The Myths of Buy-To-Let Property

Published on 03/09/2007 in Renting Your Property

Buy to Let in SpainBuy-To-Let also known as pay-for-itself-property for the unitiated first timer.

The theory is that you buy a property, furnish it and as if by magic it will pay for itself as the rental earnings will cover the mortgage.

Who is to blame? Estate agents who exaggerate the rental potential to get a sale; or rental agents for promising to get six months worth of bookings a year; or even owners who use the property for friends and family in the peak season when they are most likely to get rental clients.....

Regardless of what anyone may tell you, as the ´investor´you must take the necessary steps to ensure that your buy-to-let is a success and not just a financial headache.

Myth:  I´ll buy cheap furniture because it will just get ruined

While it would be crazy to spend a fortune on quality furniture, it pays to go for the medium range furniture if you can afford it.  Cheaper quality usually means you will have to replace it sooner with no long term cost savings.

Also, the most successful business is built on repeat business and referrals and rentals are no different.  The nicer your home looks, the more likely you are to get returning clients.

Myth:  I don´t need to use a rental management company

Trying to save money by not using a rental management company could well cost you more money in the long run. Who will keep an eye on the property and let you know if there have been any leaks, breakages or worse robberies?

You also have to consider that if there are any problems with the house you may have to try and co-ordinate builders, plumbers and other tradesmen to have access to the house.  How easy do you think that will be when you are in a different country?

Property  Management does not necessarily mean using the services of a large expensive company.  ´Property Management´means that you have someone - be it a professional company, a friend, cleaner etc. that is willng and able to visit the property on a regular basis, check for any problems, co-ordinate tradesmen and give access to the property for your rental clients.

Myth:  I will get enough clients from the English-speaking market

You are missing out on a large share of the rental market if you do not target the Spanish simply because of the language barrier. Use an agency to attract the Spanish clients while you can generate business from English speaking clients with no agency fees.

www.Kyero.com offers free translation of all the core advertising phrases you will need - select all the terms you want to include and click the Translate button at the bottom of the page.

Myth:  I can use it for holidays

The peak holiday seasons are exactly the times when you are most likely to get clients, and when you can charge the most for your property rental.   If you use it for friends and family or personal use you are unlikely to get much income if any!

Myth:  The letting agent will get me all the bookings I need

Even with the best intention in the world, a letting agent is unlikely to be able to get your property rented the whole year round.  Not only will there be thousands of properties available for rent in the area, if you live on a large urbanisation you will also have to compete with possibly hundreds of very similar properties.

The only way to maximise your rental income is to run it as a business and that means advertising in as many places as possible.

Myth:  I will make xxx amount from the rental

The clients may pay you xxx amount but you then have to pay the cleaner, the gardener, the repair man, the pool man, the rental management company, replace any broken items in the house, credit card booking charges.....

You should estimate that 25% of the rental income will need to go on various costs and charges associated with the rental.

Myth:  I will get loads of leads from my website

There is no denying that if you have a decided website for your rental property it will help to sell it better as you can include detailed area information, maps, photographs and other helpful information.   However, it is pointless having a website if no-one is going to see it.  There are millions of websites advertising rental properties and publishing it means nothing unless you can it to the top of the search engine listings -  neither an easy or cheap undertaking.

Use your website as an added tool to make your property stand out from the rest and provide more than just the basic information you are allowed to advertise on rental websites - not as your only advertising option.

And the best one of all...

Myth:  The rent will cover the mortgage

You will need time to furnish the property, landscape the garden, get rental clients.....all of which could easily take up to a year during which you will have to cover the mortgage payments.

A realistic estimate is you may be able to let out your property for 12 weeks of the year which leaves a long 40 weeks with no income.

You should not consider a buy-to-let property if you are not able to pay the mortgage without any rental income - this is a bonus!



Written by: Yolanda Solo

About the author:Yolanda Solo is the author of (Spain Survival Manual) www.spainsurvivalmanual.com.  A comprehensive look at the realities of moving to Spain or investing in property in Spain, and why it can be a financial and emotional nightmare.




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Comments:

Robert Edwards said:
29 January 2013 @ 21:04

Buy to Rent in Spain

Whilst the Spanish property market maybe going though hard times, property is selling, albeit in much lower numbers than during the boom time. On the other hand, both the holiday rental and long term property markets are in high demand in our area of the eastern Costa del Sol and Costa Tropical.

When you buy a holiday home, you’re not only making a property investment. It is also an opportunity to make money in the long run by renting the holiday home in the weeks and months that you are not using it yourself, or take advantage of the much lower prices and buy a property to let all year round.

We have a video that shows you a few but important things you must consider in the acquisition of holiday homes – things that matter most in the rental potential of the property.

Target Group

Start by getting an idea of your target audience. By determining your target group of tenants, you will achieve the best results in your rental business – both in terms of earnings and customer satisfaction.

