Occupancy levels

[Farol]

This is a question for those of you that actively rent out properties. I'm trying to gauge returns on a potential investment.

What level of occupancy do you achieve on average? (Measured however you like - percentage/days or weeks per year or whatever.) I guess this need to be expressed in relation to the periods you attempt to let as family & friends distorts the figures.

Any other information regarding how you achieve this, for example web site, letting agent, contract with tour operator, buy & lease back, etc would also be a great help.

Any profile that showed seasonal impact would also be interesting.

Regards

Farol

[Ant1969]

July, Aug, Sept fully let. Terrible May & June this year due, I think, to the McGann press / anti aircraft pollution lobby?

Easter & half terms - some interest

Christmas / New Year - poss interest.

Good website to visit is www.laymyhat.com - aimed at overseas property rentals.

Think rental simply covers your costs & you should be thinking about a 10 yr plan for cap. gains.

[Bruce Wallis]

How long is a piece of string???

You need to work out your year round costs including maid/pool man/gardener/ Portuguese Poll Tax/insurance and your Management costs.

Rental is like house buying.....location,location....and Oh yes ....location.

You need a good reliable manager, because not only will they look after your property and your clients, but they will usually do your lettings too....for a percentage.

We let quite well, june/july/aug and sept, and some bits around the edges, but as Ant says, dont expect to make money out of lettings, because that revenue has to cover 12 months costs.
A half decent maid will want an all year round contract,which means 13 months salary, and you'll need to pay her NI in all liklihood.
Poolman and Gardener are self employed, but also want 12 month commitment.

Renting through a tour operator will give you a low end fixed return, but your place will get hammered unless you are with a Top End operator. In my opinion, the worst option.

An outgoing like repainting the outside of your house can cost between 3 and 5,000 Euros. You need to keep the place in good condition if you want to let successfully.
W.e assume free holidays, and an accrueing asset, which should show a good return after 10 years.

Anything else I can help with, feel free to pm me.

[widge]

Hi Farol,

We sold 19 weeks this year which generated c.25000 euro's net of agents and tax. If you ignore running costs (which you can't) then this would represent a 3.7% yield or return on investment.

When you deduct maid, pool man, gardener & water,gas, electricity, rates, insurance not to mention maintenance, repairs and of course the unexpected then the return is zero.

In fact it's worse because had the capital been invested in the bank at 6% or 7 % instead of in your cash guzzling villa you would have made c.44000 euro's interest which of course you haven't (unless you think your villa has appreciated which it probably hasn't).

In summary, this is not a commercial proposition this is a lifestyle choice. We love it and have no regrets at all but we didn't borrow to buy and we have lots of spare time to enjoy our villa off season when it's not in demand by paying guests.

Hope this helps! Good luck.

[e-richard]

Excellent advice and number crunching from all answers above, but actually there may be a different occupancy model for a 2 bedroom apartment from a 3-4 bedroom detached Villa. The apartment will rent out for more weeks per year, but at a somewhat lower rate per week obviously.

Don't forget to also allow for income tax. This is payable in Portugal on pretty much all of your rental income (the allowances do not include all the real costs, like maid, gardener etc but its only another 15% off the net income), and, of course, despite reciprocal tax agreements you also have to declare and pay any difference in your home country as well

Pretty much as Widge says, I think of it this way:
Its much more pleasant spending a few weeks each year in CVO than reading stock performance results

[Scorpion]

and don't forget to budget for the fine if you are caught letting without a Tourist Licence! Always a risk unless you have discovered the magic to get the Camera to issue you with one (and if you have pls let us know).

[MALLYMAL]

I reckon the best way to view it is that any rental income you make is a bonus - in other words something which helps subsidise the everyday costs you knew you would face when you bought the place for your own enjoyment.
We only rented about 10 weeks last year, but every little helps, as the man at Modelo says!

[shanagarry]

There are some great answers here and all well woth taking notice of.

We bought our property 12 years ago and in the early days made some money - but the ancillary costs to market it (apart from all the other costs outlined by others) became a pain.

There is the worry that the 'paying guests' don't look after your little piece of heaven and the costs associated with repairs and the arguments when you deduct it from their deposit - it's more hassle that you need.

We have built up a core of 8 regular customers and that suits us - that way we know we won't have damage or issues to argue about and everybody wins.

Living on the South Coast we can usually get a flight at short notice from one of the 5 airlines that service Faro - and that makes the investment all the more enjoyable.

With our property being offshore in Malta we have been unable to sell it despite many 'false dawns' and have now decided to modernise and enlarge from the ground up with a view to living there permanently. In the 12 years we have owned the property I estimate we have about broken even - the good returns in the early years have subsidised the later years.

I suspect that if we put the effort and investment into marketing we might improve things but we won't.

So now - it has become a lifestyle choice - we are planning on moving to Cvo next year and if we don't have another guest - I don't care - although the bank manager might

[dennisg]

Our 2 bedroomed property at Rocha Brava is let extensively by them from April to October apart from 4 weeks in summer when my children and their families use it. RB also complete our tax returns and arrange for payment of tax from our rentals. It probably helps that our "town house" has extensive sea views.
The rental income pays for us to visit 6 to 8 weeks during the winter including golf, and I haven't had to subsidise from UK funds for some years. We have no interest in visiting during the summer as we enjoy the peace and lack of traffic and people in the winter.

[pato]

Excellent advice and number crunching from all answers above, but actually there may be a different occupancy model for a 2 bedroom apartment from a 3-4 bedroom detached Villa. The apartment will rent out for more weeks per year, but at a somewhat lower rate per week obviously.

Don't forget to also allow for income tax. This is payable in Portugal on pretty much all of your rental income (the allowances do not include all the real costs, like maid, gardener etc but its only another 15% off the net income), and, of course, despite reciprocal tax agreements you also have to declare and pay any difference in your home country as well

Pretty much as Widge says, I think of it this way:
Its much more pleasant spending a few weeks each year in CVO than reading stock performance results

Tax can be paid in the UK as well if you wish, I suppose there's not a lot of difference

[widge]

I think you have to pay the tax in Portugal and also declare it in the UK. If you are domiciled in the UK then you will become liable for any differences in taxation rules arising from your declaration in Portugal e.g capital gains tax. Similarly you will benefit in the event of incurring capital losses which may be used to offset any future gains.