RENTABILITY
What this means for your returns.
What are the different factors you should consider before choosing an investment property?
It’s no secret that tourism, is what drives the economy of the Riviera Maya and with good reason, from it’s white sand beaches, turquoise blue waters, reef life, activities, it’s culinary attractiveness (holding it’s ranking in the top 10 cuisines in the world).
* Quintana Roo Airport saw 7,545,761 arrivals in 2017 an 8% increase from 2016
“Risk comes from not knowing what you are doing.”
Warren Buffet
Now that I’ve told you something that you already know, let’s talk about something that you might have a brief introduction, but perhaps not a full understanding of and no wonder, it’s a complicated subject and it’s not easy to break it down into the simplest version.
RENTABILITY:
Rentability, also known as -occupancy rate-, is a market study of the surrounding areas of where you plan to focus your investment, specifically regarding the kind of property you are looking to acquire, there are: single family homes, 3 bedroom penthouses, 2 bedroom condos, 1 bedroom, studios and all different tears of properties that are cataloged by size, rooms and amenities offered.
4 important things:
Size: Determines your price p/ sq meter.
Rooms: Determines your targeted demographic.
Amenities: In a touristic destination amenities can make the difference between your unit being chosen or another one.
Price: Buying at the right price will determine your return percentage.
How to ensure good rentability (a high occupancy rate):
Location:
In order to ensure good rentability, you must choose a location that is accessible and is close to popular points of interest.Market Demand:
It always helps if previous to beginning your search, a small market study is made, this will help to identify the kind of demographic arriving to the area you are interested in, and will ensure that you acquire the right property within that market.Example: A single family home would rent out more long term in a suburban developed town, in a touristic developing destination it would be beneficial to acquire a hotel like condo, due to the fact you are targeting a tourist demographic.
Average Daily Rate:
Once you have concluded your market study and have decided what would be the best type of property due to the current demand, other than the fantastic numbers developers, brokers are throwing at you. Take some time and do your own research, visit a couple of the already well known sites: Airbnb, Trivago, Expedia, etc. Filter through the properties in the area you are interested in and go through the rates in high and low season.This will allow you to know what to expect your unit will be rented for and will help you determine your annual estimated income.
*Not to mention if your expected ADR is within what the current demographic is willing to pay.
When you put all these together and define what you’re looking for, there are 3 more things that you have to put into consideration:
Amenities, property management & marketing.
In a tourism based destination Amenities and property management (services offered and standard of them), play a huge roll, more than developments are willing to admit.Most developments have caught on to the amenity side of things creating entertaining and captivating amenities.
- · Pool
- · Gym
- · Wi - fi friendly
- · Lobby & concierge
- · Bar
Property management entails in broad strokes, the up keep of the building, management of services offered, cleaning, shuttle services, etc.
Marketing:
You can have the best property in the world, that checks all the previous requirements, but if you or your property management doesn’t have a solid marketing platform, more than likely it will, either not meet your return expectations or the company will go bankrupt.Make sure that the property management company is experienced in digital marketing. At the very least they should be taking advantage of most of the existing rental platforms, Airbnb, Trivago, Expedia, Tripadvisor, etc.
This will allow your property to be rented out more and thus increasing and meeting your rental returns expectations. A lot of people choose to manage their own properties, which is all well and good, they try not to pay the average of 25 - 30% of rental income property management companies charge in the area.
If, you have experience in property management it might work out, I say “might” because even being the best you would be competing with companies that have a full dedicated team 24/7 to property management and you might make the same amount you would with the property management company, or maybe less, but is it really worth the headache? Remember property management in a tourism destination is far from simple.
So, remember all these things and you will be able to choose a property that will yield your expected rental returns.
Do your research, get help, consult with a licensed agent that will not only show you but, allow you to conduct your own research and you will be able to meet your investment expectations.
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Ryan Gravel
Ryan Gravel is an American real estate broker and developer. He began his career at a young
age working for his family owned construction company.
After graduating college at the University of Central Florida with a degree in business,
Ryan set out to find untapped prolific markets around the world. His search landed him in
Playa del Carmen, Mexico where he founded Virgin Realty Mexico and co-founded the Saatal
Development Group one of the fastest growing development companies in the Riviera Maya.
With extensive market knowledge, professionalism, etiquette, innovation and integrity Ryan
is known as one of the most highly respected real estate advisors in the region.
