Is it worth renting out an apartment daily, and how much more profitable is it than long-term rental?

Before we begin

Explore hotel offers. Be interested in the quality of service and cost of living. This service is not new; you should also be aware of the situation with competition from entrepreneurs offering apartments for daily rent, hostels and boarding houses. If your competitors are not fully loaded, this is not a reason to abandon the business idea. Consider an average load of 50-65% normal.

Based on this data, you can calculate the average demand for the service and profitability. When writing a business plan, develop more attractive offers than competitors with similar conditions. Think about how you can improve the level of service.

Main risks

This service is in demand in large cities, which are characterized by a significant number of tourists and people arriving for business purposes. The progress of business is not affected by weather factors, seasonal features and other possible risks. In this case, everything depends only on your efforts and marketing policy. If all your documents are in order, and your business is conducted legally and at the proper level, everything should be fine.

The only potential danger is unscrupulous clients. There is a risk of non-payment of accommodation, theft and damage to things in the apartment. You can insure yourself. Develop a standard agreement that specifies the responsibilities of the parties in the event of possible difficulties. By signing it, the client indicates his passport details. This is a common practice.

If you live in a small town, you should think very seriously about the feasibility of organizing this business. It may be more profitable for you to rent out an apartment for a long term.

How to rent out an apartment for a long time

As a rule, apartment owners want to find people who will live long and pay regularly. They will be decent, clean people who will take good care of the rented apartment and everything that is rented with it.

To find such people, you need to understand psychology. After all, this is what will help you find such valuable clients.

First of all, you need to understand that people who are willing to live a long time and pay decent money for rent must have a permanent job in the city. They should not be business travelers who are here today and there tomorrow.

Although among business travelers there are those who can rent housing for a long time, 6-8 months, and this is quite a long time if you look at the rental market with real eyes. On average, tenants live in an apartment for 2-3 months. They are always looking for cheaper offers, and as soon as they manage to find a better deal, they can safely move out.

Therefore, in order to increase the length of time people live in your apartment, you need to interest them economically. How to do it? You can offer discount conditions when every 4 months you give people a discount on rent. It's very tempting.

Tenants may be happy with such an offer, because it will be beneficial for them. And for you, as a property owner, this will allow you to assign people to your apartment. After all, it’s more profitable to give people a discount than to have them move out, and you’ll still have to spend time finding new tenants.

Important psychological points to keep in mind:

1) Monitor your conversation on the phone. Be polite yourself and pay attention to how potential tenants talk to you on the phone. You shouldn’t react aggressively if people ask a lot of questions about the apartment.

For example, you posted an ad on Avito, but people still ask you the questions you described in the ad. The fact is that rental clients often copy their phone numbers and call apartment offers later, without having access to the content of the advertisements.

In addition, if people are concerned about different issues, most likely they are responsible for their choices and in the future they may turn out to be very decent people. On the contrary, if people don’t ask about anything, then these may be those who want to re-rent your apartment or use it in some other way.

2) Be careful. If people are interested in various everyday little things, then most likely they are decent people. If not, then for some reason they don’t care, which can be suspicious.

3) Don't neglect your lease agreement. This will avoid troubles in the future regarding unscrupulous tenants. The agreement guarantees integrity to both parties. For example, tenants are afraid to give money without receiving in return any guarantee of their stay in the apartment.

Many people may not be happy with this option. How do they know that in 5 minutes some uncle won’t appear and say that this is his apartment and kick them out? But this happens! And, if you are a decent apartment owner, then the tenants may have already gotten burned somewhere, and simply will not rent from those who do not draw up an agreement.

When it comes to the question of how to properly rent out an apartment for a long period of time, the list of things specified in the lease agreement is of great importance. Don’t be lazy, write down all the most valuable things:

1. Household appliances;
2. Furniture;
3. Repair (if the apartment has good wallpaper and doors, then if they are damaged, you can demand compensation for damage under the contract);
4. Bedding (they may be taken away, so don’t forget to include them in the contract as well).

You can also estimate the average cost of all things in the apartment so that tenants understand what damage they will have to compensate if, for example, they break a mirror or glass in an interior door.

BUT!

4) Don’t forget about people’s interests. After all, they will rent an apartment and pay money. Specify in the contract who will bear the costs if, for example, a microwave oven or refrigerator breaks down.

Tenants may encounter this problem, because equipment tends to break on its own. By entrusting yourself, as the owner of an apartment, with the repair of household appliances that have broken down through no fault of the tenants, this is competent and fair.

If tenants expect expenses from their own pockets for every occasion, then they may move out and not pay for anything, simply because the nuances were not agreed upon. But everything could be solved.

