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Getting in on the boom: buildings geared toward short-term rental - La Nación Propiedades
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www.lanacion.com.ar
August 25, 2023
They get on the boom: buildings with apartments created for short-term rentals which leaves a lot more profit
More and more developers are building projects for temporary rental: the advantages of this investment versus a traditional rental
August 24, 2023 By.Silvina Vitale
Developers build for investors looking for opportunities to generate short-term rental income, even down to furnishing and rental management
Buildings designed to rent temporarily from scratch. More and more developers are building projects designed exclusively for short-term rentals, mainly for tourism.
Defining a real estate product from the development itself, allocating it to a particular objective such as temporary rental is very advantageous. Why? “Because from the beginning the goal is to optimize the costs and maintenance that a property with an intensive use of tourists will have. They also think differently from the construction, design, format of the unit, the amenities and infrastructure of the building”, explains Daniel Bryn, owner of Invertire.
This translates, for example, into installing trunks to deposit luggage in the event that tourists need to leave the unit before leaving the country, having a laundry space as an amenity -without the need to have a washing machine in each unit- , install mostly electric ovens and stoves to avoid problems with the use of gas for people who are not so used to its use -in general, tourists are not-, have central hot water so they do not have to deal with repairs later of hot water tanks or individual boilers of each department, among others. A formula that more developers are betting on with one goal: to seduce investors.
Different business models
The developer can acquire different roles : from handing over the apartment without taking care of anything afterwards because it is the buyer who takes care of renting it ; Or you can provide a 100% complete service where you manage the rental, provide the owner with equipment options , take care of the cleaning and the owner doesn't even know who was in his apartment . "For this, the developers usually charge a monthly fee or money that is calculated based on a percentage of the income that the department had of approximately 10%," says Bryn.
"Another alternative is the 'pool'-type exploitation in which the person does not earn for their unit punctually but rather contributes their department to a group of apartments in the building whose total income and expenses are divided based on a previously defined percentage," he clarifies. Bryn.
Equipment is key to achieving constant occupancy and good reviews from tenants on temporary rental platforms.
Regarding rent, the specialist assures that the monthly income for the temporary rental of a two-room property reaches approximately US$650 gross , on average, for apartments that are rented in Buenos Aires, without deducting expenses. But he clarifies that it is important to take into account that, on average, in CABA, a temporary worker is rented 22 of the 30 days of the month, that is, that for 8 days it is empty, so that the occupation of the property is 73% of the month. "Today a two-room apartment temporarily rented yields 7.41% and 3.15% traditionally ," warns the specialist.
A key point is that, in general, the apartments of these projects designed to be temporary are rented more expensive than a unit destined for this same type of rental but in a traditional building . At that point, the founder of Invertire.com assures that it depends on the services that are offered. “If the apartment is new, modern, bright and has amenities that interest the tourist, it is common for this to impact the daily fee that is charged per night. If, on the other hand, the apartment is in an old building with small elevators, without amenities, few services, without a balcony or with a French balcony, this impacts on a lower income per night ”, he explains.
what you need to know
For Christian Leupold, commercial manager of Avilis Real Estate, when building a building for temporary rental , the main thing is defined by the location, the connectivity that the area has, if there are nearby universities and if the commercial, cultural and gastronomic environment of the area is attractive. Regarding the design, he assures that these are projects with homogeneous units and with a limited package of amenities -the most sought after are coworking and SUM- since it is sought that the building has low operation and maintenance costs.
"The model is attractive because of the profitability it offers, which is sustainable in the long term as long as there is a professional team that manages it, generating economies of scale, greater synergy and product visibility," says Leupold. She agrees with Bryn that the profitability is much higher than that of traditional rentals, "it reaches between 6% and 8% per year, practically doubles the average traditional rent," she clarifies. However, the investor, beyond the economic rent, must analyze the options of exiting the business tomorrow.
