Many people buying a property overseas want to generate rental income when they are not using it. Some property owners informally lend it to friends for some extra cash, while others use official lettings agencies and others leaseback to developers if there are programs available.
So, what are the rules of renting holiday homes and what should you be looking for to make the most of your fly-to-let property.
1. Don’t Rely on Rental Income to Cover Ownership Costs
While it’s very nice to cover your costs with rental income, holiday rentals are can be unreliable. There are a number of factors that can impact the income you can generate from a holiday let, from changes in available flights to the destinations, to currency fluctuations, global financial meltdowns – yes they do happen. If you are relying on the tourist market to generate your rental income you need to make sure you have a source of funds to cover your ownership costs away from the rental income. You can of course factor in a proportion of the rental income but always have a back-up to cover your costs. Don’t forget that ownership costs range from property taxes, utilities, management fees and much more. Be sure that you understand what they are.
2. Don’t Use Up the Peak Season
You probably want to own a home overseas so that you can enjoy it at the best times of year, but unfortunately, that is when renters also want to use your property and when you can charge the most for it. So, if you genuinely want to achieve some rental income from your property, identify the peak high-season, mid-season and low-season and make sure you spread your use between the seasons minimising the high-season use as much as possible. Don’t forget that what is peak season to you, may not be for others, so check with local agencies and hotels when they are busiest from difference source markets – this might help you squeeze a little extra of the times that are important to you. A casual chat with hotel reception or concierge teams will usually reveal an abundance of information.
3. Understand the realistic occupancy
Different destinations have different markets. Occupancy is quite a simple calculation of supply and demand. A great place to start is to understand how many people want to rent properties or stay as tourists in hotels (Hint. They are not necessarily the same thing). Governments usually publish tourist statistics for the country as a whole, but you usually have to make a special enquiry to get something more localised. Once you know how many people want to rent property in the area, you can then get an idea of how many hotel rooms and rental properties are available in the area – this is your competition. Don’t forget to include some properties a bit outside your direct neighbourhood, you might have brought something at the centre of a tourist hub, but for lower prices some people are willing to jump on a train or a metro to find the action. Don’t forget also to factor in the construction of property and hotels that may compete with you in future.
4. Check rental price projections are realistic
Make sure that the prices you are being quoted are genuinely realistic or at least understand how they have been calculated so that you can draw your own conclusions. Prices for rental properties are usually lower than hotels. You can find on AirBnB or Owner direct some guideline to the prices in the area, but don’t forget that advertised prices and selling prices aren’t always the same. Make sure you are checking like for like properties. You should ask a range of agents in the locality what sort or price they would market the property for. This shouldn’t be the same agent who is trying to sell you the property.
5. Looking After Your Property
In the days of AirBnB people are seduced into believing that they can rent their own properties without having property manangement in situ. If you don’t want your property trashed, you at least need someone who will look after your property. Make sure that you have either a very good friend or family member who are local to the property or otherwise you will need to find a rental management company. Not everyone is like you and so some tenants will leave the property in a mess or stay beyond their booking days, invite more people than allowed and so on. It’s essential to have someone who can check the property at check-in and check-out as well as being able to handle any repairs or maintenance issues that might crop up.
If you are buying a property solely as an investment, then think carefully before investing in a holiday let. With a holiday rental, you might be really lucky and find that you have incredible returns. If you’re serious about generating rental income from an overseas property, you should be looking at something that works for the local market and which is also viable for long term lets if the holiday let market is impacted. On the other hand, if you are motivated by having a beautiful home overseas that you love spending time, then using rental income for some spare pocket money can be an excellent idea.
Kenetic can help you choose from a range of fly-to-let properties, either purely for investment or based on a lifestyle and investment combination. Why not get in touch for a consultation? Either choose from amongst our available properties or you can appoint us to find your perfect fly-to-let.