Short Term Rentals – Good or Bad?
The relatively new way of let (Airbnb and others) seems to be increasing worldwide, whereas the recent report by the International Auditors KPMG refer to an increase of 48% in demand for Cyprus over the year before.
It seems that demand is not directed solely for holiday/beach locations, but it is extending to the non-beach locations (Nicosia included) including locations in the centre and the old cities.
It is a lucrative income for suitable location and quality and reflects the services offered. It produces an income well above the ordinary lets which (income) in most occasions are concluded through the internet and most likely without income tax declaration and pay. Be it illegal, this is how it is at this point of time (worldwide mind you). Based on the information that we have, occupancy rates can reach 50%-60% of the total year and depending on the services, it can produce an income of €70/per day per bedroom. So, on average the income (say 1 bed apartment) will produce an annual income of ±€13.000 p.a., a figure well above the ordinary year’s let of ±€7.000 p.a.
All in not “gold” we are afraid and lets of such a nature including letting (website) costs of around 15%-20% (unless one has its own website) plus another 20% for damages, management, insurances etc. There is now a rather sudden upsurge of demand in the Nicosia Eleftheria Square periphery, as well as within the old towns locations. Compared this with hotel accommodation cost, it makes such short lets quite attractive for the tenants. Such lets take a lot of time to manage running after the tenants and the units upkeep, irresponsible tenants with over occupancy of people (recent example of one bedroom apartment let but in fact there were 4-5 people stay) with all night parties, loud music/noise and bad language are some of the drawbacks. Landlords must have a person in charge not only to deliver the property, but also to take repossession of the property once the let ends, check irresponsible use of facilities (on another occasion the a/c units were working the whole day, notwithstanding the non-occupation of the property), complains by neighbours etc.
For those who have time in their hands these sort of lets can be a job for them to do and it takes an effort to manage and maintain their units in a reasonable state of repair. On a recent USA report regarding short lets regarding New York, the report recorded tenants leaving the apartments with furniture and equipment taken away, others were actually subletting to unknown third parties and so on. Not everything is done through the internet and physical presence of the landlord is require quite often, whereas landlords must have some sort of a technical team to repair and fix damages/non-working equipment etc. These type of lets require a higher insurance premium (must declare your let with your insurance Co) whereas certain items are still pending, such as the recent proposal to charge such lets by 20% for income tax purposes, VAT (not as yet clear 100%) and so on.
Provided one lets out and runs a business in a “proper” way (regular cleaning, good quality furniture, looking after the tenants’ requirements, offering a present e.g. a bottle or two of wine/fruit every week etc it will not be a miss. A client of ours who has for let his 20 apartments in Limassol (in various locations) is very happy with the reservations, but then he adds “I am out and about most of the time”.
This new type of lets for Cyprus is extending mainly for apartments/studio for which there is an increasing noticeable demand, be it that for such units should be offered with internet/wifi etc, as well as better quality furniture.
The more popular season lets of such a nature, are villas near the beach at the Protaras/ Famagusta region, as well as for Paphos. Shorter period of lets than the towns, but at a higher income per day.
This is an extension of the innovation that exists to exchange one’s unit with another within the same or another country or otherwise. It is also evident that the more people stay in a unit the lesser their cost (which is much less than a hotel accommodation) and since the cost is the main criterion – most important for the younger generation, the clients to let are of the younger age ranging from 18-30 years old (with the related problems). For office lets the situation is better, but it is not as yet fully operational in Cyprus.
For our part and unless you have time on your hands we suggest that you do not go for such lets, unless you decide to make it an organised business and have the time to run it.