Rental Success

You may wish to let out your holiday home when you are not using it. But before doing so, there are a number of issues that all you budding landlords should be taking into account.

On face value, renting out your property is a great way to boost your investment income and help pay off your mortgage. But rental income cannot be taken for granted and doesn’t necessarily simply come flooding in.

An effective rental property crucially depends upon choosing the right property, then marketing and presenting it in the best possible way to your target market. As an owner and investor, you’ll need to carefully consider many things, including how often you wish to use your property and how to maximise your property’s rental potential.

Essential checklist:

1. What are your priorities?

  • Are you looking to buy into an emerging market with high capital growth potential? Or do you simply wish to help cover some or all of your mortgage repayments with rental income?
    Do you want to rent out the property short-term to holidaymakers or long-term to a local or expatriate rental market? If you wish to achieve short-term rentals, then you should expect some void periods during off-peak seasons.
  • Do you intend to use your property yourself all or part of the year? If so you will need to factor in rental-free periods when you make your calculations.
  • Do you plan to retire to the property in the future? If so, is it the ideal size and the right location in which to do so?

These issues can open up hive of financial, legal and practical issues that need weighing up carefully before you make your decision.

2. Gauge your market

Having ascertained your rental priorities, the next step is to find a property that satisfies these needs:

  • Ask yourself just who will be renting your property and if it actually matches the needs of your target market. Make a mental list of all the features your rental tenants will be looking for. It’s no good expecting to rent out to families if your property has difficult access for baby buggies, not enough bedrooms, no swimming pool or a precarious-looking balcony.
  • Investigate the rental demand in the area you wish to buy. Contact rental management agencies and pretend to be asking for a holiday rental for yourself while masquerading as your target punter. In this way you can obtain an honest and unbiased insight of the market as well as a good view into the efficiency of a potential rental agency in the area for your property. If availability is restricted, this could indicate you are buying into an area of high demand. However, do look at what other properties are going up for rent in the same area and gauge whether the rental market might indeed become saturated once you have bought, or when your unit is completed.

3. Is the price right?

  • Make sure you don ’t overpay for a property. The more you pay, the more you will have to scrape back in monthly rent to achieve a respectable 5-7% rental return.
  • Visit local agencies, comparable developments or similar properties to gauge an average price per metre and the style of property you can get for your money. If you are buying anywhere below the current market value, you have made not only a good buy, but you can start with a good base figure from which generate rental income.

4. Find a good rental management agent

  • It’s important to find a good rental agent that has a strong background and list of clients, thus ensuring your property will rent as much as possible, without having to go through the time and hassle of trying to find tenants yourself.
  • Many professional rental agents are listed by The Federation of Overseas Property Developers, Agents and Consultants (FOPDAC). Endorsed by the National Association of Estate Agents (NAEA), this is a thirty year-old association that sets down a strict code of conduct for all members. has teamed up with the successful to help owners market and rent their holiday property in an effective way. With listings literally all over the world, is the twelfth largest UK travel website with an impressive track record of an average 40 booking enquiries per advert per annum.

5. Check your guaranteed rental deal

Many developers undertake to find tenants and guarantee all rental payments for a specified number of years. This is essentially what happens, however, be aware of the price you may be paying for this privilege in some instances:

  • Some developers will look to recoup the cost of their ‘generous’ offer, often by including it in the purchase price. Typically, many will offer a gross rental guarantee of say, 5% of the purchase price, while the purchase price is quietly raised by 15%, more than covering the guaranteed rental. You could therefore be paying the ‘rental’ with your own money.
  • Many developers are not interested in obtaining a maximum rental value for the property as they have already more than recouped their money with the sale. In fact, some people find that when the guarantee period ends, they are unable to rent out their unit and may be stuck with the existing low rental payments which are difficult to increase.
  • However, good guaranteed rental agreements do exist and these will be made on the basis of signed contracts with national and international tour operators. Travel agencies pre-book blocks of the year and supply bank guarantees. Genuine rentals are usually linked with tour operators and holiday lets within a good niche market that will continue to pay for your investment.
  • If, after careful research, you are confident in the rental potential of your property, having calculated the value of the rental guarantee offer, then why not ask for this as a discount on the purchase price.