The greatest demand in apartments for temporary rental is for one-room or two-room apartments
Another key point to analyze when investing in a temporary rental new construction project is to consider whether it is worth waiting for the completion of the building to generate income. This will also depend on whether or not the investor has all the money for the purchase, since the new construction projects offer financing and then can pay in long-term installments knowing that he will obtain temporary rental income in the future. “If the investor has the money and wants to generate income immediately, it may be convenient for them to buy a used one and remodel it or a brand new apartment for the same amount or a little more money and thus generate income in the short term without waiting for the completion of construction,” advises Bryn.
On the other hand, he recommends that, if the person is going to buy a temporary-oriented project, they should demand that they be provided with clear information on how much income they estimate, what vacancy, how the profit of the departments is distributed. That is, how do I know that my apartment is going to be rented as many times as possible and priority will not be given to other apartments in the same building- and also what expenses are included in the service or not.
Ariel Venneri, founding partner of Grupo MAHE, affirms that when one opts for a venture designed, designed and built specifically for temporary rental, there are advantages. "In the near future, it has to allow compliance with the regulations and regulations that will be imposed, the same as in large tourist cities in other parts of the world, trying to discourage temporary rental in residential buildings," clarifies the developer. It is also necessary to have safe and flexible investment schemes to enter the business and consider a professional management and exploitation solution that frees the owner or investor from problems and ensures maximum profitability.
The advice of the experts is to equip kitchens with ovens and electric stoves to avoid the use of gas
from the foundations
In the context of the temporary rental boom and how tempting this alternative is for investors since it leaves them with a much higher income than that of a traditional rental, there are various projects conceived from the ground up for temporary rental . According to the commercial manager of Avilis, one of the most requested areas in the temporary rental modality is Palermo. In fact, it is the neighborhood with the largest number of enterprises of this style. For example, the developer is building a building at Cabrera and Billinghurst, PLUS Cabrera, of which 80 percent of the units that were designed for temporary rental have already been sold and are offered from US$71,000 .
The MÁS Cabrera project in Palermo
Venneri agrees that the most attractive neighborhood for this activity is Palermo, especially the area known as Palermo Soho, Palermo Hollywood or Las Cañitas, with some 5,265 properties in operation and a rate ranging from US$60 to US$80 per night , for quality units. It is followed by Recoleta with some 2,295 properties, Belgrano with some 757 units and San Telmo with an offer of 526 units, with much lower rate values.
The developer MAHE has two projects, the PH Eco Renta San Telmo complex (in Defensa at 1300) with units that are already sold and in operation, while in Palermo (Cabrera at 5100), it proposes an investment fund open for 24 units (one and two rooms) that are under construction with delivery by 2025. In this case, the average investment is about US$80,000, with the possibility of paying in pesos with financing of up to 60 installments.
The departments of MAHE bet on the connection between the interior and the exterior
Wide spaces for those who travel with family with children or group of friends
The developer MCL Estudio advances with the HER, a line of buildings for investment with fixed income in dollars through temporary rental. He has one on Fitz Roy street with a US$3 million investment and apartments from US$92,000 to US$200,000 , and another at El Salvador 6057 with values ranging between US$77,000 and US$200,000 . The units are delivered fully equipped.
HER on Fitz Roy Street
A studio apartment with a balcony in the HER project
When it comes to talking about numbers, how much the investment yields, class A -those who enter before the purchase of the land- obtain a return of 45%; those who enter during the construction process, 25%; and final consumers, 10%. Regarding the yield for temporary rental of the units, class A investors will receive around 12% per year in dollars, during construction investors 8% and final consumers 5%.
The developer Equipo/6C Real Estate is also betting on this model with projects in San Telmo: one of them is Urban Nature, a 15-story building located at 1062 Paseo Colón avenue. The curious thing is that with the purchase of a unit in the construction, the owner accesses a monthly income that is equivalent to the rent of the apartment . "In this way, acquiring a unit at a value of US$60,000 in cash, the owner will charge a monthly rent of US$250 for 36 months from the second month after signing the ticket.. This amount can be received in dollars or in pesos equivalent to the exchange rate of the day. This represents a guaranteed income of 5% per year in dollars," says Fernando Cueto, team partner/6C Real Estate, adding that after 36 months, the owner can decide whether to take possession of the unit or enter a rental pool. temporary rental along with other units and share the profits.
