Vacation rental or traditional? What is the best option for my studio in São Paulo?
If you've just finished or are thinking of buying a studio as an investment in a big city like São Paulo, a lot must be going through your head: best location, type of furniture, decor, amenities, use of space. However, before that, you need to define which way to monetize your new property you will choose, in order to obtain greater profit.
For this type of investment, there are mainly two options: seasonal rental and long-term rental.
At first glance, traditional renting - as it is something more classic and widespread - brings a sense of stability. However, what many do not know is that, in the case of a property as an investment, seasonal rental can be much more advantageous and profitable, for properties well located in cities that bet on business and leisure tourism.
To help you in this decision making, we will compare the two modalities based on the same topics in both categories. Are they:
1. CHARACTERISTICS OF TRADITIONAL RENTAL
- Who assists the owner
The property owner can do all the negotiations directly or hire a traditional real estate agent to prospect for the new tenant and monitor the contract.
- Income
The rent amount is established upon signature of the contract, with a certain date for payment month by month, the figures are readjusted year after year according to the inflation rates prevailing in the market. The real estate company that brings the client keeps the first rent and then charges a maintenance fee of around 10% of the monthly rent.
- Daily expenses of the property
All bills are paid by the tenant, such as: condominium, water, internet, electricity, gas, IPTU and others. The owner's only expense will be the real estate administration fee.
- Legal security
As established in the annual lease agreement, it is not allowed to sell the property without prior communication to the tenant, who will even have preference in the purchase. If he is not interested in buying, he should always open the property to show interested customers.
- Maintenance
It varies depending on the care of the tenant, who must return the property in the same way he found it. However, as the lease can extend for years, the property is not always returned in perfect condition, as there are degradations that go beyond day-to-day use. For example: a plumbing or roof repair is not directly linked to the tenant. Therefore, due to the accumulation of damage or expenses that are not up to the tenant, the cost of post-rent maintenance can be considerably high.
- Control
The owner will not have direct control over the property. If you need to access the property for any reason, everything must be arranged with the tenant according to their availability.
2. SEASONAL RENTAL CHARACTERISTICS
- Who assists the owner
A vacation rental agency is the best indication for the service. Its functions range from implementing the property on various platforms such as Airbnb, Booking, Expedia to guest management functions such as: registration, key delivery, follow-up, payment, lease agreement, cleaning, dynamic pricing, maintenance, etc.
- Income
The values are established based on daily rates and vary according to the demand of the required dates. The amounts charged already include all costs such as (water, electricity, gas, condominium, IPTU, internet, administration fee and others). Generally, the only additional fee paid by the guest with each reservation is cleaning after use of the property.
The monthly gross income must be controlled to cover all fixed costs of the property and generate a net income for the owner greater than the value that would be generated with the traditional rent.
- Expenses
The owner will pay all bills for the operation of the property, mentioned above, in addition to the administration fee of the vacation rental agency that is charged on confirmed reservations. An important value to be analyzed and considered is the opportunity cost, that is, making a comparison between the amount that would be received in hands in the season rental versus the traditional rental.
- Legal security
In this case, the contracts will be made punctually with the guests with a maximum duration of 90 days. Generally, the only deadline that must be respected is the minimum that the vacation rental agency will ask you to work with, for example, 12 months. This deadline is requested, as the season lease is something gradual.
That is, the longer the property stays online, the more ratings and comments it will have and the greater its visibility and relevance on the platforms. Consequently, the property having more “reputation” will generate more bookings and revenue.
If the owner really has the intention and opportunity to sell the property, it will be possible. All it takes is for the agency to reallocate any reservations that have already been confirmed.
- Maintenance
Low. When considering that the agency must carry out an inspection before and after each reservation, the problems inside the property will not accumulate and, therefore, the expense with repairs and maintenance will be lower. In case of eventual damage to any item of the property (more the exception than the rule) there are tools such as the lease agreement, security deposit and lease insurance so that the damage is borne by the guest and the replacement or maintenance is carried out by the agency.
We talk more about these prevention measures in this article.
- Control
It is a great option for those who plan to use or access the property for personal purposes, the owner will always have priority in booking the dates, just inform the agency to block the dates. As reservations are shorter, there will always be windows of opportunity to access the property.
NOW THAT I KNOW THE CHARACTERISTICS OF BOTH MODALITIES, WHAT IS THE BEST WAY TO CHOOSE?
To help the owner in decision making, we always use relevant statistical data to provide a greater basis, there are platforms that read the market on platforms such as Airbnb and bring insights rich in information. On these platforms, we were able to carry out a competitive analysis of a certain standard of property in a region and calculate information such as: monthly occupancy rate, average daily rate, what is the comparison between demand and supply in that market, which items attract the most attention from guests in the time to make the reservation, which group profile rents the most and so on. This is relevant information that will help you to ensure which modality will bring you the greatest return.
Some examples of data-driven insights in the city of São Paulo:
- 80% of stays booked in São Paulo are for two or one person.
- December and January are months when people are on vacation and looking to get out of town, so prices should be lower to be competitive.
- The most popular dates in the city of São Paulo are usually during Carnival, Lollapalooza festival, and Formula 1.
- In São Paulo, there is greater demand during weekdays than during the weekend, that is, more people come for work than for leisure.
- Properties that have air conditioning have greater demand than those that do not. Internet is as basic an item as water and electricity. Properties that do not have this convenience will be out of the market.
Would you like to know more about vacation rentals, but don't have time to manage this?
If you have opted for truly passive income, hire an agency specializing in the management of vacation rental properties, such as Meu Anfitrião.
We are responsible for the quality management and leasing of dozens of studios in the city of São Paulo.
We will make your property available on the main platforms such as Airbnb, Booking.com, TripAdvisor, Alugue Temporada, Hoteis.com, and over 40 others!
Furthermore, by contracting our services, you will be able to enjoy all the benefits of being a host, without the stress and difficulties of being involved in the daily management and operation of your vacation home.
Contact us to find out more about our work.
Meu Anfitrião, your home in good hands!