What is the profitability of seasonal real estate?
What is the profitability of seasonal real estate?
For some time, investment in seasonal real estate is in fashion. A nice apartment by the sea or a small inn nestled in the mountains. But in terms of profitability, what is the balance sheet?
A well-known principle
Even though we have never heard the term, just hearing the terms seasonal real estate, we know what it’s all about. We then speak of a dwelling that is rented only for each season. We will talk mainly about seasonal rentals because most of these accommodations are rented during the holidays. The rental is short-term, the accommodation is furnished and it will not be a main residence.
These rentals are then open to all tenants at specific seasons of the year. If previously the seasonal rentals privileged the seaside sites and the very tourist areas, the development is today more and more important.
An alternative against hotels
With seasonal rentals, the competition is with the hotels. In fact, seasonal rentals are, for the most part, undertaken by individuals. This means that the fixed rates are variable.
Exceeding traditional tourist areas, seasonal rentals are even gaining ground in city centers. And quickly we go to the term “apart-hotel”. The competition is tough because tourists seek comfort without going through an exorbitant price.
A useful and pleasant investment
With an increase in demand compared to seasonal housing, real estate in this case is experiencing tremendous success. However, you have to know how to target the right areas and the good neighborhoods. The biggest advantage with seasonal real estate is its ability to combine business with pleasure.
Even though not yet on the market, housing can serve as secondary housing. Afterwards, you can rent it at a fixed or evolving rate depending on the constraints that arise in relation to the market.
And profitability in this case?
It is difficult to define exactly whether profitability is positive and negative because it varies in function of various factors. And the main downside that appears on the board is the rental period and the area in which your property is located.
Indeed, it should be noted that the rental period can be very reduced which will not give you the opportunity to touch big. Then you have to take into account the area where your property is located: is it well placed, the place is advantageous for tourists, how is the local competition?
We cannot simply go through a seasonal rental because we want it. The idea is first of all to know the market in which you invest. By settling in a high profit zone while enjoying a significant period of time, he is sure to earn more.
The benefits of seasonal real estate
With good rental management dynamics combined with a good investment in a favorable area, seasonal real estate remains very profitable. Or at least, profitability is almost assured. But behind a successful recipe, you have to know how to optimize your visibility.
And in a market where competition is tough, it’s the hardest step to go. It is then necessary in this case to play on the image and on various techniques for your property to see and be appreciated. So go through agencies, sites, the technique of word of mouth, etc. By having networks of various owners also, this ensures a good optimization of the visibility.
The occupancy rate can also play for or against you. Indeed, unlike a simple rental, the seasonal rental is for a short time only. Depending on the location, the property can be occupied during the summer or winter season.
The case of real estate credit on this plane
A real estate investment is a big project. You have to have a large enough budget to complete it and many do not have it. This is why there is real estate credit. By going through a credit institution, you have to mention in the negotiations that you have the goal of making a seasonal rental investment.
It must therefore be mentioned in your file, all accompanied by simulations of profitability. With a possibility of excellent profitability, the bank will be able to grant you credit faster.
The risks of unpaid
In a traditional investment, risks are always present and must be taken into account. Because in this regard, the risk of unpaid is higher especially if the property is located in a large city. Because the case is always the same: you rent the property for a season. And if the tenant suddenly decides not to pay the rent?
It is quite possible, before renting, to present guarantees proving incomes astronomical. But if he decides not to pay, he does not pay. And this can lead to an endless war between the people involved.
Fortunately for you, this case does not have to be for seasonal real estate. Because rents are always paid before the tenant occupies the dwelling. In other cases, a deposit is paid. Future tenants are also obliged to pay to reserve the property.
At the level of taxation
The tax benefits are notable for a seasonal rental. It is subject to special rules that highlight especially the case of a furnished rental. As a result, it is the landlord’s obligation to declare the rents received to access tax benefits. You can quite rent a real estate unfurnished.
But in the case of seasonal rentals, this would not interest any tenant. However, with a well-furnished property, the owner moves on to a commercial activity. He remains an individual and not a professional rental. But the presence of furniture is categorized as a commercial activity, so that it generates profits that are then industrial and commercial profits or BIC.
Seasonal real estate, which area to focus on?
For a seasonal real estate, the choice of the location of your property is very important. Nowadays, the choice is made in three key places: the sea, the mountain and the city. You can choose one of three or all three at the same time, the rental will be profitable to the extent that you make a good choice of location, you invest in a good quality and ensure that the market is good for your investment. Note also that the environment will play in your favor and the property must enjoy a setting appreciated by vacationers.