ourselves are willing to invest in the rental business or whether we pay agencies for these services (for example, agencies for rental mediation or for cleaning and maintenance).

Luxury Villas on the Adriatic Coast

In recent years, the popularity of luxury villas as an investment in Croatia has become increasingly pronounced. A luxury villa is primarily defined by its location. Considering that Croatia abounds in beautiful nature and enchanting landscapes, from the coast to the interior, it is a favorable terrain for such investments. Besides location, a luxury villa is defined by a unique design and the prestige that comes with it.

Luxury villas are somewhat harder to rent than small apartments and have slightly higher maintenance costs. However, the profit is also higher. The daily rental price of luxury villas in Croatia ranges from two to twenty thousand euros. The rental price of a luxury villa depends on many factors and primarily on the amenities it offers, so it can be “raised” with pools, saunas, tennis courts, and the like.

New Constructions in Urban Centers

Cities have a different dynamic from tourist areas. Thanks to the booming tourism, many cities on our coast become almost dysfunctional when the tourist season ends and are supposedly degraded to the level of a destination, which certainly does not benefit residents.

In this paragraph, we talk about cities that are not yet only tourist destinations. The demand for residential units in functional cities is always high because of amenities and the presence of companies. Families with children, workers, students, and digital nomads are groups that most often look for apartment rentals. Although traditionally Croatia is a country where property owners make up a high percentage, due to rising real estate prices, it has recently become increasingly difficult to buy an apartment, so many opt for renting.

Investing in new construction in cities is certainly a good investment. Income from this type of rental does not depend on factors such as seasonality and is often more stable and secure than income from tourist rentals. 

Land for Development Projects

Investing in land with a project is certainly the most creative form of investment compared to the others mentioned in this article. Even when without a project, land can be a blank slate on which we can fill with our ideas and imagination and we can participate in the project from its beginnings and adapt it to our wishes.

Investment in land with a project also allows better financial control because, for example, we can choose cheaper materials so that the investment cost can be somewhat lower than when buying a finished product while the profit remains the same, meaning that ROI here could be somewhat higher. However, we cannot draw this conclusion with certainty because it depends on many factors.

Renovated Old Buildings in Historic City Centers

Traditional stone houses are a special form of investment that we can compare with luxury villas and invest in them. Both types carry something intangible; luxury villas prestige, and traditional houses an authentic story.

Also, renovating old stone houses can be a demanding job, both financially and bureaucratically, and can take time considering the number of details we must pay attention to when deciding on such a project.

However, once this property is completed, it can achieve a very good price on the market, both for sale and for rent, because it offers something special and different, something no other type of real estate can match.

Another advantage of this type of investment, besides being part of history, is that the interior can be fully and freely adapted to modern living while the exterior remains perfectly integrated into the environment from which it originated.

Conclusion

Investing in real estate in Croatia has already proven to be a profitable and safe strategy. This is confirmed by the large number of foreign investors. Attracting foreign capital always benefits the community, which ultimately leads to a better financial situation for the local population, a part of which becomes investors in domestic real estate themselves.

Speaking about investment, we need to consider the return on investment segment. This index is called ROI (Return on Investment) and tells us the percentage of profit relative to the invested amount.

Apartments in tourist centers and luxury villas bring a high return on investment but depend on seasonality, while apartments in urban centers bring somewhat slower but more stable income, and thus a slower return on investment.

Traditional stone houses and land with projects require longer engagement but can achieve a high percentage return on investment.

Although there is a formula for precise calculation of return on investment, each investment carries its own factors that influence the return.