How to Buy and Manage Holiday Rentals


   
Ilan Morris originally hails from London, and has lived in Prague since 2004, where he owns and runs two holiday rental apartments. He also teaches business English part time, but holiday rentals are his passion.  He currently owns four bedroom and one bedroom holiday apartment in the city centre of Prague, and plans to buy a two bedroom apartment for the same purpose in the near future. The four bedroom apartment generates 25% return on investment a year; the one bed generates 14%. His apartments are booked for 80% of the year.

As well as turn his holiday rentals venture into a full time business, he also plans to start up a property management company, and advise property investors interested in holiday rentals. He talked to us about what to look for when in a buy to let property for the holiday rentals market, how to get fully booked and the importance of a woman’s touch.


 
   




 


Q: You’re different to many other owners because you look for properties to buy, renovate and rent as a holiday lets, and aim to turn this into your primary business. What made you decide to go into this line of work and how did you get started?


It’s kind of a long story, I came here six years ago, and I was only going to stay a year. I started teaching English and didn’t have any long term plans at first, I was only passing through. At that time I met a lawyer who I was teaching English as a bit of part time work. At that time Prague was a good place to invest, the pound was much stronger to the Czech crown (koruna). Obviously things were booming in the UK and prices of property at the time were at their peak, I think the average price was £250,000. Whereas here you could pick up something very central for about £150,000. There were a lot of people from the UK and Ireland investing here, this was from about 2003, 2004. Everything has changed now. The Czech crown is now much stronger, by 30%, so it’s not so easy for foreigners to invest here now. Then it was very different. To cut a long story short it was then I decided to make an investment here. The lawyer and I set up a company. We borrowed some money from the UK, and I got my first flat here five years ago, which I was initially renting to students. These were always flat shares. I had one big flat, and we decided to get another. Two years ago we decided to go for the short term rental market and now that’s what we do with the two apartments.

 

Q: What made you decide to choose the short term market over the long term rental market?


The student rental market was paying the mortgage but it wasn’t making any profit. I was still relying on teaching work, and I thought, well, let’s make some more money from it. Tourism was becoming big news in Prague, and I realised holiday rentals made far higher yields. I could charge a lot more for a short term letting, then I could renting under a one year lease.

I started to do some research into tourism, to get an idea of how much I was going to charge, where I was going to advertise. At first I looked at agencies and felt I was coming up a brick wall. They would say, “Well you can put the apartment on the website, but that’s about it. And we’ll charge 30% commission on every booking you make.” This didn’t really seem very attractive! When I discovered HomeAway.co.uk it opened up the door for me, because I realised you don’t have to use an agency, and you can go directly to the source. It’s not very expensive to be published on the site for a year; you can cover those costs in one booking. So for me this was a far better option, because I wanted to get involved first hand and run it as a business.

 

Q: What were the difficulties of buying property abroad? What are the dos and don’ts? Are there any pitfalls to watch out for?


My situation is probably very different to a lot of other people. I was here and I was trying to make an investment, I wasn’t thinking about having a place as a holiday home. I was thinking more in terms of business. Living here made it a lot easier, so I did have an advantage. It would be more difficult if you lived in the UK and you were buying property abroad. The thing that worked for me was the market research; I went to see as many flats as possible. I really wanted to learn about prices. What was overpriced, what was under priced? Even if you don’t live in the country you want to buy, it really is just a case of time, research and legwork. Really try to see as many properties as possible. Go over and really try to research the market. If you see as many apartments as possible you can build up a picture of what you can get for your money.

I would also recommend a good lawyer. That’s really important. I had a personal contact with my lawyer and we became friends. I trusted him and that gave me an advantage. So I would recommend to someone trying to buy abroad to get a recommendation from someone who has bought in that area. The lawyer has to know what they’re doing; they have to do a really good job. And you have to be sure you’re in good hands. I was, so that gave me a lot of confidence to really go out there and get the best deal.

 

Q: What advice would you give someone looking to buy a property that they wanted to rent out as a holiday letting?


It really depends if you’re doing it for business or as a holiday home. The two should combine as much as possible; ideally you should be able to find a great place to stay, that you should also be able to make some money off. I can only speak from the perspective of doing it for business.

