It is possible to make a profit from your apartment if you don’t ensure first ensuring that your apartment has all the features of a profitable rental property should have. When investing in rental properties, you obviously want to buy the property that is most likely to generate the highest returns to achieve that you must make sure sure that it has those features of a profitable rental property. While there is no way to guarantee the return that you will receive from your real estate investment, there are several key factors to look for in a property that will greatly increase your chances of earning the return you are looking for.
Everyone knows that “location, location, location” is the number one rule in real estate, and this is absolutely true when it comes to renting real estate. Therefore, the first thing you will need to consider is the area the property is located in. While you may not be able to afford real estate in the most popular area of the city, there may be some great options in a promising area.
Consider the location in terms of the amenities available, the schools serving the area, and the proximity of job opportunities. Crime rates and job vacancies are also factors. After all, if you buy a property in a relatively safe location where the vacancy rate is low, you probably won’t have a hard time finding a tenant. Likewise, you will be able to charge a higher rental price if your property is located in the desired area.
Bathroom and kitchen condition
It’s no secret that bathrooms and kitchens are the two most important rooms for most buyers. Therefore, you want to be sure that the bathrooms and kitchen are completely renovated and comparable to other properties in the area. If you already own a property, you can make it more attractive to potential tenants by upgrading kitchen appliances, changing countertops, and painting cabinets. In the bathroom, updated fittings, new showerheads, and fresh tiles can make the space more inviting. As a side bonus, renovating these spaces will also increase the total value of your property if you decide to sell it later.
Property tax and insurance cost
The cost of property tax and insurance can have a larger impact on your bottom line than you expect. Therefore, it is important to examine these costs before making a purchase. Keep in mind that the most sought-after cities and areas tend to face much higher property taxes than other cities and areas, so don’t make assumptions about these costs. Likewise, the cost of insurance can rise significantly depending on the location of the facility and the types of natural disasters that may affect it. For example, adding extra coverage for things like floods, hurricanes, and earthquakes can dramatically increase your overall spending.
Average rental prices for the region
Obviously, you can increase your profits by increasing rents, but you also cannot add value beyond what the market accepts. Therefore, you need to research the average rental price of real estate in the area so that you have a clearer idea of how much you can expect to reasonably ask for your property. Subtract that from all of your expenses, including mortgages, property taxes, insurance, and maintenance costs, to get a clear idea of how much you can ask for your property in order to maximize profits.
How to rent an apartment
Together with lawyers, real estate experts, and owners, we will tell you how best to rent an apartment for short-term rent, what taxes you will have to pay, and how much you really need to earn on this business
Daily rent of apartments is not only an alternative to hotels but also an opportunity to make good money. According to analysts’ estimates, with stable demand, daily rentals can bring in two to three times more income than long-term rentals. 2020 was a difficult year for this business, in some months the demand was at zero. Now the segment is gradually recovering.
Together with experts, we collected answers to the main questions related to daily rentals: from legal aspects and taxes to risks and practical advice.
- Is it legal to rent an apartment for rent? you can rent an apartment for any period of time, including daily rent. The main condition is to run your business legally, including paying taxes and concluding a lease agreement, and not violating the rights of neighbors. “The situation is similar with non-residential premises. You can rent out non-residential premises, such as apartments, for daily rent. At the same time, there is a difference in the agreement – an apartment for daily rent (or for a long term) is rented out under a residential lease agreement, and apartments – under a lease agreement. Moreover, the law does not prohibit renting someone else’s apartment for rent. For example, housing is rented for a long time, and then it is rented out by the day. But the prerequisite here is the consent of the owner of the apartment. In this case, the property itself will be leased under a sublease or sublease agreement.
- How to rent out an apartment for daily rent: A person who has decided to rent an apartment for daily rent has three options for finding a tenant,The most popular international short-term rental services are Booking and Airbnb (they charge a commission). Thanks to the rating system, they allow us to weed out unscrupulous guests, and to conscientious guests – to choose hosts with high ratings. The advantages of this method – all the money goes to the landlord, the disadvantages – all the worries associated with the delivery of housing are also on him. Contact a real estate office, which will look for a tenant for a commission (the amount of the commission depends on the specific agency). “However, interaction with tenants, maintenance of the apartment, cleaning, solution of any related problems are in the area of responsibility of the owner of the apartment. The owner of the apartment is released only from the search for clients, all other duties are on him. Sign a trust agreement. In this case, a specialized agency undertakes the turnkey delivery of housing – from finding a tenant to cleaning the premises. A contract for the management of real estate is concluded with the agency. According to Artem Kromochkin, head of the short-term rental department at Avito Real Estate, this option is suitable for busy people and those who have never been involved in renting an apartment. The plus of this option is that the owner is relieved of the routine associated with renting, the minus is a loss in money. Typically, agencies take for their services from 20% of the profit or pay the owner a fixed amount. “Even minus the percentage of the management company, the owner gets more than at a long-term rate, and often a bonus is a good repair, which many management companies undertake,” the expert of Avito Nedvizhimost believes.
