In general, vacation rentals offer a higher return on investment profitability to the homeowner than traditional rentals. But vacation rentals have certain costs that must be taken into account.
For example, the taxation applied to income obtained from tourist rentals is higher than that applied to seasonal rentals. Take this into account when calculating expenses.
We also recommend you to define very well how much will be the maintenance, cleaning, decoration costs… If your vacation home is attractive and in perfect condition, it will be much more attractive to future travelers.
If you decide to rent out your vacation home through a real estate expert you ensure greater security in the collections than in the case of a traditional rental. Forget about non-payments.
With a vacation rental, the days that your home is not rented, you can continue to enjoy it and check that it is still in good condition to enjoy the island.
Vacation rentals are a reversible decision in a short period of time, which is not usually the case with traditional rentals because contracts are usually for one year. You can try a season with vacation rentals and, if you find that it’s not for you, you can always switch to traditional rentals.
Calculate the profitability of your vacation rental in Fuerteventura
The way to calculate it is very simple. You only have to use a simple formula based on the expenses and occupancy of the property.
Calculate the monthly income you will obtain and subtract the expenses generated. It also includes those for which the tenant is not responsible, i.e., expenses generated from the ownership and use of the property, such as community expenses, property tax, management fees, insurance, provisions for repairs…
Revenues – Expenses = Profitability
Let’s take an example:
Income: 900€ per month, Expenses: 100€ per month
900€ – 100€ = 800€
But this figure would not be enough, since the profitability of a vacation rental depends on its occupancy levels.
How many nights would a tourist accommodation have to be occupied to equal the monthly income in this example? The answer is obtained by dividing that 900€ by the price per night you choose.
For example, assuming a charge of €45 per night:
900€ / 45€ = 20 nights
In other words, after 21 nights of occupancy, the profitability would be higher as a vacation rental than as a traditional rental.
If the price per night were raised to 55€, 17 nights would be needed: 900€ / 55€ = 16.36 nights
If it were possible to occupy the property at this price for 25 nights, the profitability would be as follows: 25 nights x 55€ = 1.375€.
Monthly expenses should be subtracted from this figure:
1.375€ – 100€ = 1.275€
As you can see, if the property is occupied frequently, its profitability will be higher as a vacation rental than as a traditional rental.
Experts indicate that the profitability of vacation rentals is interesting when occupancy exceeds 60%.
At Destiny Home we are experts in everything related to real estate transactions in Fuerteventura. If you want us to help you with the management of your vacation rental, keeping it occupied most of the year and achieving the maximum possible profitability, count on us.
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