If you are trying to buy to let, my biggest tip would be that all the information you need is on the HomeAway.co.uk site. There you have availability calendars, you have prices, you have location information, and you have pictures. You can use Holiday-Rentals.co.uk to look at properties in the area you want to buy. This will give you a lot of information about how well they are doing as a lettings business. You can look at the availability calendars and see what’s fully booked; you can look at prices to see how much they rent for. If nobody’s booked in that location then you might want to think twice, if certain holiday homes are booked and not others than try to figure out why. As a tool for trying to buy property abroad, I think HomeAway.co.uk is great really because it gives you that information that you wouldn’t have before, so you’re not going to anything blind. I don’t know whether or not there are many other businesses where you’d have such unimpeded access to the results of your competitors. This is really invaluable help in terms of deciding what sort of area to buy in, and what sort of property to choose. And chances are, if a certain location is performing well, then it’ll probably be a nice place for you to spend your holidays as well.

 

Q: When you are considering buying a property, how do you estimate how much it would rent for?


The great thing about HomeAway.co.uk is you can see the price similar properties rent for in your area. You can also see the availability calendars, so you can see if the property is getting enough bookings.  I was able to go onto that website and get a clear idea of how much money it was possible to make from short term rentals.

For example if you want to buy a one bedroom apartment, look for one bedroom apartments in your area and see what they’re charging. Follow their progress over a year and get an idea of what you could earn. Our decision to buy a one bedroom apartment was inspired by a woman on the site who was fully booked. We always thought one bedrooms wouldn’t do that well, they’re competing with hotels, but I just noticed that she was always fully booked. So we worked out approximately how much money she was making every month from what we could see. We worked out how much we would have to charge, and how many weeks we’d have to rent before we could cover our expenses and make a profit. We focused on what she was offering and tried to find a way of coming onto the market with something better, again it’s that whole idea of differentiating yourself, and using the information that is on that site to come up with something that will sell. What you’re essentially trying to do is get your competitor’s business.

 

Q: You have a four bedroom and a one bedroom apartment. How important would you say the number of bedrooms is when choosing a property?


When you buy to let it is always very important to consider the needs of your customers. The number of bedrooms is very important in terms the type of market you are selling to. For example our four bedroom flat can accommodate more people. It gives us an edge, because we can be very flexible. It’s very good for families. You have to remember holiday rentals are very in demand for family groups. Hotels can’t offer accommodation for families.  We have a lot of people coming over as families, fours, fives, sixes, sometimes two families together. If you think about how much it would cost to rent a hotel room for all of them, compared to a holiday apartment, then it’s incomparable. A holiday rental gives family groups their own living space. They can cook, or sit down at the dining room table in the evening. Hotels simply can’t offer this communal experience. I think a lot of owners could do more to accommodate family groups at an affordable price. Many of them are missing a huge gap in the market.

A four bedroom also gives us the flexibility to cover other types of group holidays: from groups of four, right up to groups of ten. If four couples or four single guys come over they can all have their own bedroom, which they like. There’s a lot of room for flexibility, and also there’s a separate living room, there’s a separate dining room, a separate kitchen, the layout is really crucial. If you buy a larger holiday rental apartment just really think “how many people can I comfortably accommodate here?” because once you can accommodate, eight, or up to nine or ten, then you really do have a very broad reach over the kinds of clients you can attract, and families as I said are really strong. So the bedrooms are really important, especially if you want to go for families, which is definitely worth thinking about.

Our one bedroom apartment accommodates two people, which fits our market in Prague, because a lot of couples come over on a city break. Some owners are put off renting out a one bedroom apartment because then you’re competing with hotel rooms. But many couples prefer holiday rentals to hotels. They like the individuality, the value for money. We offer a one bedroom apartment for 79 Euros a night that would be the price of the Jury’s Inn which is only a bedroom. We also offer a living room, kitchen and balcony. There’s obviously a demand for the smaller apartments too.
 
 

Q: You really do understand your customers, and what they want from a holiday apartment.


That comes from the first hand experience which is also very useful. I meet and greet the guests, so I find out who they are and what their demands are. If you live far away, and get someone else to manage the property for you, you should visit your property a few times a year to build up a picture of the sort of customer you are selling to.

 

Q: Following on from that, are there any special features that you think a holiday property should have to beat the competition in a city break destination?