- Taxes when renting an apartment for rent Regardless of how a person rents an apartment – for a short or long term, he must pay tax. His rate will depend on the status of the owner – he pays as an individual, through an individual entrepreneur or as a self-employed. The last two options help reduce taxes. “If a person rents an apartment as an individual, then he will have to pay personal income tax in the amount of 13% of the income received. If you rent out an apartment as an individual entrepreneur, the tax is calculated at a rate of 6% according to a simplified system, ”explained Olga Turunina. Self-employed can rent an apartment and pay tax at the lowest interest rate – 4%, if the apartment is rented by an individual, noted the head of the short-term rental department of Avito Real Estate, Artem Kromochkin. If the contract is concluded with a company, that is, a legal entity, then the rate will be higher – 6%. “The income for the self-employed cannot exceed 2.4 million rubles. per year – if you receive more than this amount, you will have to register as an individual entrepreneur, ”the expert clarified. Penalties You will have to pay a fine for non-payment of taxes. Its size will be 20% of the amount owed. It can increase up to 40% if it is proved during the court proceedings that the tax evasion was deliberate. The taxes themselves will also have to be paid.
- Is it worth renting an apartment for rent – the economy of the issue One of the main motives for renting an apartment is the desire to earn more. From this point of view, a long-term lease loses out to a short-term one. “In an ideal scenario, when an apartment is rented by the day throughout the entire month, that is, all 30 days, daily rent is at least twice as profitable as a long-term one, and at most four times,” confirms Victoria Kiryukhina from CIAN. The lower the long-term rental rate in the city, the more profitable it is to rent out housing for rent. Comparison of long-term and daily rentals Show table Data: analytical center CIAN According to Artem Kromochkin from Avito, on average, a short-term lease is two to three times more profitable than a long-term lease, but the final amount depends on many factors. This is the location, and the number of rooms, and repair, and staffing. In addition, you need to take into account the costs of maintaining the apartment – utilities, household chemicals, towels, bed linen, advertising and minor repairs. The most demanded apartments The most popular apartments for daily rent are located in the center, close to tourist attractions or within walking distance of metro stations – this is the kind of accommodation that tourists usually look for. Daily rent is also in demand near office centers, with large federal medical centers, which come for treatment from all over Russia. Studios and one-room apartments are in the best demand. Large apartments for daily rent are chosen less often. Usually they are rented for noisy parties, which entails risks for the owner. In addition, a large apartment is more expensive and will take longer to pay off. Not the least role is played by the appearance of the apartment and its “filling”. People choose apartments for rent on websites and sometimes they make a decision in a few seconds. Therefore, the apartment should stand out, have a modern renovation and equipment. Renting out an apartment in the “grandmother’s” style is almost unrealistic.
- Cons and risks of short-term lease Short-term renting brings more income only when the demand for housing is stable, therefore, it requires full involvement in the process. A person who wants to rent an apartment for rent must assess their resources, “Short-term rental housing, as opposed to long-term rent, is a full-fledged job, not passive income, and here you need to constantly be in touch, resolve issues of tenants, select personnel to clean the apartment after guests and coordinate their work, post ads, answer questions from guests, reviews and so on. This is a really big work, but with a competent approach it pays off, The demand for daily rent also depends on the season. For example, on May and New Year’s holidays, in the summer months there is an increased season, and in the fall there is usually a lull. In 2020, due to the COVID-19 pandemic, it lasted almost all the time. This factor must be taken into account. With short-term rentals, there are risks of damage to property, especially if noisy events are taking place in the apartment. Theft of dishes and small household appliances is not uncommon. To be on the safe side, upon delivery, it is worth signing an acceptance certificate with an inventory and a photo of things in the apartment, as well as a photo before moving in. In this case, it will be easier to obtain compensation for the damage through the court, advised Victoria Kiryukhina. As a guarantee, the landlord can take a small deposit from the tenant, which in case of an emergency will cover minor expenses. In a pandemic, demand fell to zero Daily rentals in 2020 due to the pandemic (closed borders, self-isolation regime, suspension of business events) suffered more than other segments. In some months, demand dropped to zero. Some owners were forced to reorient their businesses to long-term leases. According to Avito, by May 2020, the share of such landlords in Russia was 20%, in Moscow – 43%. Now the short-term rental market is gradually taking shape, but it is still below the dock-like indicators by 20-30%, rates have sagged about the same. According to experts, demand will be able to fully recover only after the resumption of the international tourist flow.