5) Discuss the issue of ending cooperation with the tenants. Many apartment owners are also concerned about the issue when tenants move out for the last month, do not pay for utilities and take a set of keys with them. Why is this happening?

The fact is that most often at the time of renting an apartment this issue is not discussed with the tenants. And people are afraid that if they warn, the owners will interfere in their lives for the last month, bringing other potential tenants to rent when they have not yet moved out. Tenants don’t want all this, so they often do what’s convenient for them.

To avoid such an outcome, it is better to discuss in advance with people what to do if they move out. As a landlord, you shouldn't restrict people in the last month. There is no need to bring new tenants to view the apartment.

It’s better, at the time of concluding a lease deal, tell people that they can move out in any month, but let them warn you in advance and give them the keys and pay for utilities. A common reason why tenants do not notify their owners that they are moving out is that they do so before the agreed upon time.

For example, when they were filming, people were confident that they would live for 6 months or even a year. And then something changed with their work and they need to change the area or city. Therefore, everything here is individual and you need to look at the people.

If this is not done, then in the end it is always doubly worse for the owners. People don’t give notice, they move out, they don’t pay for utilities, and they can take the last pair of keys with them, since there is nowhere to leave them, and putting them in a mailbox is not the best idea. What if someone takes them, opens the apartment and takes away all the owners’ precious things?

Based on this, tenants often simply throw away the keys when moving out of the apartment. Therefore, you need to discuss everything with people in advance. Including how they will move out, when they will have to give notice and what they can expect from the owner of the apartment during the period when they move out.

Location

If you plan to rent out your own apartment, the search problem is eliminated. But it is worth considering that the most attractive for potential clients are central areas, streets near train stations and bus stations with convenient transport links. If your apartment is located on the outskirts, there are problems with transport, or it will be difficult for a visiting person to find the right address, it makes sense to think about exchanging for a more favorable location.

You can purchase the premises. If there is not enough money, there is an option with a mortgage loan. The only drawback is that all profits will be used to pay off the debt. But as a result, you will have your own apartment in a good area.

Another possibility is to sublease. You rent housing for a long period, for example, a year. It is important to register the transaction with a notary, indicating the true purpose of the lease.

What are the dangers of illegal housing rental?

Is it legal to rent out apartments on a daily basis? Yes, because it is private property. But taking a fee for this and evading taxes is illegal. The majority (60%) hide the source of passive income, and the tax authorities do their job of identifying shadow businesses, for which they receive wages.

Important! If the fact of tax evasion is established and proven, the owner will be held administratively liable and pay the principal amount of the debt, fines and penalties. Repeated violation is fraught with criminal prosecution, a criminal record and a fine of up to 300 thousand rubles. or imprisonment for up to a year.

Equipment

You must create the most comfortable conditions for your clients. The essence of this service is not only the ability to rent housing cheaper than a hotel room and not depend on the need to have noisy neighbors. The main advantage of the apartment is home comfort.

It is very likely that you will have to make major repairs, change the plumbing, and equip the bathroom. Potential clients pay close attention to it.

Minimum furniture set:

• a bed in each room, a sofa;
• desk and kitchen table;
• chairs and easy chairs;
• spacious wardrobe.

The kitchen must be fully equipped - refrigerator, stove, microwave, cabinets. At least a minimum set of dishes and utensils for cooking is required. The apartment must have bed linen and a full set of home textiles. Also, you should consider the cost of household chemicals.

For many clients, it is important to have a TV and the ability to connect to free Internet.

Don't buy super modern and new things. Cleanliness and working order are important to your customers. You can save money by equipping your apartment with used furniture and appliances.

Vitality and competitiveness: theoretical background

Before starting any type of business, it is worth carefully analyzing it from the point of view of its potential and prospects. Actually, you need to get an answer to the question of how profitable it will be, what is its demand and whether it has opportunities for expansion and development.

Renting out housing for a short period of time as an entrepreneurial project has a number of advantages:

• constant consumer demand for the service;
• simplicity of organization (conditional);
• relatively high income.

If we analyze each of the points in detail, we get the following picture.