There are a lot of desirable Unique Selling Points. If you can get a nice view, maybe the river or a view of the castle or anything like that, that’s important. Anything like a balcony makes your property very attractive. As I said before, the number of bedrooms and the layout is very important too. But again it’s down to what the competition is offering and what’s selling. You’re going to have to do something that separates you from the competition, think about how you can come onto the market with something different. Use Holiday-Rentals.co.uk to see what your competitors are offering, and think about what you can offer that’s better.

If it’s not about the number of bedrooms or the view think about what you can do internally to make it different from the others. A lot of holiday rental properties have a very mediocre interior. Try and differentiate yours in terms of having more interesting décor. We bought antique furniture because it makes our customers feel we’re something different from the rest. Especially now you have to be really competitive, you have to make the effort to get an apartment that’s fully booked. There are many that come onto the site that don’t really make an impact, I think that’s because they don’t offer anything that’s particularly different from the rest. I think in 2006 – 2007 it was possible to come onto that site with something fairly mediocre, offering nothing particularly different from what everyone else is offering and you could still get business, but I think now it is more competitive.
 


Q: Well I’d agree with you, your property does look fantastic, and it definitely does stand out from all the rest.


It’s my girlfriend’s work. That’s her department. If you’re not very good at that sort of thing it’s definitely worth hiring a decorator. I think in these times it’s very important to differentiate yourself in any kind of business. Some of the properties you see advertised on line look like IKEA showrooms. If a traveller sees something where someone has obviously put a bit more time and thought (and money in some cases if you don’t have a girlfriend to do it for you) into it, then that makes a big difference.
 


Q: You and the other owners may be interested to know that it is that it’s usually the woman, in a family or couple who researches and books the holiday. So I think something like nice decoration does make a difference.


Absolutely I agree, I think it’s a really important to remember that most of the decision making does come through the women! Generally the man is just quite happy to sit back, agree with everything, and have her organise it. So it probably is better to have a woman’s influence seeing as you are trying to appeal to their taste more than you are to the man's. I don’t know many men who plan a city break and say, “I booked this apartment guys because the décor was really nice.” It’s definitely important to have someone in there with an eye for that kind of thing. It’s also important you continue to maintain your property and keep standards high. You should continue to invest in your property, so it stays ahead of the game year in year out. If you let yourself get sloppy a new competitor could take your business from you.
 



Q: Following on from that, you bought both of these apartments and renovated them. Can you tell us more about the renovation process? What are the dos and don’ts of renovating properties for the holiday rentals market? Any pitfalls to watch out for?


Again I have an advantage because I’m here. There are probably people who have their holiday apartment as a holiday home, they want to make some extra money from it, and they’re not that concerned with competing seriously. Other people have very busy jobs, this isn’t their main source of income, and it’s not a huge priority for them. Living here gave me an advantage.

There was a hefty amount of renovation involved in the four bedroom flat. Having rented to students for three years it was in an awful state. We redid the whole place, put in a new bathroom, and a new kitchen. The second place was more cosmetic. We like original features, so were lucky that a lot of those were already in the structure.

We were also very aware that we were renovating for the holiday rental market, so you should always bear in mind that it’s all about the pictures that you have on your holiday home advert. Your property photographs are one of the major factors that will sell your holiday rental, and get travellers to enquire. It’s all about differentiating yourself from the competition, the style of the decoration, the colours that you use. When you renovate it you should be trying to think about how photogenic you can make the apartment.

You should definitely have 12 photos, and every single photo should count. Each photo should show a different aspect of the apartment, don’t repeat yourself by having three or four photos that show the same kind of thing. If you’re looking to buy a place think “How many really great photos can I get from this apartment?” If it’s only four or five then it’s really not that good. You need twelve photos to really sell it, even if it’s only a one bedroom apartment; I don’t understand people who will only put up the minimal number of photographs.

Your photos are your chance to really sell your holiday rentals business. Spend a lot of time on them. It would be worth while getting a professional photographer, or just use your imagination, be creative in terms of photographing the apartment. Again look at the other apartments on the website, see the quality of the photos and see if you can up it a notch. When I was going onto that website 2 or 3 years ago, I saw what apartments were selling, but I didn’t like many of the photos, they were boring, they weren’t inviting. We thought that was a gap in the market we could fill by coming onto the website with a property where the presentation was that little bit better than the rest.

