Putting your property on the market can be a bit scary but if you have done your homework, it should be pretty straightforward and you should know what to expect.
Things to consider before putting it on the market
There are numerous things to consider before putting your property on the market but some things you really should know as they will affect your return. Below are some of the things I recommend considering before you start advertising your place (guessing you want to make the best possible return on your investment).
1. Understanding the market dynamics in the specific area (what drives demand and rent levels)
I hope this is pretty obvious and it relates to our previous posts. Before you make any kind of investment (in any asset) you should have a pretty clear picture of what is driving that market. You have to understand both the market you are looking at and the area around it. The better you understand your market, the better investment decisions you will make.
The easiest way to do this is to first check online what is being advertised, what price levels and in which neighborhoods. Most likely the rent level you will achieve will be similar to what you see although of course you want to maximize your rent. There might be certain objects that are more attractive than others, objects that might not even come to the market as they are being signed before they are official.
To really be ahead of the game, you should talk to a handful or brokers covering the area. Let them tell you what is in demand, what is selling fast and if they were investors what would they look for and why. If they are good at what they do, they already work with investors and hence know what they are looking for and why they are looking for those specific objects. When you understand this, you know what to look for and what you can expect. Great relationships with brokers can be invaluable as you might be the first one they call when they have an object they think you might be interested in (especially if you already have the finances in place).
Don’t just buy because it looks cheap, it might be a good reason for it!! The more research you do, the lower the risk of a financial disaster…
Our thoughts about the supply and demand in our case
The demand is relatively high even though the place is located in a smaller town, however rents are also low. Based on the tax system and rent regulations, there are limits as to the rents you can charge and how much tax you will have to pay. This is different in every country so you have to make sure you understand the tax situation in your country as that for sure will have an impact on your investment decision.
The other aspect for us was the location being a rather big recreational area with a lot of outdoor activities available and hence could work well as a holiday home (pros and cons with both of course). In our case, we wanted to use the place for ourselves as well so it needed to be in an area that appealed to us. A limited supply of holiday homes in the area and a very low supply of properties for sale made it quite interesting. We then used booking.com, airbnb.com and local websites to check the the supply, how many bookings they had during certain periods and how much they were charging per night. By knowing this, we knew roughly how much we could charge and how often it would be rented which is a brilliant insight as it makes it so much easier to price accordingly!
I really suggest you do the same, regardless of how you intend to rent it, as the more you know the better!
2. How to advertise based on your target audience (what to focus on)
This completely depends on who you are targeting. By doing you research, you know what is important to the audience you want to capture. For example, for families it might be the number and style of the bedrooms (yes many people check with their kids before deciding), maybe it’s the size or layout of the garden. Make sure you highlight the things they would look for; the ideal garden to practice baseball, play some football with friends or having a great barbecue.
By putting yourself in the shoes of the tenant you are looking for and by styling and phrasing your ad (or making your agent focus on certain things during viewings), you will appeal much more to your target group than if you just use generic wording, pictures and phrasing. Try to paint a perfect picture for your ideal tenant allowing them to see all the benefits and how well it would suit them (100% honesty of course).
Often it’s the small things that make the difference so the better you understand the potential tenant, the better you will be able to reach that group and make them pay top dollar (within that segment).
Our thoughts before taking our ad live
The first thing we did was to read lots of other ads and in particular those who had great reviews. By reading reviews of other places, we could find out what the guests really liked. Maybe there would be certain things we could do in an easy manner to offer the same thing (unless we already have those).
We also read loads of ads with the purpose of seeing how others were phrasing their text, displaying their pictures etc. By just “pretending” to be a customer and see what stands out and really catches your eye, you learn a lot about your competitors and the customer base.
When we had all this information, we tried to put ourselves in the shoes of our potential guests. People who love being outdoors!
The title of our add is: House with view of Isaberg – for active travelers!
We wanted the viewers to immediately be curious and realize that the place is pretty big (a house) and if they know the skiing area Isaberg, they should be intrigued by having a view of the slopes. This also indicates that the house either must be located on a small hill or quite openly to have a view of the slopes. The last part is to hit home with our target audience, those who love being active!
We think this heading will catch the eyes of the travelers looking for a place to stay in this area and that is interesting enough for them to read more about our house.
