How To Rent An Apartment And Turn It Into A Profitable Business

How To Rent An Apartment And Turn It Into A Profitable Business

by Johnny S

You can rent out your own home for short-term rent, take a property in a long-term lease and re-rent it by the day, or take an apartment under management. In the article, we will talk about each of these methods and figure out how to choose the perfect apartment for daily rent, which one to make repairs, where and how to look for guests.

Which is more profitable: short-term or long-term rent

An empty apartment does not generate income. But this can be corrected by renting out the property – long term or short term. With a long-term lease, everything is simple: you need to find tenants, conclude an agreement and hand over the keys to them, and once a month receive a fixed amount. You can come to the apartment to check that everything is in order in it, or you can trust the tenants (and the insurance deposit).

With short-term rentals, you will have to look for tenants more often – every day. They are looking for them both on “regular” real estate sites in the “Daily rent” sections, and on special ones. But you can monitor the condition of real estate almost daily. And the income will be higher: on average, according to experts on daily rent, by 1.5-2 times. For example, according to Black Stone Estate Agents, the monthly rent of a one-room apartment in the UK costs an average of 380 GBP. That is, if you load at least 16 days a month, short-term rent will be more profitable.

Long-term rental income can be considered passive. And interaction with guests when renting a day takes a lot of time – this is a full-fledged job. Therefore, some consider the daily rent of several apartments as a business and become hosts. The name came to us from Airbnb, and it is actively used by those who are engaged in daily rentals.

How To Rent An Apartment And Turn It Into A Profitable Business

If you don’t have your apartment, you can rent someone else’s

To start making money on daily rent, you can buy several apartments and rent them out. But this requires serious investment. An easier way is to rent an apartment for a long time and write down the terms of sublease in the contract so that you can re-rent the apartment for rent. The difference in price between daily and long-term rent minus the cost of advertising, cleaning, and other household stuff is taken by the host – the one who organizes the entire process of finding and meeting guests.

Another option for short-term rent without ownership of apartments is to take ownership of the property. Then in the contract between the owner and the manager, it will be written what percentage of the profit each of them will receive (the host usually gets from 5 to 20%). The owner of the apartment does not participate in the process at all, and the manager takes on all the responsibilities: places ads, monitors the cleanliness and equipment of the apartment, and meets guests.

Cooperation is beneficial to both parties. To the owner – because he does not receive a fixed payment, as in a long-term lease, but a percentage of the profit and this amount is usually higher. And the manager has more options, because the owner seeks to maximize profits and gives carte blanche for any action, for example, redecoration, furniture renovation, or long-term advertising campaigns.

Maxim Ott, real estate investor, an expert in daily rent:

“Last year we made an apart-hotel with 26 small rooms with an area of ​​12-19 square meter, near the Stockport metro station. Almost all real estate objects were bought by investors. We provide about 18% per annum on invested funds, we provide a full range of services – from repair and purchase of furniture to components, photos, work with sites, and receiving guests so that the investor receives passive income. “

Choosing an apartment for short-term rent

Not every home is suitable for daily rent. For example, the demand for large multi-room apartments is lower, as well as for those “killed” without repair. Renting them out for daily rent is almost impossible. If the apartment has no furniture, household appliances, and even such trifles as dishes, napkins, and shampoo, you can also forget about short-term rentals.

But almost all of this is easy to fix, unlike the location of the apartment. To understand whether it is suitable for daily rent, you need to present a portrait of the future guest. For foreigners and tourists, the city center, locations close to attractions and cultural sites are suitable. Business travelers usually settle closer to their place of work – next to the business and economic centers, offices of large companies. There is a high demand for budget housing near federal medical centers: guests do not want to overpay for rent due to the high cost of treatment. But in residential areas far from the metro, there will certainly be problems with demand, because it is not clear to whom and why to rent an apartment there for a day.

If the apartment is owned, then its owner evaluates each of these parameters and chooses whether it is worth renting out the apartment daily or long-term. If you are just planning to buy an apartment, then they will immediately look for the appropriate one. Moreover, sometimes they neglect repairs – they especially choose killed apartments to create a designer interior or even divide them into small studios.

A host subletting or managing a property looks for it using the same parameters. And the investor often does not even look for an apartment but hires a manager so that he selects a suitable object and then rented it out for daily rent for profit.

Big or small? 

On the market for daily rent of two-, three- and multi-room apartments there are fewer than one-bedroom apartments and studios. Therefore, it is generally accepted that the best object for daily rent is a one-room apartment or studio. A large apartment is more expensive, which means it will pay off longer. According to the experience of hosts, singles go on business trips more often, and couples go on trips. They spend a lot of time away from home and prefer to save money than overpay for “extra” space. Therefore, the demand for large apartments is less.