Saying all that you should never distort from reality, the ideal situation would be you make the apartment look as attractive as possible and people should expect something really nice, but when they arrive it’s even better. It’s about finding a balance. You should never misrepresent your holiday let, because your guests will be disappointed when they arrive, that kind of feeling doesn’t leave. But if they arrive and it’s even better than they expected then they’re always very happy.

Please note: Since we spoke to Ilan (August 2010), the number of free photos included with a standard advert has risen from 4 to 24.
 


Q: I’m looking at your HomeAway.co.uk advert and you have a whopping 68 reviews on there. Your guests have given you top marks. One thing they talk about is the high level of personal service they received from you as an owner. What do you do to ensure your guests have an exceptional stay?


I think it’s important that the apartment is very well maintained; when people arrive it should look new. It shouldn’t look like it’s been lived in, which is obviously quite difficult it you’ve just had ten guests leaving the day before. So you’ve really got to keep on top of maintaining the apartment. You should have numbers of cleaning and maintenance people you can access straight away, so if there’s a problem they can solve it very quickly. Everything should work efficiently, everything you’ve offered on the site is there and available for the guests. It should have a very clean and polished look about it. You are competing with the hotel industry as an alternative type of accommodation. Most reasonable hotels can invest in a cleaning service. You’ve got to have equally high standards of cleanliness and upkeep. That’s dependent on having good cleaners, and being there to manage the quality control and make sure that everything is presented the way it should be, with an emphasis on attention to detail.

It’s also important to provide people with a little bit more than they expect, and it’s up to the owner to decide how they are going to do that. Try and use your imagination and find ways that small details can make a big difference. If you succeed I guarantee your guests will leave satisfied. Offer some extras, pick up from the airport is very handy, I think most people are offering that now. Make sure you have a good reliable taxi service for that. During the stay let the guests know that you’re at hand, make them feel you care about the quality of their stay. Exchange phone numbers they can contact you in case of emergency. I’d even say phone them before they leave their homes, and make sure they know your phone number because they might not be able to pick up a signal once they reach their destination, so you might not be able to reach them once they arrive. If there’s a disaster and they can’t get hold of you, you don’t want your guests having to sleep rough! These are definitely some of the pitfalls that you need to be on top of in order to avoid much bigger mistakes. It’s logical to make sure they can contact you at all times.
 


Q: What are the most important points to remember when dealing with your guests, from the moment of initial enquiry to the point of their departure?


When you receive enquiry things have to go smoothly and they have to go fast. You have to respond to enquiries quickly. Of course I’m doing this as a slightly different level of intensity to someone who simply runs a holiday home because it’s their business. People with other jobs aren’t going to be able to respond as quickly.

If you’re serious about it you should try and respond quickly and efficiently. You should have a really solid booking system. We’ve got quite a professional one. My girlfriend works in the hotel industry, and she was able to set one up for me which was fool proof. This efficient system to accept bookings is really important; it gathers the information about the guests so I have it at hand. Small details like what time they’re arriving, how they want the beds prepared, how many people. And this can help you avoid embarrassing mistakes like not having enough towels, or you’re expecting six people and eight arrive. There is a lot of potential for mistakes, so you have a fairly professional system so you can gather the information and keep it on record.

You should always respect the fact that people are on holiday, they’ve paid a lot of money, and only have two or three weeks out of the year to enjoy them selves. You’re responsible for them. People of course will be very upset if you impose undue stress on them during their holiday period. If you get one bad review then it can be very damaging. The reviews are obviously really important, but it does also make you vulnerable.
 


Q: Do you think having the apartments run by a self managing owner makes a difference to why your guests pick your property over holiday accommodation run by a property management company, agency, or a hotel?


I think the success of HomeAway.co.uk is a testament to the fact that people do appreciate that it works. They want to get directly to the source for the very simple fact that it’s cheaper, it’s like anything when you cut out the middle man. That’s what HomeAway.co.uk is doing, it’s cutting out the middle man, its making it potentially more profitable for the owner, and cheaper for the guest. Whenever you do that obviously there’s going to be a demand for it, everyone wants to get a flat for a better price.