In our description of the place and every room, we are trying to be consistent with our core message; that this place would be ideal to spend a few days or a week in when looking to enjoy all the outdoor activities offered in the area. As we did all the renovation in less than three weeks, we have been limited in terms of how many and what kind of pictures we have been able to take. We currently don’t have any summer pictures, nor any pictures of the activities available close by. These will all be added (as soon as summer comes and we are back to the house) because the more you can show off that might appeal to your target group, the better (as long as it is relevant)!
If you are curious about the content and wording of our advertisement, check out our ad on Airbnb (unfortunately the translation might not be perfect as it was originally written in Swedish).
Again, try to find what your audience is looking for and the more of those things your property offers, the better and the higher the rent you can charge (of course you have to do a cost/income analysis so that it makes economical sense!).
3. What channels to use for maximizing your rent
What is the best way of getting access to your potential clients? When they are looking for a place to rent, were do they go first and how can you make sure that you are visible there or make them find you even earlier on? Again, it comes back to understanding your market, as well on the supply side as on the demand side.
Your “competitors”, how do they market their places, through what channels and why? If they are big, they might have their own channels but if not, why do they choose certain channels? Try to understand why and then use the best ones for your target audience. Maybe you want to use a few different channels? The key thing is to have a good understanding of how much you are paying versus the visibility you get and for how long you think you might have your advertisement live.
Targeted websites is the obvious place to go, as well as different Facebook groups. If these groups allow for advertising, then you might be able to pinpoint your exact target group. Another option is being a member of local groups and communities where you might hear of people looking for a place to rent. If you can find them before they start looking, that could be an advantage.
Try to think outside of the box to find that great tenant. They might not even know that they are looking for a new place until they see yours! If you want to maximize (which you of course do), you have to do things differently and you have to be different, else you will get average dollars. Standing out from the crowd doesn’t mean you should over spend, just use FIRE logic!
Our choice of channels
Since we are letting a holiday home, we are targeting both an international and a national audience. After doing our research and also thinking about how we normally book accommodations ourselves when traveling, our choice fell on Airbnb. There are numerous reasons to this but for one, their reach is global and they are attracting more and more users. Secondly, their platform is very simple to use and the host/owner is only charged a few percentage points on every booking.
For us the alternative would have been to work with different platform providers who target certain countries with more dedication. We decided not to use them initially as they would charge 20-30% of the rent. We found it hard to figure out whether it would be worth it so we decided to start off ourselves with Airbnb. The only reason why we should be willing to pay 20-30% in fees would be if they would be able to charge higher rent or reach more potential customers. Based on the fact that there is so much transparency online and comparing prices is quite easy for customers, I would find it hard for these providers to be able to justify their fee based on a much higher rent. I still use these companies as a good source of information and view their listings to see what pictures and wording they use etc. Again, the more information you have about your competition, the better decisions you can make.
As I was having a look at our competition, I was going through the occupancy rate at the skiing resort which is just around the corner from our house. On their site, I found links to other accommodation providers as well. This got me curious so I reached out to them and asked what was required to have my listing on their website as well. Turned out they only charge 50 EUR to have my listing on their site for a full year. As I knew they are often fully booked, I thought this would be good value as there should be some potential clients coming my way via their site when they are fully booked. If you want to check this out, here is the link to their site. Whether this was a good move or not remains to be seen (funny thing is that someone just called me up to ask about availability after having seen my ad on that site!).
Still, if one can find a way to complement other accommodations in the vicinity, then why not. No one will let you cannibalize on their customers but if you have something they don’t which can generate more customers for them too, then maybe there is a possibility of collaboration.
I have also considered to offer our place to companies in the area but have not done that yet. It would require a bit more time but can for sure be worth it as there are very few hotels in the area and companies who need a place for their employees are often able to pay a bit more…
4. Do you need any approvals or fulfill any regulatory requirements prior to letting it?
Before purchasing and for sure before putting your property on the market, you need to make sure you follow all rules and regulations. You don’t want to end up in disputes with any regulatory bodies. Do the homework first and then play by the rules and you should be able to stay out of any nasty surprises.
Depending on the “agent” or site you are using to let your place, there might be other requirements from their side. In general I would say that it’s good to maintain a certain standard and ideally fulfill the general recommendations in terms of health and safety. They are often minor things but which can make a big difference in the end.