But you need to analyze the supply and demand in a particular city or area, perhaps somewhere there are not enough large apartments for families and those who travel with a company. The ideal option is to have both a large and a small apartment in your portfolio of investment properties. But be prepared for the fact that more tenants – almost always means more problems.

Maxim Ott, real estate investor, an expert in daily rent:

“It’s easier to have a party in larger apartments. You simply cannot invite many people to a small studio of 15–20 squares. This way we filter out a certain segment of guests that could create problems with neighbors. But large families who come on vacation do not get to us either, because we do not have enough sleeping places. In other regions, we would revise our strategy. In Sochi or the Crimea, it is better to rent large apartments, because families of 3-4 people usually come on vacation. Instead of two rooms in a hotel, they prefer to save money and rent a 2-3-room apartment. “

Nico J, an expert in daily rent, blogger:

“I have two apartments for short-term rent: a small 30 sq. m for two guests and a large three-room suite for six guests and even a baby. A small apartment is much easier to manage, to resolve issues with guests – there are only two of them. Much fewer problems, breakdowns, dirt after guests check out. The demand for small apartments is higher, but there are fewer large apartments on the market, so both properties end up showing the same profitability. But I spend more time in a big apartment. “

Apartment location

When choosing real estate for daily rent, the “rule of three Ls” applies location, location, and location again. A prerequisite is proximity to the “centers of attraction”: attractions, business centers, stadiums, federal medical centers.

Another option is proximity to the metro or public transport stops, from where you can get to the “centers of attraction”. Optimal location – less than 10 minutes walk to the nearest station. But the price in residential areas will be lower. Tourists are sometimes ready to get to the object longer, but they want to save on the cost of the apartment. But the demand for apartments in the center is still higher.

Nico J, an expert in daily rent, blogger:

“It is important to understand the needs and requirements of the guest. In Moscow, I focus on tourists, so my apartments are inside the Garden Ring. I understand why people go to Moscow, what they need. And outside the Third Transport Ring or Moscow Ring Road, the guest becomes very incomprehensible. Problems can begin here: arrivals in crowds, appointments, intimate meetings. If we do not understand the guest, it becomes more difficult to rent an apartment and there are more problems. “

What should be the repair?

In daily rentals, the repair and appearance of housing come to the fore – in the “grandmother’s” option, finding tenants will be problematic. On vacation or a business trip, a person wants to get more or at least the same comfort that he is used to. And in the center of Moscow and St. Petersburg, the hosts are counting on foreign guests, and you definitely won’t “sell” them a Czech wall and a carpet on the wall. The guest decides in seconds after looking at several photos. And he will either choose the most comfortable apartment or put up with some inconveniences for the sake of a better price. Therefore, before renting out an apartment for daily rent, in some cases, you will have to make repairs.

Nico J, an expert in daily rent, blogger:

“There are a lot of offers in Manchester, and if you don’t stand out for the renovation, you can only compete on the price. I didn’t want to play this game. My goal is to create vibrant designer apartments. This required the hiring of a designer and a major overhaul. It doesn’t have to be expensive. Nobody needs Italian furniture for short-term rent. IKEA had time to call her eyes, but even from it, you can make an interesting interior. It all depends on the sense of taste and the ability to combine colors and objects.

For my special apartments, there is always a tenant among people who prefer to live in a beautiful space. The price should be adequate, but my guests will no longer fight for 1-5 GBP a day because they will not find analogs. “

Maxim Ott, real estate investor, an expert in daily rent:

“Repairs can be quite inexpensive. Two years ago, we subleased a 33-square-meter apartment near the Stockport metro station for 350 GBP a month. The apartment was “killed”, so it was necessary to change the wallpaper, paint the walls white, whitewash the ceiling, lay the carpet, buy a new bed, and a chandelier. It took 350 GBP, but the difference was enormous. The apartment looks better, and the rental rate has grown by half. But now I would not take a “killed” apartment, because it requires additional investments of money, time, and nerves. It is better to immediately choose a good option, which is ready for delivery. “

Furnishings and equipment of an apartment for daily rent

With a long-term lease, it is quite possible to find tenants with their furniture and household appliances. An apartment for short-term rent must be equipped.

The minimum set of furniture and household appliances usually includes:

  • Double bed 140-180 cm.
  • TV set.
  • Dinner table.
  • 2-3 chairs.
  • Kitchen set.
  • Hob or stove.
  • Washing machine.
  • Microwave oven.
  • Electric kettle.
  • Some owners additionally buy a multicooker and a coffee maker, an iron and a hairdryer.