As well people obviously appreciate the fact that they’re getting a more personal kind of service. I think a lot of people like holiday rentals because it’s more individual, they’re getting an experience which is not mass produced, like you would in a hotel. Even if you go through an agency things feel more mass produced and there isn’t the personal care and attention that you’d get directly through a private owner. If you can do that people notice the attention to detail. I think HomeAway.co.uk definitely taps into that need. As a holiday home owner you have the opportunity to offer people something slightly different, something more individual, especially if you play on the character and style of the property.

Of course it wouldn’t be possible for me to manage my holiday apartments if it wasn’t for sites like this. I believe in the product and the advantages it gives me as an owner and the guests that are staying in the apartment. If you can do it right you really can have a fully booked apartment for most of the year. Obviously mine’s a city break apartment so it’s a little bit less seasonal. We’re slower in January, February and November, three months where we get about 40% occupancy. But for the rest of the year, right from March through to October, and December is also very popular, but a city break destination you can have that pretty good occupancy. But again, I have an advantage because I’m more hands on, it’s my main business, but I understand that this wouldn’t be relevant to everybody.
 


Q: It’s still very useful to know, there are people who would be trying to get that many bookings as well.


Yes. And for investors Holiday-Rentals.co.uk really is a very interesting source of information because you can make speculations on how much your investment can make. Let’s say you want to invest in a holiday rental apartment, you want to put the time into your apartment, differentiating your flat from the competition, and then you can make a speculation based on the occupancy and availability of the other apartments that are advertised online. You can estimate what sort of yield a competitive apartment can produce in a year. A holiday rental will generate higher yields than a long term rental because you can charge tourists higher rates.

Another advantage for overseas property investors is that you have to maintain the flat. If you buy a flat and let it on a long term lease you can’t really maintain it because you’ve got somebody in there for a whole year. Whereas with a holiday rental apartment, in order to be successful it has to look new, it’s got to have up to date facilities, and so the value of the apartment will go up as you improve it and add to it. There’s definitely no other way that you can make those kinds of yields. Certainly not through long term rentals. So as I said it is potentially interesting for investors.
 


Q: I’m looking at your advert now. Your calendar is practically fully booked for the next six months. Could you tell me about any more marketing initiatives you’ve practised for getting more bookings and enquiries?


I’ve told you about photos, reviews, and market research, which are essential. I also can’t stress how important it is that you have a complete availability calendar. Showing when you are booked on your availability calendar will definitely get you booked for the following year. It’s the same reason that people don’t walk into an empty restaurant. If you have an empty apartment, then people aren’t going to book it, unless it’s really new. If people see you’re fully booked they will start to book it for the following year. We’re already receiving bookings for 2011; we have one in August, a few in June and July. That of course is a great bit of marketing in itself, it makes people think, “Oh, this person’s already getting bookings for 2011, ahead of the other apartments, he’s also got more reviews than any of the other apartments and we like his photos better, so obviously we’re going to book through him.” It’s about getting all the elements correct, and then you’re going to have something that is potentially going to be very a very competitive product.
 


Q: I see you’re clued up about availability calendars. We have a big problem on HomeAway.co.uk that 40% of advertisers Availability Calendars are not up to date.


See a full explanation about how the Availability Calendar works, and why you should always keep it up to date.

You’re shooting yourself in the foot by not updating your availability calendar, doing it once a week moves you to the top of the search results for your location. Everybody who is serious about advertising a holiday home on HomeAway.co.uk tries to come to the top every week. I don’t see why anyone would keep their availability calendar open if they had a booking. I don’t understand the logic of that. The more booked up your apartment is the more it will sell. It is one of the most important tools you can use to market yourself. That’s why of course I’m already starting to put down my bookings for 2011 because once people can see that that property is already starting to fill up, it will encourage them to book now. None of the other apartments have bookings for 2011; it’s just another selling point really. It’s the same mentality why people go to lively cafes really; they don’t go to somewhere where it’s dead.




Q: And finally, what do you think sets your holiday rental apart from the rest?


It’s about competitive differentiation. Differentiating yourself from the competition, by looking at properties that are advertised online and thinking what you can do to set yourself apart from the rest.

 

Copyright HomeAway.co.uk, August 2010