Your target group could be: young couples with no children, old couples with no children, families with children, groups of families with children, families with a person with disability, or perhaps a group of business travellers. Each group has different and specific needs. But if you are able to deliver 100% of their wishes and expectations, you can be assured of your success.

Location

First and foremost, your holiday home has to be in an ideal location where you would dream of living when you go yourself on holidays or vacations. Since you also need to consider your target group’s needs and requirements, it is advisable to find a location that is both perfect for your own and your target group’s holidays.

If your target group is families with children, for example, it is important that the home is safe – not close to roads with heavy traffic and speeding cars. Families with children also want easy access to supermarkets, restaurants, beaches, parks and playgrounds. If your audience are young couples without children, your holiday home can be closer to busy places and the bars. For business travellers in groups and for older couples, the holiday home can be in quiet and peaceful areas.

Other important things to consider, in terms of location, are the view and the distance to the airport. You might want to also think of its distance to golf courses and ski resorts.

Size and structure

The size of the accommodation that you choose to buy is likewise important for your target group. Smaller apartments are great for young and old couples travelling without children, while large villas are good for families with children. Larger villas are perfect for groups of families or business travellers.

Regarding how the house is laid out, think of the necessary equipment and facilities your target group is looking for: a number of bedrooms, private bathroom for each bedroom, and maybe more living rooms or work spaces. If you wish to rent for persons with disabilities, or in wheelchairs, make sure to provide direct level access and plenty of space in the bathroom, kitchen, bedroom, front doors, etc.

Features and Furnishings

The choice of house features and furnishings is also important for your target group. Nowadays, Wifi Internet access, cable TV, air conditioning and mosquito nets for windows and doors, are important for all groups. The same applies to washing machines and dishwashers. But there are big differences with other things.

Families usually find swimming pools an attractive feature that’s why pools can be important for groups of families for children. But, of course, do not forget safety. The pool must be adequately shielded with a fence. The entire outdoor area must be fenced, so parents can relax without being worried about where the children might walk or wander off. Likewise, remember to have a door or gate in front of stairs. Remember, it’s quite crucial to think about security if the target group is families with children.

Another thing to consider is that the furniture must look presentable. It’s generally recommended to choose pieces of furniture that are better than the cheapest in the market. Try to make the house comfortable, cosy and homey, and your guest will feel even more at home. Also, keep in mind the target audience when it comes to choices of furniture. If they are business travellers, there must be good work desks and chairs. If they are families with children, there must be high chairs, cribs, etc.

Holiday Renting

Once you have purchased your dream holiday home with the appropriate choices of location, size, design, features and furnishings for the target group in mind, renting it out is much easier and more pleasant. Most rent the property on a weekly basis as rental income on short-term rentals is significantly higher than the long-term ones. Also, implementing short-term rentals makes it easier for you to use your holiday home for yourself, your family and your friends.

The normal level is 20-30 weeks of rental per year. Advertising about renting can be either through your own website, vacation property portal or agency. The rental itself can be managed by either you as the owner or a skilled agent in the area that you choose. Tasks are to meet with customers, provide keys, accept payment and check guests out, etc. In most cases, cleaning is done by local cleaning companies.

Long Term Renting

If you should decide to rent long term the overall financial annual gain may be lower than short term lets, but you are secure in the knowledge that it is rented all year round, at a fixed monthly rent, with the tenant paying all the utilities. Maintenance and wear-and-tear on the property is also reduced. In coastal and touristical areas you will find that many of the tenants are couples, often with no children, and a simple one or two bedroom property will suffice in many cases. If it’s a villa or large town house that you have, then this will appeal to families with children.

Split Renting

In an ideal world, you can split the year into 6 months during winter to cater for the winter residents, switching to short term holiday lets for the summer. In this way, you can also allow room for your own booking!

In summarising, the Spanish property market now offers good property at very attractive prices. If you’re thinking of moving into the market, to buy to rent, then this is the time.

LPG Spain.






Robert Edwards said:
29 January 2013 @ 21:03

Buy to Rent in Spain

Whilst the Spanish property market maybe going though hard times, property is selling, albeit in much lower numbers than during the boom time. On the other hand, both the holiday rental and long term property markets are in high demand in our area of the eastern Costa del Sol and Costa Tropical.

When you buy a holiday home, you’re not only making a property investment. It is also an opportunity to make money in the long run by renting the holiday home in the weeks and months that you are not using it yourself, or take advantage of the much lower prices and buy a property to let all year round.

We have a video that shows you a few but important things you must consider in the acquisition of holiday homes – things that matter most in the rental potential of the property.

Target Group

Start by getting an idea of your target audience. By determining your target group of tenants, you will achieve the best results in your rental business – both in terms of earnings and customer satisfaction.