Maxim Ott, real estate investor, an expert in daily rent:

“Such sites as Booking, Airbnb,“ Daily ” allow guests to search for an apartment by filters: is there an internet, TV, washing machine or dishwasher, etc. The more you have from this list, the more often the apartment will appear in the search results “.

Nico J, an expert in daily rent, blogger:

“We have to look at which guest the apartment is made for. For families with children, there should be a full-fledged nursery with toys, not a faceless room. In a small apartment for a couple, an oven is often not needed, but it is in demand among families with children. In addition to washing machines, my apartments also have tumble dryers, but literally, 2-3 guests said that they chose the apartment because of her. “

Victoria Soboleva, an expert in daily rent, blogger:

“Apartments with a bed as the main berth are in great demand. An extra bed will be an undeniable plus. For example, a sofa bed in the kitchen area will allow receiving not only couples but also families of three. “

Guests have almost the same requirements for an apartment for daily rent for a hotel. Therefore, unlike long-term leases, the landlord will have to buy all the household items and supplies and then renew them regularly. The apartment must have:

  • Bed linen for each bed.
  • Pillows and blankets.
  • A large and small towel for each guest.
  • Dishes for cooking and serving.
  • Toilet paper, soap, shampoos and shower gels, dishwashing detergent, and laundry detergent.

Also, it is considered good form to take care of the little things for which the guest does not make sense to spend money on his own: napkins, sponges, dishwashing liquid, sunflower oil, sugar, salt, tea, and coffee. All this has little effect on the choice of a particular apartment, but reviews about the apartment and the owner depend on such subtleties.

Search for tenants

In short-term rentals, the owner of an apartment is looking for tenants not just every few months or years, but almost every day. This minimizes downtime days. Therefore, all the available means and methods are used for this.

The most popular services for finding apartments for short-term rentals are Booking and Airbnb. This is where most ads are placed. There are other options – sites like “Daily”, “I want to the south” (for the southern direction), and ad sites, for example, “”. It makes sense to advertise designer apartments in both capitals on Instagram.

Victoria Soboleva, an expert in daily rent, blogger:

“Booking and Airbnb allow us to weed out unscrupulous guests by reading reviews about them before confirming a booking. You can also check tenants in communities of rentals on social networks, in chats in messengers with blacklists of guests. The practice of withholding bail is normal. “

Nico J, an expert in daily rent, blogger:

“I only list my apartments on Booking and Airbnb and don’t use bulletin boards because I don’t like answering calls all the time. I’m an introvert, and I don’t need 20 calls a day, of which no one will come for the rent. And in Airbnb, you can set various restrictions, for example, to accept only those guests who have previous positive reviews, passport details are indicated. You will not see them, but the site has them and allows you to weed out unreliable clients.

Maxim Ott, real estate investor, an expert in daily rent:

“On weekends and holidays, we try not to populate young people, because they might throw a party. We sign an agreement with all the guests and take a deposit for the safety of the property. But this is rather a symbolic amount so that the guests do not leave with the keys and forget to give them to us. In services, we confirm each reservation personally, specify the purpose of the trip and the composition of the guests. We are focused on long-term work, so we try to weed out those who can harm us, our apartment, and our business. “

Meeting with guests

The most time-consuming daily rentals are interaction with guests. You need to meet them, hand over the keys, show them the apartment, and sometimes tell them about nearby attractions, tourist routes, and even cafes and grocery stores. Then, when leaving, you need to check whether everything in the apartment is intact, pick up the keys, clean up, update consumables, for example, toilet paper, soap, shampoos, sponges, and dishwashing detergent.

Novice hosts sometimes perform all duties personally. But if there are several objects, it becomes quite difficult to do this. Therefore, you can hire a cleaning lady who keeps order in the apartment, washes, dries and iron bed linen and towels, makes the beds, and puts everything in its place.

It is also not necessary to meet and see off guests: according to the hosts, they increasingly prefer to check in on their own and do not want to see the landlord. You can solve the problem the old fashioned way – hide the key under a rug or in a mailbox. But advanced owners choose high-tech solutions – electronic door locks. They can be synchronized with the rental service, which is very convenient. To enter the apartment, the guest receives an access code. And after each exit, the code should be changed. And the owner answers all questions of the guests in correspondence or by phone.

But this does not mean that it is possible to organize the work so as not to participate at all in the process. Even if the owner of the apartment has an au pair and an electronic lock, you still have to independently post and promote ads, communicate with guests, and answer their questions almost around the clock. Also, from time to time you need to visit the apartment in person. Let not after every arrival, but still, it is necessary to monitor the safety of the property.