1) Demand is guaranteed by a number of factors:

• Daily rentals are of interest to clients with different budgets focused on this service, ranging from minimal to large sums. One category wants to save money, the other is looking for maximum comfort.
• The insufficiency of offers in the hotel industry makes it possible to attract attention to the daily rental of apartments from those who come on a business trip, and those who are looking for home comfort, and those who find themselves during the “peak” and cannot rent a room due to... that everything is busy.
• Anonymity and absence of “prying eyes”. It is clear that often this format of housing is of interest to people who want to hide the very fact of renting it. No one will force a client who rents an apartment for a day or a few hours for an intimate meeting or other purposes that he wants to keep secret to register. The safety of property can be ensured not only by taking a copy of the passport and attaching it to the contract, but also in other ways. In addition, the lessor can guarantee complete confidentiality of information.
• Possibility of "autonomy". When comparing staying in a hotel and staying in an apartment, the latter option has a number of advantages. A kitchen, washing machine, and iron provide a complete set for self-service. Anyone who rents an apartment can easily provide themselves with the comfort of home and save money on services imposed by the hotel format. In addition, he can eat “at home”, rather than in cafes and restaurants, and cook his own lunch or dinner, which will cost several times less.
• Mode. The apartment and the keys to it in your pocket provide freedom of coming and going. No restrictions on night time or visits. Here lies a very effective mechanism for attracting a certain category of clientele. You can rent out housing by the hour, which is convenient for many people.

2) In this type of activity there is only one difficult point - the availability of real estate at the disposal of the entrepreneur. Although its solution can be approached in different ways. All other organizational aspects are subject to the control of a person who does not have specific knowledge and skills. They also do not require major capital investments. What's important here is:

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• Establish communication with potential clients. This can be a variety of advertising, ranging from placing advertisements on poles to promoting a project on the Internet.
• Organize the process of acceptance and transfer of the apartment. It is clear that not every tenant is guaranteed to be neat, crystal honest and not damage property, even by accident. Therefore, it is necessary to document the rental, for example, concluding a rental agreement for an apartment with furniture, so that later there will be someone to make claims against.
• Debug the household side of short-term rentals. Not only the initial stage, interior design, furnishing, equipment with household appliances, utensils and the like are important here. Equally important are regular cleaning jobs, changing linen, preventative care and routine repairs of utilities and household appliances.

Advice : to use word of mouth to advertise your services, you need to pay attention to the little things that make life more comfortable. High quality bed linen, several towels in the bathroom, salt and spices in the kitchen, cable TV and Internet access - all these nuances can greatly increase the attractiveness of a particular home. This is exactly what your former clients will tell their acquaintances and friends about, respond positively on social networks and give you free and very effective advertising.

3) High level of profitability. There is a simple algorithm involved here:

• A long-term lease will provide less benefit in terms of cash flow from customers over a given period. If, when renting for a year, you receive 100 units per month, then short-term rental will increase this figure by at least 30-50%. This is due to the fact that wholesale (long term) involves lower payment.
• It is worth noting that you will have to incur more expenses for short-term rentals, although they are fully covered by client payments.
• It must be taken into account that there is much more effort, as well as time spent, in the short-term option.

That is, short-term rental of apartments is a relatively highly profitable business, easy to organize and set up, and does not require major investments. The latter is very conditional; this point requires detailed consideration.

Personnel

At the start, when a businessman rents out 1-2 apartments daily, employees are not needed. All concerns include cleaning and replacing bed linen after guests check out. New clients need to be met and escorted to the apartment, a contract drawn up and the keys handed over.

If you are developing a business and working with several apartments, you should think about hiring employees. The number of staff directly depends on the number of apartments. The most stringent requirements are imposed on the cleaning and cleanliness of bed linen; it must be packed in plastic bags, like on a train.

Make sure that there are no problems with the check-in and check-out of guests. If guests have to wait for your employee, they will not be willing to rent from you again. Please note that about 40% of the profit comes from regular customers.

If your business consists of 10 or more apartments, you need to hire an administrator. His responsibilities include communicating with customers and placing orders, coordinating the work of other employees and maintaining records of the workload of each facility.

Attachments

If repairs had to be made after each tenant, the number of housing offers would be greatly reduced. Repairs today are a very expensive undertaking.

All my apartments were renovated 5-7 years ago. Replacing lighting, wiring, completely redone bathrooms, new floors, wallpaper and painting, new furniture, etc. - each renovation at that time cost at least 700 thousand rubles.

average cost of repairs in each apartment

The previous renovations throughout were recent, but they were impractical to rent and old-fashioned. For some, a carpet on the wall is an excellent solution, it’s their right to think so. I carried out all the repairs according to the same requirements: it looks good, is easy to restore, and does not get dirty. As a rule, all walls or wallpaper need to be painted, the floor has laminate or laminate tiles, suspended ceilings with spot lighting. Furniture and household appliances are in good condition and fit into the interior.

I wanted to freshen up the property and increase the rent. After all, people on the Internet often write that they are willing to pay extra for good repairs. But in practice, price is a more important factor. In my opinion, now people are ready to live in poor conditions if they manage to save a couple of thousand rubles. For good repairs and new furniture, an average of three thousand is added to the rent if you rent out the apartment without much downtime.