Your target group could be: young couples with no children, old couples with no children, families with children, groups of families with children, families with a person with disability, or perhaps a group of business travellers. Each group has different and specific needs. But if you are able to deliver 100% of their wishes and expectations, you can be assured of your success.

Location

First and foremost, your holiday home has to be in an ideal location where you would dream of living when you go yourself on holidays or vacations. Since you also need to consider your target group’s needs and requirements, it is advisable to find a location that is both perfect for your own and your target group’s holidays.

If your target group is families with children, for example, it is important that the home is safe – not close to roads with heavy traffic and speeding cars. Families with children also want easy access to supermarkets, restaurants, beaches, parks and playgrounds. If your audience are young couples without children, your holiday home can be closer to busy places and the bars. For business travellers in groups and for older couples, the holiday home can be in quiet and peaceful areas.

Other important things to consider, in terms of location, are the view and the distance to the airport. You might want to also think of its distance to golf courses and ski resorts.

Size and structure

The size of the accommodation that you choose to buy is likewise important for your target group. Smaller apartments are great for young and old couples travelling without children, while large villas are good for families with children. Larger villas are perfect for groups of families or business travellers.

Regarding how the house is laid out, think of the necessary equipment and facilities your target group is looking for: a number of bedrooms, private bathroom for each bedroom, and maybe more living rooms or work spaces. If you wish to rent for persons with disabilities, or in wheelchairs, make sure to provide direct level access and plenty of space in the bathroom, kitchen, bedroom, front doors, etc.

Features and Furnishings

The choice of house features and furnishings is also important for your target group. Nowadays, Wifi Internet access, cable TV, air conditioning and mosquito nets for windows and doors, are important for all groups. The same applies to washing machines and dishwashers. But there are big differences with other things.

Families usually find swimming pools an attractive feature that’s why pools can be important for groups of families for children. But, of course, do not forget safety. The pool must be adequately shielded with a fence. The entire outdoor area must be fenced, so parents can relax without being worried about where the children might walk or wander off. Likewise, remember to have a door or gate in front of stairs. Remember, it’s quite crucial to think about security if the target group is families with children.

Another thing to consider is that the furniture must look presentable. It’s generally recommended to choose pieces of furniture that are better than the cheapest in the market. Try to make the house comfortable, cosy and homey, and your guest will feel even more at home. Also, keep in mind the target audience when it comes to choices of furniture. If they are business travellers, there must be good work desks and chairs. If they are families with children, there must be high chairs, cribs, etc.

Holiday Renting

Once you have purchased your dream holiday home with the appropriate choices of location, size, design, features and furnishings for the target group in mind, renting it out is much easier and more pleasant. Most rent the property on a weekly basis as rental income on short-term rentals is significantly higher than the long-term ones. Also, implementing short-term rentals makes it easier for you to use your holiday home for yourself, your family and your friends.

The normal level is 20-30 weeks of rental per year. Advertising about renting can be either through your own website, vacation property portal or agency. The rental itself can be managed by either you as the owner or a skilled agent in the area that you choose. Tasks are to meet with customers, provide keys, accept payment and check guests out, etc. In most cases, cleaning is done by local cleaning companies.

Long Term Renting

If you should decide to rent long term the overall financial annual gain may be lower than short term lets, but you are secure in the knowledge that it is rented all year round, at a fixed monthly rent, with the tenant paying all the utilities. Maintenance and wear-and-tear on the property is also reduced. In coastal and touristical areas you will find that many of the tenants are couples, often with no children, and a simple one or two bedroom property will suffice in many cases. If it’s a villa or large town house that you have, then this will appeal to families with children.

Split Renting

In an ideal world, you can split the year into 6 months during winter to cater for the winter residents, switching to short term holiday lets for the summer. In this way, you can also allow room for your own booking!

In summarising, the Spanish property market now offers good property at very attractive prices. If you’re thinking of moving into the market, to buy to rent, then this is the time.

LPG Spain.






c.kelly said:
04 September 2007 @ 10:51

Renting
Very interesting article, but I can not understand why you have not mentioned the 25% tax, which I understand is from the gross income from renting your property.



normansands said:
04 September 2007 @ 08:54

what of the mystery guests?????????

Has anyone else had mystery guests via La Quinta rental services?

We have had unexplained use of the apartment with furniture damage, electricity used, cleaning incomplete and crockery left in the dishwasher.

Also when we notified a personal booking we were told that they had already booked for that same time but had not yet notified us.

Is this unique to our apartment?

Anyone know what is going on???

what to do??????



barker said:
04 September 2007 @ 08:46

true true true! have the t shirt to prove it
this article is 100% correct i would add location location location if you want to rent must be near a beach shops and retraunts i have no mortgage rentals just cover taxes services property maintenace not replacements like water heaters furniture etc try to find somewhere warm in the winter months this maybe your only time to go! i dont belive i am a pesimist just a realist. have property in usa, italy and spain . spain the best


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