occupancy rates

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
hippyer
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Joined: Thu Apr 29, 2021 3:33 pm

occupancy rates

Post by hippyer »

Hello people, I am a first time poster.

I am contemplating buying properties for holiday lets. My plan was always to go down the buy to let route, but I find it is too hands off (I have one buy to let already). Also, I quite like the idea of eventually running a property management company once I have some experience of managing my own properties.

I live in a tourist town so I figure that this is something I can take advantage of and do successfully. My first curiosity is to learn how to find out occupancy rates for my specific area that others are achieving. Then I can do some back of the envelope maths in order to determine what kind of profit I can hope to make.

Could anybody shed any light on how I might be able to learn this? I googled and came across a website called alltherooms. Has anybody used this and would you recommend it?
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Cymraes
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Post by Cymraes »

Use google to look at the local competition or AirBnB of course.

Don't confuse occupancy with profit though - fewer weeks at a higher price can give a much bigger profit than more weeks at a lower price. Fewer costs and much less wear and tear.

I could get full occupancy by cutting my winter rates - it's not worth it for me.
vacancesthezan
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Re: occupancy rates

Post by vacancesthezan »

hippyer wrote:Hello people, I am a first time poster.

I am contemplating buying properties for holiday lets. My plan was always to go down the buy to let route, but I find it is too hands off (I have one buy to let already). Also, I quite like the idea of eventually running a property management company once I have some experience of managing my own properties.

I live in a tourist town so I figure that this is something I can take advantage of and do successfully. My first curiosity is to learn how to find out occupancy rates for my specific area that others are achieving. Then I can do some back of the envelope maths in order to determine what kind of profit I can hope to make.

Could anybody shed any light on how I might be able to learn this? I googled and came across a website called alltherooms. Has anybody used this and would you recommend it?
We laugh when people ask us about occupancy rates. If you are a business with staff then maybe as you would have to pay staff whether or not the property (or properties) were occupied.

If it just you (with partner/family) then your time (and downtime) MUST be factored in otherwise you run the risk of becoming a busy fool. Holiday rentals mean that you are busy when everyone else is on holiday. ie work/life balance is key

As per the previous post, it is about profit (for your time and effort) and not occupancy.

VT
hippyer
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Joined: Thu Apr 29, 2021 3:33 pm

Post by hippyer »

Cymraes wrote:Use google to look at the local competition or AirBnB of course.
By this do you mean simply look at the day rate similar properties in the same area are advertising for? How would this help me to understand potential profit? After all, there is no data here to tell me how many bookings are achieved at these rates.

You and VT do make good points about not solely focusing on occupancy rates which I accept. Occupancy rates would give me some indication as to how busy I will be, so surely it is not entirely useless information?
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CSE
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Post by CSE »

Occupancy rates: These will depend on so many things.
Things like demand, pricing, perceived quality, local competition, facilities included. etc etc
As you say OR will affect profit. However, there are other factors to be included in those calculations too.
When you write about being busy. What is your main concern here? Is not all about having the property(ies) occupied. There are things which you have to do in the background that can keep you active. :wink:
Never try to out-stubborn your guests.
hippyer
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Post by hippyer »

CSE wrote: When you write about being busy. What is your main concern here?
Well, I don't want to be run ragged or left twiddling my thumbs. I'd like to strike some sort of balance. I live in a tourist town, so I would expect a reasonable level of demand during the peak season, but I don't have any quantifiable data to measure that. Is the advice to just roll the dice and see how it goes?
zebedee
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Post by zebedee »

Do you have local tourist information offices or officers? They will be able to tell you about demand for accommodation.
An agent will promise you the world until you have signed the contract with them.

Really good quality accommodation which is very clean, very well equipped and in a good location plus maintained to a high standard will always be in demand.

The other person who may help ( as we don’t know where you are) is the Visit England Inspector for that area
newtimber
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Post by newtimber »

Be wary of buying lots of properties for holiday lets. Once you reach a certain level of income, you end up having to register to VAT, lose the small business rates benefits and as the likes of Airbnb etc take over, you end up paying high levels of commission regardless of the number of properties you have.

