Calculating the profitability of a rental is absolutely necessary to determine the quality of your real estate investment. For this, we advise you to use tools to obtain an initial estimate. But to refine it, it is essential to speak to real experts in the field. Thus, your potential rental income will be determined with the greatest precision.
How to determine the good rental profitability?
It is an indicator of success when you make a real estate investment. More simply, the ratio in relation to the purchase price and housing costs, while integrating your rental income. When we talk about the net rental return, it is the profit after the deduction of taxes and charges. You take into account the gross return on your income and you remove all the charges specific to the rental of the accommodation. Also, don't forget to incorporate property income.
In France, the profitability for a rental is 5.9%. A national average and of course gross. Nevertheless, there are many disparities according to the agglomerations. For example, the average return on real estate in the provinces is around 7%. In Paris, the average return on a rental investment is 3.9%. This observation can be explained by the higher prices in the capital.
Gross profitability is determined by the following calculation: (annual rent received X 100) / acquisition price of the property.
The net rental return uses the previous calculation, but management fees, non-recoverable charges and property tax will have to be deducted. Therefore, the average profitability in real estate is always expressed as a percentage.
What are the advantages of long-term rental?
Long-term seasonal rental will allow you to have the same tenant for several months and in some cases several years. As a result, management is less time-consuming, because you have far fewer entries and exits to manage. This is the main advantage of this rental, because you do not need to mobilize your energy to hand over the keys, carry out an inventory and take the time necessary to study the applications.
In addition, the risk of unpaid rent remains relatively low, because you have previously carried out all the checks on the solvency of the tenant. Therefore, the average rental profitability is there, even if the zero risk does not exist. To protect yourself against this kind of situation, do not hesitate to set up a deposit and ask for several guarantors. Otherwise, do not forget to take out unpaid rent insurance.
Long-term rental also has an advantage in terms of maintenance. Generally, this is the tenant's main residence and the tenant will take great care of it. So, there is no need to include maintenance or cleaning costs, unless you suffer damage. But once again, these various inconveniences can be covered by the owner's insurance.
The advantages are real, but its main flaw lies in profitability. Especially in comparison with seasonal rental and short-term rental. But for people wishing to make a prudent real estate investment, it is a good way to secure income by attracting solvent tenants.
What are the advantages of short-term rental?
The alternative to long-term rental is to invest in seasonal rental. In this context, you prefer shorter periods, from one night to several weeks. Mostly, you attract tenants for tourism reasons. So, passing customers who will not consider your accommodation as a main residence.
The advantage remains directly palpable from a financial point of view by collecting higher rents. An idyllic location with a view to rapid profitability. Generally, the pricing charged for one night remains higher than for a long-term rental. So tenants pay more by integrating the sums of money into their vacation budget.
The risk of non-payment is non-existent, if you choose the right strategy. That is to say, through a platform specializing in seasonal rentals such as Airbnb. Payment is made in advance and it is a way of ensuring the solvency of the tenant.
In addition, seasonal rental remains possible with your main residence. Let's imagine that you are going on vacation for some time, you could use this time to rent out your current property. The same goes for your second home, because you only use it a few weeks a year. Rather than leaving your property abandoned, you take the opportunity to rent it out and thus obtain additional income.
Although seasonal rental has many advantages, it is still necessary to take its disadvantages into consideration. First, careful management is needed to manage tenant turnover. A presence nearby remains necessary to ensure the cleaning, to hand over the keys, the inventory and the reception of travelers. Do not forget the communication phase, which is absolutely essential to satisfy your tenants.
If you are not near your seasonal rental, we recommend that you delegate its management to a specialized agency. More precisely to a concierge who will integrate its know-how so that you can obtain the best possible profitability. In addition, seasonal rental implies strict compliance with the regulations in force.
How to obtain the best profitability with a seasonal rental?
To achieve the best profitability of your short-term rental property, it is necessary to integrate several factors. In particular its geographical location and its overall attractiveness. It's very rare to get 100% occupancy, but you can optimize it based on market supply and demand.
However, very specific skills are necessary in the management of a property. It is therefore in your best interest to rely on a concierge who will guarantee you rental income, without the slightest intervention on your part.
Why trust UpperKey?
With UpperKey, you receive a monthly rental income with a rate much higher than that found on the market. You have no interaction with the tenants, because the agency takes care of everything. First, you could use the online tool to determine your rent. This is an interesting first estimate which will of course be refined by the watchful eye of our experts.
Indeed, the determination of rental income is made with the location of the property, the size of it, the number of bedrooms, bathrooms, if you have made special arrangements as well as renovation works.
Our goal is to generate additional income with a profitable real estate investment. It is perfectly possible to achieve your goals, whether in a French city or in Europe. But do not forget to be accompanied by a concierge like UpperKey to have a tailor-made service. All administrative and technical questions will be handled with the utmost rigour. In addition, it is an essential solution when you do not have time to manage your rental or when you are not on site.