How To Get The Most Profit From Your Overseas Rental
There’s no single secret to choosing a successful
rental property overseas.
Instead, four factors need to come together to ensure:
- Healthy, regular payments show up in your bank account
- You don’t lose your mind
Today, we’re going to take a look at these four secrets.
(By way of full disclosure, I swiped these straight from Lief’s new video program,
How And Where To Pick Up Profitable Real Estate Starting At US$50k.)
Secret #1: Engage The Right Property Manager
Unless you’re living near your investment property or have personal experience in
property management (and don’t mind spending time on administration and tenant issues), you’re better off employing the services of a
professional property management company.
Services differ greatly depending on the company and the market in question. Sometimes, you’ll have one company to take care of advertising your property and managing bookings, while another will look after maintenance. The Holy Grail is the one-stop shop that offers everything from changing the light bulbs to offering airport transfers to your clients. Be sure you understand what services are offered as you weigh up the costs. (
Go here for more on what to look for when choosing a property manager.)
The cost of property management varies by market and also by rental type. But, as a guideline, look for agency commissions that fall in or around these rates:
For furnished long-term rentals: 10% (or one month’s rent)
For short-term rentals: 20%-25%
Be wary of agencies quoting below these prices—they usually provide a minimal service… or go out of business fast.
Secret #2: Know The Market
Before you
buy your property, speak with property managers in the area to help identify which neighborhoods get the highest occupancy. You’re looking for a minimum of 70% to 80%.
If possible, spend time in the area. Walk around to see who is renting… and what they’re renting.
When Lief and Kathleen were buying their rental apartment in Paris, for example, most investors in the city were buying up studios. With fewer one- and two-bed properties in the rental pool, their two-bed apartment had less competition. Think about what you can you do to stand above the rest.
With this groundwork behind you, you can then approach local realtors with your requirements.
Secret #3: Don’t Underestimate Location
Pay attention to the areas that are most appealing to
tourists… but don’t ignore those up-and-coming areas that are within reach of amenities. A lower entry price in an area of strong rental opportunity may result in a greater ROI.
For short-term rentals, walkability is vital. Foreign visitors to big cities typically don’t want to drive. They want to stroll to shops, cafés, and restaurants. In major cities, proximity to public transport (especially a metro or tram line) is an advantage.
Ultimately remember that, in this digital age, no matter how attractive your property is inside… you can’t hide a poor location. If you’re far from amenities, some disgruntled visitor (or 10) will call you out on Tripadvisor.
Secret #4: Don’t Overspend On Your Asset
This one can be a challenge. Many first-time overseas buyers try to put their own stamp on a place—especially if they’re planning to spend some time in the property themselves (we call it “The Spousal Factor”).
Overspending on furniture is generally not recommended. Unless you are hitting the luxury market (and can charge higher rents to justify the cost), skip the antique shops and go with IKEA or similar.
Above all, what you want is a tasteful, uncluttered look that photographs well. The best way to go about this is to hire a professional interior-decorating firm. A little investment here can pay off in spades.
Lynn Mulvihill
Editor,
Overseas Property Alert
