Rental real estate investment Are you interested in the short term? Do you think this is THE solution for your future retirement, to create a future asset for your children? Or simply to make your money grow?
With the advent of platforms for connecting owners and travelers, such as Airbnb, bringing short-term rentals into high popularity, it may seem that long-term rentals are not such an attractive investment. Even more so when there are no less than 800,000 furnished tourist accommodations in France.
As an investor, you might be wondering which real estate investment strategy is the most profitable. That is what we are going to see in this article.
If you realize right now that you will have neither the time nor the energy to take care of your short-term rental property, OIQIA offers you to manage it from A to Z, for you.
From the writing of your announcement to the autonomous entry of your guests to cleaning your home, we take care of everything!
To find out more or to contact us simply click here: I discover OIQIA
Before investing in a property that you think can be well positioned as a short-term rental, you may be wondering what the advantages of this type of investment are. In particular, short-term rentals offer their owners flexibility and greater control over their property. As well as numerous other benefits detailed below.
Many investors like to make personal use of their vacation rental property and rent it out when it's not in use. When a property is listed on the short-term rental market, it is much easier for the owner to block the dates when they want to use the property.
Short-term rentals tend to be busy around weekends and tourist seasons, but not necessarily throughout the year. For this reason, the wear and tear of the property is slower.
Properties that are rented for a short term are often easier to maintain. Indeed, as maintenance is carried out more frequently (generally with each change of tenant), this results in better maintained properties. This makes it possible to avoid any long-term damage and above all, an entire home to be completely renovated.
Short-term rental rates are not comparable to long-term rental rates. Although occupancy can fluctuate, making rental income less constant, short-term rentals tend to provide rental income multiplied by 3.
Short-term rentals offer the ability to adjust rent prices more often than long-term rental owners can. Short-term rental owners can change the rent price between occupants as they see fit. So, if there is a high demand during the summer season; they can increase their rent and produce even more income.
Likewise, this will include exchanging messages with interested travelers, updating ads on rental platforms. Or even the offer of promotional discounts. Communication, customer relationship and marketing arts will be required here.
Time constraints: beware of the perverse effect of wanting to manage everything yourself
Additionally, many rental owners will choose to manage tenant turnover on their own to reduce costs. If this allows them not to pay an external service provider, watch out for the perverse effects. Indeed, this will include a significant loss of time and significant physical effort (especially for cleaning and laundry). As well as costs that should not be avoided (vehicle wear, fuel for travel... and the cost of your time). Because at the end of the day, how much is your time worth? Click here for more information on this topic.
Most customers expect their short-term rental to be nicely furnished when they go on vacation. As we have seen in published Airbnb studies, the traveller seeks to recreate a”Home Sweet Home“. At the same time, the numerous television programs popularizing the tips and advantages of beautiful decoration influence travelers who are becoming more and more demanding in this area.
This therefore requires the owner to invest in decoration. To replace the furniture if necessary. Not to mention the equipment to be renewed regularly (small household appliances, kitchen tools, etc.). In other words, if a long-term home works even with outdated furniture and decor, in a short period of time, this will very difficult be the case. In the end, the owner must offer an appetizing “product”, within a well-supplied catalog. The competition is such that it requires commercial and marketing skills so that housing is always attractive. A cost in terms of time and money.
This adaptation requires great responsiveness and a good knowledge of its local market. Your price cuts, as well as those of other hosts, will have an impact on the latter (it is an ecosystem that interacts strongly). It is important to devote time to it because if you stay, for no reason, well beyond the market price, you will have little chance of renting your property.
Finally, there is the management of the rental property which will require time and involvement. If you do not live near your short-term rental home, or if you buy several units in different cities, this may require unparalleled organization. However, there is a solution: call on a concierge. Often, the personal involvement that a short-term rental requires is underestimated. However, this requires a lot of skills and a lot of time: between travelers' questions, their problems or requirements. Issues related to rental platforms. Not to mention the challenges of cleaning and laundry. Last but not least, it is required to adapt to any situation since, in particular, you become a “personnel in contact”. A service professional. Without training, you throw yourself in the towel. It can quickly become sporty, especially if you have a family or a job to manage at the same time.