There will no doubt be more legislation changes as the government wants to keep houses for permanent living.

You cannot really tell anything about occupancy rates or profits at the moment as everyone is on Staycations this year but next year who knows?

Also house prices are running away with themselves and if interest rates rise, there may be a large correction.
hippyer
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Post by hippyer »

zebedee wrote:Do you have local tourist information offices or officers? They will be able to tell you about demand for accommodation.

The other person who may help ( as we don’t know where you are) is the Visit England Inspector for that area
Yes I do. I hadn't considered these. Thank you very much for the suggestion.
newtimber wrote:Be wary of buying lots of properties for holiday lets. Once you reach a certain level of income, you end up having to register to VAT, lose the small business rates benefits and as the likes of Airbnb etc take over, you end up paying high levels of commission regardless of the number of properties you have.
Thank you. I don't expect to jump in gung-ho, but in time would like to acquire 5+. I have looked in to the sole trader vs limited companies or LLPs a little and I do lean towards the limited company or LLP route. I suppose that this is where a good accountant shows their value. Would you set up new corporations as you acquire new properties prior to reaching the threshold for losing small business rates relief/VAT or is that not how it works?

Re: Airbnb commissions. Are you saying that the percentage you pay in commission on Airbnb goes up the more properties you own? That seems backwards.
newtimber wrote:Also house prices are running away with themselves and if interest rates rise, there may be a large correction.
I am anticipating a correction. I'm trying to position myself so that I will be able to make my purchases after/during a correction. Time will tell how that plays out for me.
newtimber
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Post by newtimber »

hippyer wrote:
newtimber wrote:Be wary of buying lots of properties for holiday lets. Once you reach a certain level of income, you end up having to register to VAT, lose the small business rates benefits and as the likes of Airbnb etc take over, you end up paying high levels of commission regardless of the number of properties you have.
Thank you. I don't expect to jump in gung-ho, but in time would like to acquire 5+. I have looked in to the sole trader vs limited companies or LLPs a little and I do lean towards the limited company or LLP route. I suppose that this is where a good accountant shows their value. Would you set up new corporations as you acquire new properties prior to reaching the threshold for losing small business rates relief/VAT or is that not how it works?

Re: Airbnb commissions. Are you saying that the percentage you pay in commission on Airbnb goes up the more properties you own? That seems backwards.
It doesn't matter whether you're a sole trader or LLP, you still have to charge 20% VAT on all your income once it reaches a certain level. It effectively wipes out all the profit you get from buying the extra property since you can't charge 20% extra on the rent to cover it. No the sites don't charge more the more properties you have, but you no longer get a discount from having more properties. By the time you've given up 15% in adverts and 20% in VAT and then with the cleaning expenses and business rates, you'll find you'd be better off with a permanent let.
AndrewH
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Post by AndrewH »

Think hard before going down the road of forming a limited company instead of trading as a sole trader. Limited companies are good if you fear your business might become insolvent, but otherwise a limited company requires a lot of extra work each and every year and also expense should you employ an accountant.

This will give you an idea: https://www.informdirect.co.uk/company- ... d-company/
newtimber
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Post by newtimber »

AndrewH wrote:Think hard before going down the road of forming a limited company instead of trading as a sole trader. Limited companies are good if you fear your business might become insolvent, but otherwise a limited company requires a lot of extra work each and every year and also expense should you employ an accountant.
It depends on your tax situation and you'd need to discuss with an accountant. There are other advantages other than just insolvency of running a limited company.
zebedee
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Post by zebedee »

Just an additional thought. You say you are in a tourist area, and look to have more than one holiday let.

It’s worth looking into the costs that you will incur for your changeovers. Whilst you can vary your changeover day (Friday for one, Saturday for another etc) the issue is that there is limited time for the work to be done and clearly you won’t be in a position to do this yourself.
Cleaning a holiday let is very different to cleaning a residential property and good staff are like gold dust. In a tourist area, it may be that the prices will be high as those who do this work and know they are good at it know they are in demand.
It sounds as though you will need to recruit a team, and may well need to pay retainers in the winter when your properties may be empty so factor this into your profit calculations.
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