Vigilance is the name of the game: don’t allow a salesman to talk you into a deal that is not worth the paper it is written on. has already done all the independent groundwork for its investors. With a clear conscience, they recommend only carefully vetted developments that offer genuine investment potential, taking away much of the stress and worry that choosing the right option can cause.

6. Ascertain your occupancy rate

For year-round rental, a 60-70% annual occupancy rate is considered to be good, which is effectively 30-34 weeks per annum paid for by rental income. Few coastal resorts attain these levels due to off-peak cool winter temperatures that are simply not conducive to beach destinations. Only those destinations with 300 days plus of annual sunshine will be classed as offering genuine year-round holiday rental potential.

Typically, longer rental seasons can be gained from golf or other sports-related properties which can attract year-round visitors. Additionally, city properties are also highly successful in supplying a demand from students and workers who may be living and working in the city for a number of years. Berlin and some other former eastern block cities such as Budapest, Warsaw and Krakow have been seeing record rental occupancy levels both centrally and in and around newly constructed business parks.

For holiday rentals, a quick online search will allow you to identify the busy periods and average rentals fetched per season in the area. Be aware that school holidays from the British market mean peak season and in Europe, January to March is considered to be low season.

7. Tax

Remember, tax on rental income can amount to as much as 25% of the income in some countries, while you ’ll need to add to this any community fees, local taxes maintenance and management costs before even seeing your rental yield (the annual income divided by the property’s purchase price, as a percentage).

8. Simple supply and demand

If you are interested in achieving maximum rental returns from your property, there needs to be a high demand for rental property, whether long or short-term, in your chosen area.

For long term rentals, this is normally the case in some growing capital cities or other large population centres where demand still outweighs supply. Occupancy rates are always highest where there is a strong demand and relative undersupply of rental properties, while year-round rental is achieved by an ongoing demand for property in cities and some carefully chosen holiday resorts.

9. The best location

You are probably wasting your time looking to rent to international holidaymakers if your property is located hours from an international airport, so check how many flights come in and where from, in order to evaluate the nationality and number of potential renters you can expect.

The property will also need to be near amenities, maybe the beach (within 10 minutes drive), golf, shops, restaurants, bars, kids’ clubs, pools and other sporting facilities, or even good schooling, depending upon your tenant. A good combination of all these features always maximises the number of weeks you will be able to rent out the property.

Year-round tourist facilities will also increase rental opportunity, eg. a combination of golf and skiing or golf and beach, as will a full range of nearby activities to suit all ages.

You will need to be located within easy reach of a reliable management company to help with any lettings or maintenance in your absence. If you plan to use rental income to pay off your mortgage, it is of utmost importance to use a professional agent who will not let you down and will find you good tenants to cover your outgoings.

10. The best property

Does your property stand out from the crowd? Unique selling points will attract holidaymakers to choose your property over another and they may even return to it year after year. Swimming pools, a parking space, satellite TV, air conditioning, attractive neutral décor, quality furnishings and all mod-cons are a winning combination for rental success. Help your tenants live the dream with attractive outdoor space, plants, garden furniture and barbecue, or a log fire, to make their stay an extra-specially relaxing one.

As with all property, natural light and a good view are also highly desirable features, not only affecting the rental price, but also making or breaking a future sale or rental.

Look at your property through “renters’ eyes” and imagine you are your target tenant coming to stay, be it for holidays or year-round city living. Consider all the basic items you would expect to find in the home and make sure they are all in new or as-new condition. Let no item go amiss - especially not the teabags or the corkscrew! All renters expect a good standard of home furnishings and comfort, while modern, neutral styles and tones will appeal to the majority. Use durable furnishings and fittings that will stand the strain of many, often disrespectful, users.

Many holiday renters appreciate a list of local services and information about the area, together with useful phone numbers and directions.

11. Remember insurance

Don ’t forget to cover your rental property for any damage or theft. Most owners take out liabilities insurance to protect them should a holidaymaker bring a case against them. If you leave a spare key with anyone for changeover, make sure it’s kept in the insured premises of a business such as an agency, or you may not be legally protected.

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