Documents and licenses

By renting out 1-3 apartments, you can register as an individual entrepreneur and work under a simplified taxation system. No special permits or licenses are needed.

When creating an extensive network, you will have to register a legal entity. In this case, you need to hire a qualified lawyer to prepare all the documents; his services will pay off with interest.

Is it profitable to rent out an apartment?

This issue should be analyzed based on the location of the apartment. If this is a large, promising city, where new people come and, thus, the city increases in the number of people, then it is profitable to rent out such an apartment rather than sell it.

Often, people buy a second apartment as an investment with the opportunity to earn money on rent. Of course, people often inherit a second apartment, however, everyone who has such an opportunity is puzzled by the issue of renting.

If the apartment is located in a small town, from where there is a constant migration of the population to larger cities, then it is most likely more profitable to sell such an apartment. Why:

1. Population decline creates decreasing demand for rental properties.
2. Every year the rental price falls.
3. Also, the price of the apartment as a whole is falling every year. Therefore, selling an apartment in such a place becomes more difficult every time.

Why is this happening? Everything is very simple. The fact is that if new jobs do not appear in a small town, new enterprises do not open, then gradually the level of wages in such a place falls. Some people leave, and for those who remain, salaries are constantly decreasing, since in general the economic potential of a given place is constantly decreasing.

Therefore, in order to understand whether to sell an apartment or rent it out, you need to analyze rental prices in its location over the past few years. Read on the topic: why the apartment is not for sale.

To do this, you can go to some VKontakte group in your city, find the section for the sale and rental of real estate and look at the archive of advertisements, rewinding the publications.

If you see that a couple of years ago real estate was sold and rented out cheaper, it means your city is promising and it is better to rent out real estate rather than sell it. For convenience, you can familiarize yourself with the table, which shows the average rental price in major cities today.

Table 1. Average price for renting apartments by regions of Russia:

If the situation is different and you see that after 2-3 years the prices for rent and sale of real estate are falling, then it would be more advisable to sell the apartment in such a city and have time to move to a more developed place.

A city where real estate costs the same, but prices for rental and sale of real estate are going up. You can also explore another city for this indicator through VKontakte groups. Here is the second table with average real estate prices per 1 square meter to help you.

Table 2. Average price of an apartment in major cities of the Russian Federation:

Marketing

The lion's share of travelers search for overnight accommodations on the Internet. Creating your own website is mandatory. It should contain high-quality photos of the apartment, a description of the conditions and advantages. Be sure to indicate the daily rental price, address and location on the city map. Reservations can be made by telephone. Place advertisements on any platform - travel platforms, popular message boards, city forums. The greater your online presence, the higher your chances of reaching maximum capacity.

Cooperate with taxi services. If you know drivers, offer them your business cards. Visitors often ask for advice regarding the profitable opportunity to rent an apartment from taxi drivers.

You shouldn’t give up classic advertisements on pedestals in busy places, near taxi stands, public transport stops, train stations, bus stations and airports. They will bring you about 30% of clients.

Impeccable service is very important. When traveling to another city on business or vacation, people often consult with friends, read reviews and look for recommendations regarding a particular temporary residence option. A lot of clients come through patronage.

Profitability

The return on investment depends on many factors. The profitability is affected by how much money you invested in furnishing the apartment, and what prices for daily rent are set in your city.

You should offer clients a price 20-25% lower than the average price of a hotel room in your city. On average across the country, entrepreneurs working in regional centers demonstrate a net monthly income from each apartment in the amount of 15,000-25,000 rubles, depending on the workload. If the space is purchased with a mortgage or is subleased, your profits will be lower. You can talk about solid income if you have more than 5 apartments at your disposal.

The relevance of renting apartments by the day as a business idea

The idea is interesting to the majority of the country’s working population, because getting money without doing anything is a more than tempting prospect. Analyzing the global market, one can notice an increase in demand for daily rental housing. There are several reasons for this jump - an increase in the level of mobility of the population of the Russian Federation, a trend towards rationalizing costs for temporary housing and comfortable conditions for an adequate price tag.

There are 2 forms of rent - long-term and short-term. There are pros and cons to each form of business organization. More details in the table.

The target audience will be people on business trips, students, tourists, and residents simply passing by, looking for shelter for a couple of days. For long-term rental housing, priority is given to family members, students and individuals who have gone to another city for permanent work.

Please note: daily rental housing is an active position in business. If you want to receive completely passive income, priority is given to long-term rent. The downside is that the earnings are a couple of times lower than the first job option.

The benefit from renting housing is also determined by the difference in prices between a hotel and a private owner. A comfortable room in a hotel will cost 2-3 times more than private housing with similar amenities. The choice of tenant is obvious.