- How to rent an apartment for rent: practical advice Before renting an apartment for rent, you need to prepare it. If necessary, make cosmetic repairs and general cleaning. Buy towels, bed linen, bathroom accessories, kettle, hairdryer and so on. Check that all equipment is working, remove all valuable items and documents. We asked people who rent out an apartment for daily rent to give several such recommendations. Yulia Platoshina, expert in daily rent, blogger, rents two apartments for daily rent:
- My first advice for those who are going to rent an apartment for rent: your apartment should be interesting. It should be different in design, decor and stand out from many other options. Now there are a lot of identical apartments for rent, which at some point begin to compete only in price. The guest does not catch his eye on them. The apartment may have IKEA furniture, but in a thoughtful combination, it is interestingly combined. Those apartments that are distinguished by their taste and look like home-like cozy always shoot out. In second place is cleanliness. She should always be in the apartment. As for the repair and equipment, you need to equip the apartment as for your own residence. In third place is adequate service regardless of who communicates with the guests – the owner himself or the management company. Communication should be simple, polite. Try to promptly answer all questions that are in your area of responsibility. The guests appreciate it very much. These nuances form the impression and influence your rankings. For negative reviews, you need to give feedback. The answer should be structured, without emotion, but with a detailed explanation of the situation. A well-thought-out response to a negative review will ultimately create a good impression of the host. Badly affects the rating if the photos do not match the description. Photos must be of high quality, but true. Otherwise, you may get the first customers, but then negative reviews will go. Therefore, the picture must match.
Make the apartment attractive
My first advice for those who are going to rent an apartment for rent is that your apartment should be interesting and attractive It should be different in design, decor and stand out from many other options. Now there are a lot of identical apartments for rent, which at some point begin to compete only in price. The guest does not catch his eye on them. The apartment may have costly furniture, but in a thoughtful combination, it is interestingly combined. Those apartments that are distinguished by their taste and look like home-like cozy always shoot out.
Keep the apartment clean
In second place is cleanliness. She should always be in the apartment. As for the repair and equipment, you need to equip the apartment for your own residence. In third place is adequate service regardless of who communicates with the guests – the owner himself or the management company. Communication should be simple, polite. Try to promptly answer all questions that are in your area of responsibility. The guests appreciate it very much. These nuances form the impression and influence your rankings. For negative reviews, you need to give feedback. The answer should be structured, without emotion, but with a detailed explanation of the situation. A well-thought-out response to a negative review will ultimately create a good impression of the host. Badly affects the rating if the photos do not match the description. Photos must be of high quality, but true. Otherwise, you may get the first customers, but then negative reviews will go. Therefore, the picture must match. If you are going to rent an apartment for rent, first of all, you need to look at the nearest points of attraction. These can be hospitals where people come for treatment, sports facilities where training camps are held, universities, and so on. Points of attraction will help you understand who your audience is. For example, if you have an apartment near sports or game House, then it should be larger than one-room apartments, which are popular for short-term rent. Students and fans who come to the games are more comfortable with larger accommodations. But even if you rent a one-room apartment, it is better that it has more than two sleeping places. This will expand your audience and replenish your budget. Once you have decided on the audience, you need to take professional photos of the apartment and its high-quality description. It is better to publish ads on all popular platforms – Google usually gives them in the first place for the query “rent an apartment in Moscow”. Placing on multiple sites will help attract more guests.
The apartment must look nice
An important rule is that the apartment should look “delicious” in photography and in life. It should have basic things – sleeping places, a fully equipped kitchen, a bathroom, preferably an air conditioner, and additional accessories – bed linen, towels, shampoo, shower gel, slippers. The kitchen should have utensils and a minimum set of products – cereals, oil, spices, tea so that a person can cook his own breakfast. If the budget allows, you can put a coffee machine. This will increase the level of guest satisfaction. The presence of the Internet in the apartment is very important.
In general, the apartment should have everything that is in your home for a comfortable life but without unnecessary things. That is just the simple way to make an apartment valuable in the eye of a potential buyer and profitable to the property owner.