Rental reality check

[Planky]

Slightly different subject to the last thread. We've been seriously looking for somewhere to buy and let out round Cva. It's got to be able to 'wash it's own face'/ cover costs as a little business. Agents are telling us you can rent out a place with heating and pool most of the year. So this is a reality check with anyone who's actually renting out.........just wondering how many months a year a decent 3 bed villa + pool near facilities/a resort could be let for, realistically?

[EMM]

Do not believe everything the agents are telling you.
You can achieve a decent rental income but certainly not all year round.

What I would do is look on owners direct, holiday rentals etc , find villas like yours ( there a quite a few ) and look at their bookings for this year.

It is not one of the best nor by anymeans a bad year.
You will also have to factor in other costs, garden, pool, with our without maid service, cleaning, laundry etc.

You will also have the tax and lisencing issue to resolve.

Is it worth it YES but for more reasons than just having a summer rental income.

[fmm]

I would say do it, but only if you do not need the money. If the rental comes in, then great. If not, then you need to be able to fund the property yourselves.

People are looking for bargains these days - so whilst costs are going up (and the euro/£ rate causing problems for the Brits), the actual rental costs being achieved are not increasing at the same rate.

Once you have established yourselves, you will probably find you get the same people returning year on year. Carvoerio has regular clientele and they tend to stick to the same villas each year.

[widge]

Been renting my place out for six years & the answer to your question is 21 weeks average. It's nearly always the same weeks between April & October, the rest of the year appears to be very quiet so enjoy the villa yourselves during the off season.

[cereza]

Have sent you a pm Planky

[Planky]

Useful bunch of replies - thanks guys - all showed real experience behind them unlike the agents spiel which I suspected was too optimistic.
Those owners direct - type websites do show a lot of empty months, it must be said.
21 weeks pa isn't too bad - nearly 50% of the year - then I think about normal (non holiday) rentals in the UK, where the aim is to keep the void/unoccupied period below 5%. The average 21 weeks Widge mentioned is about a 60% void rate!

[e-richard]

Planky,

There is no way you can compare occupancy levels for UK, non-holiday rentals to a summer resort-based villa. Compare annual revenue instead.
Also, remember that for a Villa in Carvoeiro, 16 weeks between Jan and June is not the same as 16 weeks between June and October. Just look at the prices !

As to the availability calendars on OD or similar, there are a number of reasons why these may show more vacancy than reality:
a) The owner is lazy, and does not update the calendar. The owner may be advertising on 5 or 6 or many more such sites and its just too tedious.
b) The owner deliberately leaves it vacant to build up enquiries and a mailing list
c) The owner has multiple units and can redirect enquiries to other vacant properties
d) I'm sure there are other (good and bad) reasons.

[Planky]

Very interesting e-Richard - the plot thickens.
I am not interested in living in the place. I do not like blurring the edges of business and pleasure.
What I am trying to do is establish is whether a piece of paradise is also a viable rent machine. I am still in the mindset of year round student rentals in the UK, but If 21 weeks of holiday stays produces similar percentage returns to year round UK rentals that's a whole different thing. Be interesting to know what sort of returns people get.

[fmm]

If you are buying for business and no pleasure at all, then I feel you are looking at the wrong market. You are better purchasing more property in the UK and dong student renting where there is always a market.

[widge]

If you are buying for business and no pleasure at all, then I feel you are looking at the wrong market. You are better purchasing more property in the UK and dong student renting where there is always a market.

Sound advice ! A villa in Portugal is not a sensible business proposition.

[Planky]

But if that is the case, that it's a dodgy business renting, why are some people investing in multiple holiday properties to let? Think of all those hundreds, no, thousands of empty properties here during the winter, then the same in Spain, etc, etc. Many of them new, beautifully kitted out, just sitting there empty for months on end. There must be some way they can generate income.

[EMM]

There are a large number of rental properties owned by expats who already live in Spain or Portugal and who by looking after them them selves save at least 20% of their rental income that they would have to pay out for cleaning etc.
There are many who take advantage of lease back and get a rental return ( at least for a few years ) of 5% ( better than any bank is offering .
THere are those like us who bought for personal use an use rental income to offset some of our costs.

True many did buy 4-5 years ago due to easy credit, low interest rates and a strong £, believing ( were told ) that they would rent 26+ weeks year and if they wanted to sell it would be easy and they again would make money.

It is some of this last group who are in trouble with the problems caused by the decline in sterling and the world recession.

[fmm]

The trouble is, people want to rent over the winter months for virtually nothing. There was a thread last week where someone wanted to rent for 3 months for £1000 including heating and bills.

Winter is when it costs more to keep the property going if someone is living there. Heating alone is an enormous cost as most holiday homes have not got sufficient heating to keep the place warm enough for comfort. Therefore huge electric bills appear. In addition, because the weather is colder, people spend far more time inside, hence the general wear and tear on the place is significantly higher.

I don't know a single person who invests in multiple holiday homes abroad. In the UK, yes - I know several people who make a very nice living out of it. But definitely not over here.

I had someone living in my property for 1 week a month over the winter a few years ago and my bills come year end were far higher than they were the following year where the place was unoccupied from November to February. The cost of rental did not cover the cost to me.

If you are serious about this you need to look at real figures rather than speaking to agents and canvassing random opinions on the internet. We have all (as far as I can see) said that holiday homes do not create a business income.

[tricky]

I agree totally with all the comments, 'buying a holiday home is not for profit'
We bought 6 years ago when the euro was strong and half expected to at least cover our costs. I do know of people who brake even but that is if they let every week during the peak months and some of the winter. We have never broken even but have enjoyed the frequent holidays and pleasure of owing your our place. That's what it is really all about.

[mac]

We also bought about 6/7 or so years ago. We stay about 2 or 3 times a year and let friends use it. When our friends use it we just charge them enough to cover the cost. We also allow it to be rented out by the development. We have only twice been in credit through renting, most of the time we have to top up the charges. This doesn't bother us as we didn't buy it to make money but are in it for the long term. So I don't think you can actually make money on renting a 3 bedroom villa unless you live there and do all the upkeep yourself. When we retire we'll probably spend more time there, especially during the English winter.