A studio apartment in Urban Nature in San Telmo
Also in Palermo but in Soho, the CEK group advances with a venture designed with this DNA: Haaus Hotel Living. It has three projects underway: tower one, tower two in pre-launch, and another in Armenia and Avenida Córdoba. In these cases, they have a double benefit, on the one hand, the capitalization and surplus value of between 40% and 50% of the value of the square meter, entering the Friends & Family instance, and on the other hand, in the case of joining and be part of the rental pool, a return in dollars, which usually doubles and even triples the traditional rent.
Units can be purchased starting at US$70,000, paid 30% to the ticket and the balance in installments during construction (which can be in pesos adjusted by CAC or in dollars). In the first place, the investor receives a capitalization of between 40% and 50% in dollars during the 24 months of work, entering values that start from US$2,000/m² that when finished are around US$3,000/m² and US$ $3,500/sqft. In addition, in the case of choosing to keep the unit and join the rental pool, it would have a return in dollars that ranges between 10% and 13% in hard currency.
The towers of Haaus Hotel Living
The view from the apartments that include a private terrace
Lastly, Korn Propiedades is in full development of a building designed for temporary rental -but which may eventually have other functions either as a home or office-. It is on Córdoba avenue, between Ravignani and Carranza, it has 34 units of one and two rooms. The value per square meter starts at US$2,200 and well at US$1,900
The division of environments with iron and glass is the latest in decoration
what you need to know
To define what to buy, Bryn, raises key differences with the traditional rental.
Contract duration : the traditional rental is long-term, with a minimum duration of three years in Argentina according to current law and the temporary rental is for short periods, which can range from one night or a few days to a maximum of six months.
Profitability : in the traditional way, the rental price is established in pesos according to the market value and is updated -according to the current rental law- once a year. On the other hand, in the temporary rental the price varies according to the season, the demand and is in dollars.
Management of the rental : the temporary requires a more intensive management since guests must be attended to, coordinate cleaning and maintenance, and be available to attend to any need of the tenant.
Location and rooms : today in Buenos Aires the preferred properties for temporary rental are two rooms (62%), studio apartments (16%) and three rooms (17%); located in the center and north of the City, in neighborhoods such as Palermo, Recoleta, Barrio Norte, Belgrano, Retiro, San Nicolás and Monserrat, which are the most in demand.
Profitability : Today a two-room apartment rented temporarily yields 7.41% and traditionally 3.15%.
Equipment : in the temporary rental, the apartment must be fully equipped -like a hotel room, and this includes linen that must be replaced with each new rental- and must be furnished, with electrical appliances, air conditioning and services (cable, Wi-Fi, Netflix), which implies an investment of between US$4,000 to US$6,000 if it is a studio or 1 bedroom. The equipment must be replaced every two or three years due to wear. In the traditional rental, the tenant brings his own furniture and equipment, it is rented empty.
Flexibility : in the traditional one, if the owner decides to sell the property or needs it to live in it, the traditional rental contract can only be terminated by the tenant, therefore he must sell it with rent or wait for the tenant to finish his contract. In the temporary, when rented for short periods, it gives the owner more possibilities to dispose of the property for another purpose, to use it when he wants or to sell it.
Qualification : temporary properties usually require a greater dedication to ensure that the tourists who inhabit them are satisfied and that the property is well qualified on the platforms to generate more visits. For this reason, many developers offer the administration service to avoid the owner these setbacks.
