Ever watched “Place in the Sun” or flicked through a property magazine in a Dentist's Waiting room and found the allure of owning a second home almost irresistible? Seems a great way of using some of that spare cash you have and putting it to good use, not doing much in the bank after all. And the promised cherry on the cake is letting the property out when you are not using it for your own short breaks. The fag-packet calculation reveals that you could buy the property and rent it to guests who will essentially pay for the mortgage [if you take one] and all the running costs. Hey presto, a free holiday house. You pat yourself on the back for being so clever, go into the Dentist's chair and think on it some more. One reflection, it seems too good to be true. Why doesn't everyone get up to this wheeze? Let's take a look at the fag packet in more detail, using the usual boring metrics our regulars will be used to.

Location

As usual, the daddy when it comes to criteria in evaluating the viability of a purchase of any property, in this case a second home purchase. But rather than using the usual tools to determine demand from long-term tenants, we are looking for the short term market [let's agree that to be 3 months or less]. Different ways of tackling this one. Here's some ideas, all internet based so you can keep your buttocks firmly where they are right now:

• Research a number of travel sites to determine where people are going for short breaks.

- This will give some ideas mainly about the leisure market.

 

• Look at fast growing regions where the employment base could be very transient [and therefore unwilling to go for long-term accommodation].

- This could include sectors such as off-shore energy [short stays onshore], near film studios where only temporary accommodation is sought or more typical seasonally-based activity.

 

• Try and find areas where business people come and go a lot.

- These could be near convention centres, universities or research areas and just an area undergoing a lot of development.

The internet really can save so much time in research. When I was researching the viability of a UK short term property, I found the Travelodge website very useful for example. Travelodge operate all over the UK, and have small hotels which service short stays for the range of clients. What was very useful was to see which Travelodge's were the cheapest [check out Grantham or Dundee, for example] and where the dearest were [London, Edinburgh, Aberdeen rank high]. In fact, the Travelodge in Aberdeen really stood out. Due to the oil industry, and a thriving economy, rooms were fully booked right out to 3 months, and then the maximum £70 per night for the rest of the year. Dundee, only 60 miles south, had rooms available year-round for £19 or so. This really was a good first indicator of the viability of short term accommodation. Closer investgation on the ground showed that Aberdeen didn't have enough beds in the city, but property prices were on a par with nearby Dundee. Short term accommodation really took off in the city a few years ago, local property owners eventually catching on.

And really that what this section is all about. Any fool can tell you that the capital cities such as London, Paris and Berlin have a lot of demand for short-term accommodation. But how much do you have to pay for the property in the first place? This is clearly key. Property in London or Paris is often around 5.000 – 10.000 Euro per sqm. In Berlin, central property can be had for 1.000 Eur – 2.000 Eur per sqm. That's a bit different! And whilst long term rents usually have some correlation to the price of a property [the rental yield], the price paid by a short-termer is often more closely related to the price of hotels in the city. Now that is interesting....

Finally, a bit of competitor analysis in the market could be useful. Is there someone else in the area you are looking at doing just what you want to do? Perhaps they will chat things over with you. If not, their availability calendar on the website [check it for a few weeks] will show demand fairly well.

Property Type

There will be different property types in different location and markets in which you are researching that will be the “golden ones”. In a holiday resort, proximity to beach and such amenities are often crucial to avoid long void periods. In a city servicing tourism [like Berlin or London], proximity to tourist attractions and transport will be valued by clients. Whilst long-term tenants may be more particular over which floor the apartment is on [ground floor being a no-no perhaps] or does it face south, short termers will pay less regard usually. For city lets, can the property be configured to allow a maximum number of guests for the given space. For example, does the property have a large lounge that could accommodate a bed-settee for example and push the potential occupancy up by 2? Clearly a lot of your research into location will feed in to this part of your work.

One tip I will share on location is perhaps most pertinent to short term lets for business people, but could apply anywhere really. The point is that your competition a lot of the time will be purpose built accommodation for short termers such as hotels or apartment-suites. These often come with additional benefits to travellers such as meeting rooms, dining and leisure facilities such as Gym and swimming pool. But here's a good one. Why not ensure your short term apartment or house is located right near one of the great hotels in the area. You can often negotiate some level of collaboration between you and the hotel, where the guests use the hotel facilities as part of your cost, or as an additional package. If you negotiate well with the hotel, you may even be able to piggy-back off their reception and have keys collected and deposited there. You can then give the added perceived value of staying in a hotel to your guests [and market this] whilst having the space and convenience of an apartments. A real win for all.

Maintenance and Running

The property will of course take more of a pounding from short-termers. That's just a fact. You will also have to provide everything within the apartment or house, as appropriate to the market. This will often mean towels, toiletries, IT and internet etc etc. Lots of overheads you don't get with long-termers, but of course you will make some use of all these lovely facilities when you stay at the property.

In terms of running of the property, the level of client expectation [usually related to what they are paying!] needs to be considered. Obviously, you are going to present the property spotlessly clean and having a good cleaning team on board that will work when you are not in town. But how are your guests going to access the property, especially out of hours. Will a key box suffice outside the property, or should clients be met? Things to consider. How will the clients expect to pay? Do you offer credit card payment [expensive] or are your guests happy paying cash, or better in advance by PayPal?

And what about marketing? Of course the internet will be the most useful way for you to start, before you build a word-of-mouth following. Research will tell you if the market is competitive enough to need to market through portals [such as Expedia] or you are in a niche location that you can service well from your own internet site, perhaps with links from local service providers such as exhibition halls and the like. For example - I run a simple site for accommodation in Leipzig, great for my apartments in Leipzig for rent. A whole article is needed on the marketing of the property really, but suffice to say it is here that the investment, if bought in the right location, will live or die.

Case Studies

To be honest, I usually meet people that have leapt very quickly from the 'Dentist Waiting room' stage to the 'Buy a property out of a glossy brochure stage' very quickly. Indeed, many perhaps would confess to making the decision right there and then. They knew it was a great idea! Well, usually, these stories end in a sorry end somewhere along the line. The property doesn't meet up to the glossy brochure in some way [or never gets built!], the location is not where clients want to spend a short break or have needs for business. Perhaps there are a lot of potential clients in town, but there are far more properties than clients. Check out the US city of Orlando for this effect. Other horror stories are usually about the “rip off levels of maintenance charges etc” [which they clearly did not check before, of course..] or tenants from hell, making off with the plasma television and Nespresso machine. So, there is usually more to this than most people think. [Further case studies on Aberdeen, Berlin, Orlando & Leipzig are available - contact me and I'll be happy to show you}