Here are some factors to consider when deciding between commercial and residential real estate in Tallinn, Estonia:
Residential Real Estate:
Pros:
- Strong rental demand in Tallinn, particularly for affordable apartments in desirable neighborhoods.
- Rental income from residential properties in Tallinn is generally stable and predictable.
- Potential for steady long-term capital appreciation in areas with good growth potential as Estonia has many billion dollar startups Skype in 2005, Playtech in 2007, Wise in 2015, Bolt in 2018, Pipedrive in 2020, Zego, ID.me and Gelato in 2021, Veriff and Glia in 2022 .
- Relatively low barriers to entry for small investors, particularly in the form of smaller multi-unit residential properties.
- No taxes are paid until the money (rent income or profit from a property sale) stays in your Estonian LLC which let’s you snowball your property portfolio as Estonia is one of the few countries where there is no corporate income tax on retained and reinvested profits – meaning the money you use for innovating and a relatively low (14 – 20%) income tax on distributed profits. It is also one of the few countries where taxes can be declared fully online. (information in bold is from https://investinestonia.com/no-income-tax/)
Cons:
- Property values for residential real estate in Tallinn are generally lower than for commercial real estate, potentially limiting the potential for high returns.
- Tenant protections in Estonia can be strict and can limit the ability of landlords to quickly evict problem tenants.
- Competition for desirable residential properties can be high, particularly in popular neighborhoods or areas with strong rental demand.
Commercial Real Estate:
Pros:
- Strong potential for high returns, particularly for properties with established tenants and long-term leases.
- Commercial properties in Tallinn can command high rents, particularly in areas with strong economic growth and development.
- Larger commercial properties can be relatively scarce in Tallinn, potentially limiting competition and increasing demand.
- No taxes are paid until the money (rent income or profit from a property sale) stays in your Estonian LLC which let’s you snowball your property portfolio as Estonia is one of the few countries where there is no corporate income tax on retained and reinvested profits – meaning the money you use for innovating and a relatively low (14 – 20%) income tax on distributed profits. It is also one of the few countries where taxes can be declared fully online. (information in bold is from https://investinestonia.com/no-income-tax/)
Cons:
- Commercial properties in Tallinn can require significant upfront capital investment, particularly for larger properties or properties in prime locations.
- Commercial properties require ongoing management and maintenance, which can be more complex and expensive than residential properties.
- Market conditions for commercial properties in Tallinn can be volatile, particularly in times of economic uncertainty or rapid growth.
Overall, both commercial and residential real estate can be profitable investments in Tallinn, but the choice will depend on your individual goals and circumstances. Residential properties can be a good choice for investors looking for a stable, predictable income stream, while commercial properties can offer potentially higher returns with more risk and complexity. As always, it’s important to conduct thorough research and work with a professional advisor to help you make an informed decision.