On the rise : temporary rentals are on the rise, today there are 15,000 units in the city under this modality.
www.buysellba.com
Source:
Propiedades: todo lo que hay que saber antes de comprar un departamento para alquiler temporario
Cada vez son más los desarrolladores que construyen emprendimientos destinados al alquiler temporario: las ventajas de esta inversión versus un alquiler tradicional
www.lanacion.com.ar
August 25, 2023
They get on the boom: buildings with apartments created for short-term rentals which leaves a lot more profit
More and more developers are building projects for temporary rental: the advantages of this investment versus a traditional rental
August 24, 2023 By.Silvina Vitale
Developers build for investors looking for opportunities to generate short-term rental income, even down to furnishing and rental management
Buildings designed to rent temporarily from scratch. More and more developers are building projects designed exclusively for short-term rentals, mainly for tourism.
Defining a real estate product from the development itself, allocating it to a particular objective such as temporary rental is very advantageous. Why? “Because from the beginning the goal is to optimize the costs and maintenance that a property with an intensive use of tourists will have. They also think differently from the construction, design, format of the unit, the amenities and infrastructure of the building”, explains Daniel Bryn, owner of Invertire.
This translates, for example, into installing trunks to deposit luggage in the event that tourists need to leave the unit before leaving the country, having a laundry space as an amenity -without the need to have a washing machine in each unit- , install mostly electric ovens and stoves to avoid problems with the use of gas for people who are not so used to its use -in general, tourists are not-, have central hot water so they do not have to deal with repairs later of hot water tanks or individual boilers of each department, among others. A formula that more developers are betting on with one goal: to seduce investors.
Different business models
The developer can acquire different roles : from handing over the apartment without taking care of anything afterwards because it is the buyer who takes care of renting it ; Or you can provide a 100% complete service where you manage the rental, provide the owner with equipment options , take care of the cleaning and the owner doesn't even know who was in his apartment . "For this, the developers usually charge a monthly fee or money that is calculated based on a percentage of the income that the department had of approximately 10%," says Bryn.
"Another alternative is the 'pool'-type exploitation in which the person does not earn for their unit punctually but rather contributes their department to a group of apartments in the building whose total income and expenses are divided based on a previously defined percentage," he clarifies. Bryn.
Equipment is key to achieving constant occupancy and good reviews from tenants on temporary rental platforms.
Regarding rent, the specialist assures that the monthly income for the temporary rental of a two-room property reaches approximately US$650 gross , on average, for apartments that are rented in Buenos Aires, without deducting expenses. But he clarifies that it is important to take into account that, on average, in CABA, a temporary worker is rented 22 of the 30 days of the month, that is, that for 8 days it is empty, so that the occupation of the property is 73% of the month. "Today a two-room apartment temporarily rented yields 7.41% and 3.15% traditionally ," warns the specialist.
A key point is that, in general, the apartments of these projects designed to be temporary are rented more expensive than a unit destined for this same type of rental but in a traditional building . At that point, the founder of Invertire.com assures that it depends on the services that are offered. “If the apartment is new, modern, bright and has amenities that interest the tourist, it is common for this to impact the daily fee that is charged per night. If, on the other hand, the apartment is in an old building with small elevators, without amenities, few services, without a balcony or with a French balcony, this impacts on a lower income per night ”, he explains.
what you need to know
For Christian Leupold, commercial manager of Avilis Real Estate, when building a building for temporary rental , the main thing is defined by the location, the connectivity that the area has, if there are nearby universities and if the commercial, cultural and gastronomic environment of the area is attractive. Regarding the design, he assures that these are projects with homogeneous units and with a limited package of amenities -the most sought after are coworking and SUM- since it is sought that the building has low operation and maintenance costs.
"The model is attractive because of the profitability it offers, which is sustainable in the long term as long as there is a professional team that manages it, generating economies of scale, greater synergy and product visibility," says Leupold. She agrees with Bryn that the profitability is much higher than that of traditional rentals, "it reaches between 6% and 8% per year, practically doubles the average traditional rent," she clarifies. However, the investor, beyond the economic rent, must analyze the options of exiting the business tomorrow.