Short-term rental platforms such as Airbnb have rapidly boosted the popularity of seasonal or one-time rentals in recent years. A tourist apartment intended for short-term rentals offered on a rental platform offers owners the possibility of changing prices, receiving opinions from tenants and promoting the accommodation for free (only the reservation service is chargeable). Thus, the rental platform transforms an individual into a service professional, a salesperson and a marketer. The economic model is constantly evolving but we can only see the impact that this has had on the hotel sector which is now adapting accordingly. The autonomous arrival of the traveller is gradually becoming a norm in accommodation.And even hotels are equipping themselves accordingly.
Owners often hesitate between long term and short term: “how can you be sure that it works in the short term?” “Isn't the long term safer?” Like any investment, the real question to ask yourself is: what are you looking for? Security? Yield? To answer the question of the certainty of success in the short term, only the field test will validate the value of this rental strategy or not. Like any new product launched on the market, there is a zone of uncertainty. For a test to be successful, you need to manage the product/price/location/communication mix well. In other words, the marketing mix. Present the product (ad) well, position the price well, have a strategic location and finally, manage communication effectively. If all this is under control, then only the perception and response of the traveler (reservation) remains. The famous “field test”. A 2.0 concierge is there to help you properly frame the marketing mix of your home. Do not hesitate to contact OIQIA to fully understand the importance of preparing housing before renting it out for a short term. The latter must be much more profitable than the long term. If not, contact professionals to objectively help you understand where the problem is coming from. A furnished apartment on a long-term lease is a regular income that is smoothed out monthly. A furnished apartment on a long-term lease means a greater and fluctuating income. In the end, it is only a strategic decision to take. Not irreversible otherwise.
“Will the short term damage your home more quickly?” No, far from it. A long-term tenant will “wear out” your home gradually but you will not realize the extent of the problem until he leaves. In a short period of time, any damage is repaired gradually. Responsiveness in this area is always recommended. “The short duration is likely to bring me partygoers, prostitutes or others”... It is possible. But in this case, one can react quickly and terminate the unhonored rental contract in terms of the tranquility of the rented premises. In long-term furnished accommodation, the procedure for stopping incivility will be longer and more tedious. In the end, neither choice will preserve you from human nature. “The long term will bring me a steady and certain income.” Watch out for false beliefs. Of course, you know the amount upfront. But in the long run, you are never safe from a bad payer, a squatting tenant or the like. A tenant always takes a long time to evict and during this time, you may not receive any income (except in special cases). With rental platforms, the service is paid for before the service. So in a short period of time, you are certain of the correct payment. But indeed, the income will fluctuate according to the price, the discounts and any action taken to ensure its profitability.
Buying old hotels to transform them into buildings dedicated to short-term rentals, or simply a building with several apartments, is a rental investment that we are seeing more and more. No mix of short- or long-term tenants, logistical facilities (housekeeping/laundry), economies of scale in terms of costs: these economic models have many advantages.
In marketing, nothing beats consumer testing. The field study. Are you hesitating? Test. Because instead of assuming, you will get your answer. Test short-term rentals to see if this rental strategy is the right one. Of course, if you don't have the time or the desire to do it, call on professional janitors. Especially those who, like OIQIA, opt for a non-binding contract. Of course, avoid doing your test only during the low season. The best is to practice its positioning and mode of operation in the spring. Then take advantage of the high season. If you fail during the high season, it is imperative to get the problem audited quickly. Based on your results and the gap between your forecasts and reality, then your decision will be informed. You will have numerical elements to make a pragmatic choice. No assumptions, just numbers. It's best, right when it comes to evaluating a strategic choice?
As we have just seen, investing in a furnished apartment dedicated to short-term rentals is a choice, a decision (action), which offers many advantages. Even if some inconveniences or constraints should be taken into account (you have nothing without anything...), the same goes for long-term rentals as well. If you hesitate between the two rental strategies, OIQIA recommends that you make a decision based on numbers and a field test. Test short-term rentals and based on tangible results, opt for the best profitability for you. As a professional, OIQIA is there to support you during this decision-making. We prefer numbers to assumptions and will be happy to assist you in unlocking the full potential of your home. Working as much as possible on your profitability is our commitment, don't forget it!
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