Preservation of the apartment

One of the main myths about daily rent is that such an apartment is very quickly “killed”. Experts agree that with a long-term lease, the owner, by and large, does not know what is happening in the apartment. And in case of short-term risks are minimal – you can control the number of guests and the load on the housing, keep order, check the operability of technical equipment, and the serviceability of furniture.

Nico J, an expert in daily rent, blogger:

“The average rental time in Moscow is 3-4 days. That is, every 3-4 days a full check and general cleaning is carried out in the apartment. The smaller of my apartments have been rented for 2.5 years. It requires repainting one wall, but not because of the guests, but because of the mistake of the builders. If all these 2.5 years she gave up on a long-term basis, then I would have to do at least cosmetic repairs.

In the case of daily rent, theoretically, such a guest can come and destroy the apartment completely. But even in the world, such cases are easy to count on one hand. And for a broken glass partition, broken table, chair, bed, you can always request a refund from Airbnb, attaching photos, etc. The service shares responsibility with the owner of the apartment for its safety and compensates for losses through insurance. “

Working with reviews

The first thing that guests pay attention to when choosing an apartment for daily rent is photographs. They should grab attention and interest, stand out. Therefore, the hosts advise on using bright details in textiles and decor, and sometimes to hire a professional interior stylist and photographer. But from equally attractive apartments, the choice is usually made based on reviews.

Maxim Ott, real estate investor, an expert in daily rent:

“After each check-out, we call the guests on the phone and clarify whether they liked everything, whether everything corresponded to the description, please leave a review. This is very important for us because it affects the result of the object in the search. The sites encourage reviews and bring apartments with good ones to the top. “

Nico J, an expert in daily rent, blogger:

“In my opinion, there is no need to work with positive reviews and litter the space with your thanks. But negative reviews need to be worked out – to answer competently, clearly, and without emotion. Reviews can be true and false. In response to the truthful, it is worth admitting mistakes and promising to correct them. And if, for example, guests complain that it was cold, but it was not, you can write that on such and such dates there was such and such an air temperature, and the sensations are subjective. You should not be afraid of negative reviews – they not only can but should be in every apartment. This is an indicator that the ad is real, and not fake. Much more important is how the owner handled the negative feedback. “

Problems with neighbors and the law

Another common myth is that tenants do not like being near apartments for daily rent. A lot depends on the behavior of the guests. If they do not violate the rules of the lease, then the neighbors may be unhappy unless they meet at the entrance and the elevator with strangers with suitcases. And you cannot be held accountable for this.

Usually, there are no problems with law enforcement agencies either. Daily rentals are perfectly legal if the landlord officially pays taxes (as an individual, self-employed or sole proprietor). The worst thing that can happen: in a residential building because of the noise, the neighbors will call the district police officer. We’ll have to come to the apartment and listen to the warning.

Nico J, an expert in daily rent, blogger:

“I had no problems with my neighbors during the lease. In addition to electronic locks with a variable code (so that you don’t have to throw the key under the rug or into the mailbox for independent check-in and check-out), I have a temperature, humidity, and noise sensors installed. I rent an apartment in residential buildings and should not disturb my neighbors. I set up an alert in the program if the noise level exceeds 70 decibels during the day. This way I can contact the guest before the neighbors start complaining to someone or call the police.

As a matter of principle, I rent apartments on the ground floor so that guests do not use the elevator. Thanks to this, neighbors do not have to constantly face strangers. Out of concern for the neighbors, I limit the maximum number of tenants and the rental period. A crowd of people with suitcases every day is an additional load on the entrance. Problems with neighbors will arise if you don’t think about them. It is better to get acquainted in advance and ask to report about the guests who interfere, and the host will make every effort to prevent this from happening. “

Pros and cons of daily apartment rental

·       The profitability is 1.5-2 times higher.

·       The apartment is constantly under the control of the owner, so its depreciation is lower, and its safety is better.

·       The lease can be terminated at any time if the owner needs the apartment. There is no need to wait for the lease to expire, as with a long-term lease.

·       You can earn extra money on short-term rentals during the sale of the apartment.

·       Communication with different people, including from different countries. Language practice.

·       Subleasing and managing is a fast and inexpensive way to start your own business and scale.

·       Renting requires the attention and time of the owner. this is a full-time job.

·       The host must be in touch 24/7, because guests can check-in at night, stay late, or, conversely, arrive ahead of time.

·       There are fixed costs for minor repairs, consumables, household chemicals, dishes, towels, bed linen, laundry, ironing, and cleaning.

·       You need to follow the rental market, learn how to use advertising and guest search tools.

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