The greatest demand in apartments for temporary rental is for one-room or two-room apartments
Another key point to analyze when investing in a temporary rental new construction project is to consider whether it is worth waiting for the completion of the building to generate income. This will also depend on whether or not the investor has all the money for the purchase, since the new construction projects offer financing and then can pay in long-term installments knowing that he will obtain temporary rental income in the future. “If the investor has the money and wants to generate income immediately, it may be convenient for them to buy a used one and remodel it or a brand new apartment for the same amount or a little more money and thus generate income in the short term without waiting for the completion of construction,” advises Bryn.
On the other hand, he recommends that, if the person is going to buy a temporary-oriented project, they should demand that they be provided with clear information on how much income they estimate, what vacancy, how the profit of the departments is distributed. That is, how do I know that my apartment is going to be rented as many times as possible and priority will not be given to other apartments in the same building- and also what expenses are included in the service or not.
Ariel Venneri, founding partner of Grupo MAHE, affirms that when one opts for a venture designed, designed and built specifically for temporary rental, there are advantages. "In the near future, it has to allow compliance with the regulations and regulations that will be imposed, the same as in large tourist cities in other parts of the world, trying to discourage temporary rental in residential buildings," clarifies the developer. It is also necessary to have safe and flexible investment schemes to enter the business and consider a professional management and exploitation solution that frees the owner or investor from problems and ensures maximum profitability.
The advice of the experts is to equip kitchens with ovens and electric stoves to avoid the use of gas
from the foundations
In the context of the temporary rental boom and how tempting this alternative is for investors since it leaves them with a much higher income than that of a traditional rental, there are various projects conceived from the ground up for temporary rental . According to the commercial manager of Avilis, one of the most requested areas in the temporary rental modality is Palermo. In fact, it is the neighborhood with the largest number of enterprises of this style. For example, the developer is building a building at Cabrera and Billinghurst, PLUS Cabrera, of which 80 percent of the units that were designed for temporary rental have already been sold and are offered from US$71,000 .
The MÁS Cabrera project in Palermo
Venneri agrees that the most attractive neighborhood for this activity is Palermo, especially the area known as Palermo Soho, Palermo Hollywood or Las Cañitas, with some 5,265 properties in operation and a rate ranging from US$60 to US$80 per night , for quality units. It is followed by Recoleta with some 2,295 properties, Belgrano with some 757 units and San Telmo with an offer of 526 units, with much lower rate values.
The developer MAHE has two projects, the PH Eco Renta San Telmo complex (in Defensa at 1300) with units that are already sold and in operation, while in Palermo (Cabrera at 5100), it proposes an investment fund open for 24 units (one and two rooms) that are under construction with delivery by 2025. In this case, the average investment is about US$80,000, with the possibility of paying in pesos with financing of up to 60 installments.
The departments of MAHE bet on the connection between the interior and the exterior
Wide spaces for those who travel with family with children or group of friends
The developer MCL Estudio advances with the HER, a line of buildings for investment with fixed income in dollars through temporary rental. He has one on Fitz Roy street with a US$3 million investment and apartments from US$92,000 to US$200,000 , and another at El Salvador 6057 with values ranging between US$77,000 and US$200,000 . The units are delivered fully equipped.
HER on Fitz Roy Street
A studio apartment with a balcony in the HER project
When it comes to talking about numbers, how much the investment yields, class A -those who enter before the purchase of the land- obtain a return of 45%; those who enter during the construction process, 25%; and final consumers, 10%. Regarding the yield for temporary rental of the units, class A investors will receive around 12% per year in dollars, during construction investors 8% and final consumers 5%.
