Vacation Rental Economics

[rickulivi]

Hi All

I own an apartment in Recoleta and I had it rented to one person for nine years and collected about $15,000 dollars in rental gross income per year. I have now completed remodeled the unit and will use it a few months a year. However, I am considering turning it into a vacation or short term rental for the time I am not in BA.

To find vacationers, I plan to use Internet sources like airbnb and vrbo rather than a local source.

I have run some simple projections and I assume that I will rent it out for 10 days per month or a 33% occupancy rate, which I think is reasonable given that hotels usually have a 70% rate. I have assumed a daily rate of $170 which I feel I should be able to get--but time will tell. The unit has an outstanding location, it's fully furnished, has three full bathrooms, a toilette, two bedrooms and a office room, and all the necessary accommodations.

One of my unknowns is the repair and maintenance budget. I assume that having two sets of tourists per month in an apartment will do far more damage and/or require far more maintenance than for somebody who occupies it full time. I budgeted 10% of rental income for those expenses, but that may be too low. I would appreciate if you were to share your experience in this area too.

Question: for those of you experienced in renting out apartments for short term rentals, will an apartment put out for vacation rental generate the same annual income than it would if it were just rented out per year--in a long term contract? I would appreciate your opinion and your comments about the finances of short term rentals.

 

[Rich One]

Just as a guideline you may check the Camara Inmobiliaria for data what they claim that in BA the NET rental income for a property is close to 6% or less per annum . Net Income after reserves and all taxes.

 

[jez]

I am considering turning it into a vacation or short term rental for the time I am not in BA.

Don't forget to factor in the cost for someone doing check-ins/out, cleaning etc.... and finding someone reliable may be your biggest problem...

A well managed vacation rental will easily generate more rent than a long term rental contract (2 years) but you will have a load more hassles.

 

[rickulivi]

Veteran: Thank you for your excellent advice.

Rich One: My experience is that an apartment in BA, on a two year contract, will yield a 2.5% return, or less, after all fees, expenses and taxes.

 

[Musicman]

My experience is 6% after all fees and taxes for long term rental based on original price paid.....I also heard the short term rental market is not as good as it once was

 

[GS_Dirtboy]

The short-term rental market has taken a nose-dive in the last 3 years. Local prices have been rising (inflation) and Buenos Aires is no longer seen by tourists as the "cheap" great destination it one was. The rising costs hit directly on your expense line as well. Further, the number of properties available for short-term rentals has increased dramatically, saturating the market and dropping the average nightly price. Media headlines like police on strike and looting don't help things. Even the Blue Dollar, that one would expect to bring tourists, isn't helping that much as North Americans (in particular) are not comfortable with anything called "black-market" or "illegal." I have sat down with American tourists and laid out on a napkin the economics of using Pesos purchased in a cueva vs. using their credit card. They still use the credit card.

The issue for a property manager here is that the revenue line and expense line are both going in the wrong direction. To be successful, aka "make a living" you will need to niche yourself and offer something that almost no one else offers.

 

[Dublin2BuenosAires]

The market is suffering through over supply and increase in price and BA getting bad press in US newspapers.