The residential real estate market is showing clear signs of recovery after a downfall due to the pandemic. The market value is projected to reach $12.182 billion by 2027, with major developments expected in Europe and Asia.
Deloitte Property Index 2020 highlights that while the impact of COVID-19 has been significant, the housing market in Europe is growing, with cities like Lisbon showing a whopping 164% increase in housing prices. The story is the same in the Asia Pacific, as the region’s housing economy is expected to grow by 7.2% in 2021.
While this is good news for property management companies, things aren’t the same. Property managers are generally inclined towards short-term rentals, considering their high profit and revenue potential. But while COVID-19 continues to cripple the travel sector, property managers are incurring property-related expenses.
This requires a hybrid rental model that enables property management companies to leverage both short-term accommodation and long-term rentals at the same time.
Renting out properties on a long-term basis has some clear advantages. These include:
However, long-term rentals come with some drawbacks as well. These include:
While long-term rentals are great to generate consistent income, short-term accommodation properties also have some tempting advantages.
However, the short-term accommodation model has some drawbacks.
Choosing between short-term accommodation and long-term rentals can be difficult for property management companies. While long-term rentals can generate consistent income, you might miss out on potential opportunities to increase your revenue and profits.
On the other hand, short-term rental properties are at risk of not attracting any guests during low seasons. For instance, Airbnb’s booking rates dropped 85% in 2020 due to the pandemic.
To overcome this uncertainty, property management companies are moving towards a hybrid property management model. By transitioning to a hybrid model, you can get the best of both worlds.
A hybrid model is a combination of short-term accommodation and long-term rentals. The focus of this model is to allow property managers to maximize profitability while minimizing risks.
Depending on the type and number of properties you own, you can take two approaches to hybrid property management.
Approach-1 – Diversifying Your Property Portfolio
This approach works best for large property management companies with properties in various locations. Let’s say you have ten properties in England. Six of them are located in urban areas like London, Birmingham, and Manchester, and the remaining four are located in tourist destinations like Bath, Cornwall, and York.
You can use your properties in urban areas as long-term rentals, as it’ll be easy to find tenants looking to stay for 6 or 12 months. As for the properties in popular tourist destinations, you can turn them into short-term rentals and maximize your profits during peak seasons.
Hence, even if the tourist volume is low and your short-term rentals don’t generate enough income, your long-term rentals will act as a consistent source of revenue.
This approach is ideal for small property managers who have a handful of properties in a city or region. For instance, let’s say you have two properties in Istanbul, Turkey. While the city is one of the most popular tourist destinations in Asia, it’s also the most populous urban area in Turkey.
The peak tourist seasons in Turkey are Spring and Fall (mid-April through September). Tourist visits are comparatively low from October through March. So, you can use the property as a long-term rental in October-March and rent it out on contracts of 6-8 months. And during the peak season, you can transform it into a short-term accommodation property and invite new guests every week.
While managing a hybrid property can be associated with high maintenance and marketing expenses, the profit potential is massive, with relatively low risks.
The travel sector continues to be mercurial, with some destinations experiencing all-time high tourist volumes and others being completely shut down. In such uncertain times, property management companies can ensure consistent revenue, profitability, and business survival by transitioning to a hybrid property management model.
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