The developer Equipo/6C Real Estate is also betting on this model with projects in San Telmo: one of them is Urban Nature, a 15-story building located at 1062 Paseo Colón avenue. The curious thing is that with the purchase of a unit in the construction, the owner accesses a monthly income that is equivalent to the rent of the apartment . "In this way, acquiring a unit at a value of US$60,000 in cash, the owner will charge a monthly rent of US$250 for 36 months from the second month after signing the ticket.. This amount can be received in dollars or in pesos equivalent to the exchange rate of the day. This represents a guaranteed income of 5% per year in dollars," says Fernando Cueto, team partner/6C Real Estate, adding that after 36 months, the owner can decide whether to take possession of the unit or enter a rental pool. temporary rental along with other units and share the profits.
A studio apartment in Urban Nature in San Telmo
Also in Palermo but in Soho, the CEK group advances with a venture designed with this DNA: Haaus Hotel Living. It has three projects underway: tower one, tower two in pre-launch, and another in Armenia and Avenida Córdoba. In these cases, they have a double benefit, on the one hand, the capitalization and surplus value of between 40% and 50% of the value of the square meter, entering the Friends & Family instance, and on the other hand, in the case of joining and be part of the rental pool, a return in dollars, which usually doubles and even triples the traditional rent.
Units can be purchased starting at US$70,000, paid 30% to the ticket and the balance in installments during construction (which can be in pesos adjusted by CAC or in dollars). In the first place, the investor receives a capitalization of between 40% and 50% in dollars during the 24 months of work, entering values that start from US$2,000/m² that when finished are around US$3,000/m² and US$ $3,500/sqft. In addition, in the case of choosing to keep the unit and join the rental pool, it would have a return in dollars that ranges between 10% and 13% in hard currency.
The towers of Haaus Hotel Living
The view from the apartments that include a private terrace
Lastly, Korn Propiedades is in full development of a building designed for temporary rental -but which may eventually have other functions either as a home or office-. It is on Córdoba avenue, between Ravignani and Carranza, it has 34 units of one and two rooms. The value per square meter starts at US$2,200 and well at US$1,900
The division of environments with iron and glass is the latest in decoration
what you need to know
To define what to buy, Bryn, raises key differences with the traditional rental.
Contract duration : the traditional rental is long-term, with a minimum duration of three years in Argentina according to current law and the temporary rental is for short periods, which can range from one night or a few days to a maximum of six months.
Profitability : in the traditional way, the rental price is established in pesos according to the market value and is updated -according to the current rental law- once a year. On the other hand, in the temporary rental the price varies according to the season, the demand and is in dollars.
Management of the rental : the temporary requires a more intensive management since guests must be attended to, coordinate cleaning and maintenance, and be available to attend to any need of the tenant.
Location and rooms : today in Buenos Aires the preferred properties for temporary rental are two rooms (62%), studio apartments (16%) and three rooms (17%); located in the center and north of the City, in neighborhoods such as Palermo, Recoleta, Barrio Norte, Belgrano, Retiro, San Nicolás and Monserrat, which are the most in demand.
Profitability : Today a two-room apartment rented temporarily yields 7.41% and traditionally 3.15%.
Equipment : in the temporary rental, the apartment must be fully equipped -like a hotel room, and this includes linen that must be replaced with each new rental- and must be furnished, with electrical appliances, air conditioning and services (cable, Wi-Fi, Netflix), which implies an investment of between US$4,000 to US$6,000 if it is a studio or 1 bedroom. The equipment must be replaced every two or three years due to wear. In the traditional rental, the tenant brings his own furniture and equipment, it is rented empty.
Flexibility : in the traditional one, if the owner decides to sell the property or needs it to live in it, the traditional rental contract can only be terminated by the tenant, therefore he must sell it with rent or wait for the tenant to finish his contract. In the temporary, when rented for short periods, it gives the owner more possibilities to dispose of the property for another purpose, to use it when he wants or to sell it.
Qualification : temporary properties usually require a greater dedication to ensure that the tourists who inhabit them are satisfied and that the property is well qualified on the platforms to generate more visits. For this reason, many developers offer the administration service to avoid the owner these setbacks.
On the rise : temporary rentals are on the rise, today there are 15,000 units in the city under this modality.
www.buysellba.com
