Renting out your property for short-term holiday rentals can be highly lucrative, but it’s also a lot of work and the right mindset is a must. From the owner’s perspective, it’s important to treat your venture as a business from the start and to avoid common pitfalls.
If you’re considering turning your second home into a vacation rental, you may need guidance from someone who’s been there. We have spent time with our most loyal landlords to pick their brains and put together the best of their tips. Continue reading if you think luxury rentals could be for you.
Why Holiday Rentals are a Great Investment
Holiday rentals are a smart investment for landlords looking to generate income from their apartment or villa and still benefit as their property’s value rises over time. Landlords who understand the market know how to spot a good location. They can earn significantly more with short term rentals than they would from traditional long-term leases in a resort like Marbella. Holiday makers are typically willing to pay a premium for luxury accommodation in sought after areas such as Sierra Blanca, The Golden Mile and The Golf Valley.
Of course, landlords also have the option of using their property themselves on specific weeks of the year. A luxury villa in Marbella could double up as a holiday venue and an investment stream in one.
One of our owners, who has a charming 4 bedroomed property in the Nueva Andalucia area of Marbella told us “It was the best thing I have ever done, thanks to buying at the right time. I now have an investment with an asset that is growing in value but which at the same time provides me with a near- passive income.”
Factors to Consider Prior to Purchase
Before you purchase a property for vacation rentals and make that leap into the unknown, there are a few things to consider.
Firstly, what percentage rental yield are you hoping for? Are you confident the property will really bring in as much rental income as the estate agents tell you? To find out, you can browse the market value of similar rentals on booking platforms. It is extremely important to do your due diligence, so you know that your business plan and forecast is realistic. Have you modelled up the rental income based on various levels of occupancy? This is fundamental! Don’t assume you will get 100% occupancy in peak season. Try the numbers at different levels (60%, 70% and 80%) to give yourself some alternative views and work out if it still makes sense commercially.
Secondly, before purchasing a place with a view to rent it out, what are the deal breakers? The likelihood is you have already thought about location, but have you also considered the amenities it will offer guests? Investing in a property with no swimming pool in a resort like Marbella might be a bad move, no matter how stunning the views are.
At Swish we have stopped working with one owner because their villa, a charming and luxurious rental off The Golden Mile, as pretty as it is, just doesn’t have the amenities guests demand. We could not agree on pricing to please the owner and attract guests. Essentially clients want it all and they won’t pay more just because an owner needs a certain yield percentage, especially if there are similar properties at the same price which do have the extra amenities.
We recently conducted consumer insight with our guests and found that amenities are extremely important. Consider them not only once you have purchased your property but make them part of the criteria when looking to buy.
Our consumer insights survey in June 2022 shows the most desired amenities. Read the full article here.
Landlord’s Tips to Boost your Rental Income Once you have Purchased Your Property
Once you have chosen your future nest egg in the form of a luxury property in Marbella, the work starts! Investing in villas and apartments for rental is not entirely passive. There are things to do after you purchase the property to make it market-ready.
One of our landlords who has four properties told us her secret to attracting clients. She has been renting out her two villas for over 10 years and understands what works and what doesn’t. She stressed to us that to really boost the occupancy rate, you have to make your accommodation stand out from the rest. This can be done with interior design, additional home comforts like state of the art appliances, and stylish textiles guests will love.
In a zone where holiday rentals can often look the same, what sets yours apart? Invest in the interior design to give your villa or apartment an edge – first impressions do count! For inspiration, why not check out our recent blog about the move toward maximalism in villa interiors?
Pricing is one of the most discussed and debated areas of luxury rentals, especially amongst owners who have to keep up with rising costs. Landlords tell us all the time that pricing their rentals for maximum return is their goal. This doesn’t necessarily mean setting the price as high as possible, it means achieving the highest occupancy rates by ensuring the price is right for the market. If needed, we can support you by providing rate estimations for your property. Here are a few tips on how to maximise rental profit despite rising energy costs.
Lastly, one of the themes we have picked out from conversations with our owners is mindset. It’s essential to treat your luxury rental as a business, not a passion project. We see the occasional owner who is new to rentals who simply hasn’t made the mental shift from having a second home to owning a rental. It’s essential to think like a business owner; don’t let friends stay for free, and don’t over invest time or money in decorating the place for how you would like it. It must appeal to your target market, not just you.
If you are an owner of a luxury rental, or thinking of becoming one, find out more on our owner’s page or contact us to see if we can help. We aim to find the sweet spot between keeping you happy and keeping clients happy too, ensuring guests have an exquisite experience and you get the maximum return with the least amount of hassle.