If you are one of the many millions of investors who have purchased a holiday rental property over the last few years, you may well be wondering how best to maximise the return on your investment in respect of its rental income potential. No matter whether you own a holiday villa in Spain or Florida, an apartment in Tenerife or Lanzarote, a country cottage in Scotland, England, Ireland or Wales, a gite in France or a holiday home in Cyprus, Turkey, Bulgaria or Croatia, there are some simple key principles which you need to follow to ensure that your dream investment starts to pay its way.
In addition to buying your holiday home for its likley future capital appreciation, I suspect that you are also very keen to generate income from your investment by means of letting our the property for a few weeks or even months each year.
To compete in what is a very crowded marketplace, you need to think and plan carefully as to how best to promote your property in such a way that you generate enough booking enquiries which will ultimately lead to rental income.
So here are some tips and ideas which I think you will find useful in ensuring that your property achieves and even surpasses your expectations in terms of generating rental income.
1.Know Your Break Even Point!
How much income do you need your property to generate each year to cover any mortgage, maintenance costs and local authority charges and taxes- not forgetting of course, the monies you may have to spend on advertising and promoting your investment property? Once you know the answer to this question, it will allow you to calculate how many weeks rental you need to obtain to cover all your costs. Knowing this may also allow you to be more flexible when it comes to setting the weekly rental price of your property. This is especially useful in a competitive market or during times when, quite simply, there are fewer people looking to rent holiday homes.
2. Set An Advertising Budget (And stick to it!)
Clearly it would be disappointing to find that despite your best efforts, you have actually spent so much money in promotional and advertising costs, that it has wiped out any potential profit from your total rental income. In the world of business, many companies would tend to set a marketing budget of anywhere between 5% & 10% of their total annual turnover. This would seem to make sense, and if you see your investment or holiday rental property as a business- which I suggest you should-then you can use this 5-10% figure as good guideline in helping you to set a sensible advertising budget.
3 Know Which Methods Are Working (Keep Records)
A marketing director of a well-known company was once alleged to have said that he believed about 50% of his marketing budget produced profitable returns. The problem was, he didn't know which 50%! This may sound funny, but alas, it is an easy trap to fall into and its cause is largely down to not keeping records or tracking exactly where each new business enquiry comes from.
This problem is so widespread amongst all businesses that it goes to explain somewhat, why many companies have now started to ask their potential and actual customers that most valuable of $64,000 questions- "Where did you learn about us?", or "Where did you find us?".
Some sage business guru once said "Turnover is vanity, but profit is sanity!". In other words your campaigns must be cost effective and generate more in ultimate rental income than the cost of the promotional activity itself. Some campaigns may well bring in rental enquiries and even some actual bookings but at what cost?
4. Understanding Your Cost Per Enquiry.
One of the key benefits of keeping records and tracking and monitoring the sources your enquiries is that it will allow you to see which campaigns are the most cost effective and the most profitable. This will allow to ditch those methods which have a very low return on your investment, conversely it will also allow you to focus more on those methods and areas where the majority of your enquiries and bookings are coming from.
5.Use The Pareto Principle (The 80/20 Rule!)
In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr.Joseph M.Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is sometimes called, can be a very effective tool to help you manage effectively.
Despite all of your various efforts at promoting your property, you will probably be amazed to calculate that most of your booking enquiries will come from one or two sources- this is what we mean by the 80/20 rule. Providing you are not like our unnamed hapless marketing manager referred to in point 3, then you should be able to use this valuable information to really focus on those activities which achieve the most profitable results.
Summary
So there you have it! Some tips and examples as to how you can leverage the rental income producing ability of your holiday home, whether it be a villa, townhouse, cottage, ski chalet or apartment.
In future articles I will be covering the issues of where best to advertise your property and how to ensure you are promoting your property in the most advantageous and effective way.
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Paul Mitchell is a founding Director of the holiday property rental website: http://www.letsbookaholiday.com . His site offers holiday property owners from all around the world a well established and cost effective web based advertising portal to help generate more rental income by means of increased rental enquiries and bookings.
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