One should also make sure to have an insurance which is valid for the purpose of the letting. Your usual home insurance might not be enough if you are renting your place and you might need a special insurance. As always, use a comparison site to find great quotes but make sure you get what you need so that you are covered for the things you want. You don’t want to pay for things you don’t want, you only want to pay for the coverage you want or need.
5. Who will manage the property and how much will that cost?
This of course has to be sorted out before putting your property on the market. It should have been part of your calculations prior to putting an offer on the property. These costs can vary significantly depending on what kind of management service you want or need. If you are just starting out and if you buy something close to where you live, then maybe you will take care of it yourself to keep the costs down to start with. If it is a larger property (meaning more rent coming in but also more work), you might want to have someone do it for you. It is very important to find a great team to work with so that you can build both trust and a long term relationship. This will be mutually beneficial over time.
How we decided to handle this
We are fortunate to have my retired parents close by and they have been willing to assist when needed. We are trying to let the place in a way where we minimize the risk of something breaking and minimize the maintenance as well as unexpected costs and emergencies. Although one has to understand that this inevitably will happen at some point.
Our place is let short-term and our guests have to bring their own bedding and towels as well as clean the house before checking out. They can let themselves in by getting the key from the safety box so no one has to be there to let them in. Of course, this is built on trust as there is a chance that someone might not be cleaning up after themselves meaning I will get an angry call from the next guest.
I try to always be available per phone and text so that guests know that if they need anything or have any questions, I am just a short call away. By being swift to respond and doing it “with a smile” I am trying to start off on a good foot so if something goes wrong, we can sort it without a lot of discussions or arguing.
The other thing is that our place is decorated for being rented, meaning there really isn’t much that can break. Even though it is fully furnished and equipped to live in, there is not much of value either which means we don’t have to worry about that expensive sofa being stained etc.
Based on our clientele being active travelers coming by car and who spend +3 nights with us, the above requirements should not mean fewer guests. We also have to take into consideration how much it would cost to have someone clean and do laundry every time our guests leave. I don’t see how we would be able to charge enough to make up for the time it would take. Currently our bookings are coming in nicely so I don’t think it has deterred that many potential guests from booking. Also, at the moment we don’t really have the capacity to do it in any other way but this might change in the future and possibly that will have a positive effect on our bookings, but so far so good!
Our ad has been live for a month!
Our ad went live mid January and since skiing season was just around the corner we immediately got some good response as you can see in the calendar above. Within the first couple of days we already had a few bookings! I knew that I might had priced our place a bit too aggressively, in particular based on the size of our house compared to our competition. At the same time, we wanted attraction so that we could start getting some reviews (if they are good, it will be easier to get more guests!). But with bookings coming in that fast, I decided to increase our prices during weekends as most people seemed to book for a long weekend. I also adjusted the price per guest, so being more than four guests would cost a bit more. My reasoning was basically that if they are a family of four, the price is still the advertised price. However, if they are more than four guests, it is a great likelihood that they would be two families and then they won’t mind the price being a bit higher as they are splitting the cost. The same goes for a group of friends traveling together.
I am trying to be responsive to all requests and since going live we have made the decision to allow pets. We have also added an extra bed to accommodate for 8 people (should be enough in most cases and give us an edge). I am contemplating adding even one more extra bed since it’s such an easy thing to do, even though it is probably unlikely to be used. Other things we feel would be adding extra value would be to also offer bedding, towels and cleaning but I am currently finding it hard to make financial sense. What we most likely will do in the short-term is to add wifi. As we recently bought the house we have not taken care of that yet. Besides, travelers from within the EU can still surf from their mobiles at no extra cost just as in their home country. Active travelers should on average not be that picky as regards wifi, still we will most likely take care of that shortly as there are probably families where this is a priority.
We have already had a few guests staying with us and so far so good. The only issue has been a mirror breaking in one of the bathrooms but we had taken into account some minor things occurring every now and then.
All in all, we are very happy with how this is turning out and without taking any financing cost into consideration, the bookings we have so far will more or less cover all the running costs of the house for the full year. A pretty good start I would say and then we have not even had the opportunity to use the house ourselves yet!
If you would like to visit our place you can book via this link or contact me directly and I will of course give you a discount!
I have been really happy with AirBnb and the way their platform works and if you too want to try it out as a host and be putting your property on the market, use this link and AirBnb will pay me a small fee but you still get your full rent!
Actions to take:
- Maybe invest in a property!?!