Renting apartments daily as a business

Having additional real estate, you can make a profit from it. Renting out an apartment is a truly profitable business. But is it so simple and safe? What risks do landlords bear?

It would seem that it is simpler - to rent out an apartment for a certain period, by concluding an agreement, and receive payment. All risks and force majeure will be spelled out in it, and there will be many fewer worries. But this is the most ideal option. In life, everything is much more complicated.

Even with an ideal legal purity of the transaction, there is a risk of meeting unscrupulous tenants who will pack up their belongings, and well, if only their own, and disappear in an unknown direction, without paying for the last month of living or leaving debts on utilities. To prevent such a situation, it is enough to agree on payment in advance. First, pay the bills yourself by increasing your rent by that amount. This way you can visit your property once a month to take meter readings and at the same time check the condition of your home. Second, when collecting rent, take it for the first and last month of your stay.

If, with a long-term lease, all the nuances can be stipulated in a notarized agreement, then if daily renting of housing is practiced, this is more difficult to do. Usually, those who want to rent an apartment for a day are not eager to fill out a lot of paperwork. A handwritten receipt often has no legal force. All troubles that may happen during the day of such a rental fall entirely on the shoulders of the lessor. You can avoid them by concluding an agreement with a real estate agency, which will act as an intermediary in such a transaction, and draw up the agreement on letterhead with all signatures and seals. A small loss of money is not worth the wasted nerves.

Perhaps the most important issue worrying those who rent out apartments is the possibility of evading paying taxes. In accordance with Russian law, any income must be declared and income tax paid. But there are some nuances here too. The tax police must prove “illegal business activity.” If your contracts do not exceed one year in duration, this will be very difficult to do. This is especially true for daily rentals. 3-NDFL must be submitted before the month of April following the reporting year. Therefore, if you are caught in the act of illegally renting, there is always time to pay the tax.

The text was prepared with the support of experts from the NDV-Real Estate agency https://arenda-kvartir.ndv.ru/

Contact an agency or rent an apartment yourself

Let’s imagine a situation where you or, for example, your loved ones, due to some urgent circumstances, needed to rent an apartment in Moscow. The first and quite logical step would be to call your friends and ask if they have a good and reliable option in mind. Well, if, unfortunately, they cannot help you, or you need a rented apartment in another city, all you have to do is turn to advertisements for real estate for rent. And here you find yourself faced with a dilemma - use the services of a real estate agency, or look directly for the owner. Both in the first and second cases there are both positive aspects and disadvantages, which we will try to consider in more detail.

Rent an apartment directly from the owner

One of the main positive aspects of renting an apartment from the owner is tolerance in terms of the initial payment. Typically, the owner of the property is reasonable in terms of payment, for example, he can offer monthly payment, and, provided that you enter into an agreement with him for a fairly long period, he can also reduce the cost of rent. The disadvantages of this option include, first of all, the time spent searching for the optimally suitable rental apartment. It is not a fact that on the first try you will find what suits you most. In addition, the owner may simply turn out to be a fraudster, and such a possibility, unfortunately, cannot be excluded. There are quite frequent cases when the imaginary owner rents out housing without having absolutely any rights to do so, it is simply not his, or he has limited rights to this apartment. It is also possible that the owner of the apartment simply makes money from gullible tenants by renting out housing to several people at the same time. In the first case, you will certainly be evicted by the rightful owners, and the swindler with your money will disappear. In the second, the owner of the apartment, having received an advance, denies your agreement with him to rent out housing, on the assumption that you will not go to court to confirm the authenticity of the signed agreement and receipts received. It should be noted that it is mandatory to file a lawsuit against an unscrupulous apartment owner.

Renting an apartment through an agency

By turning to the services of an agency, you, first of all, really save your time and receive guarantees that the transaction will be transparent and you will not be deceived. Large companies, as a rule, value their reputation and do not commit fraud for short-term gain. As for payment, you will still have to fork out the cash. The agency will offer you to pay three monthly housing costs at once, including payment for a month of accommodation in advance, payment of a security deposit (which is returned at the end of the rental period) and payment - remuneration for the services provided by the agency. But even if you are satisfied with the apartment and the price offered by the agency, there is still a risk of encountering a dishonest realtor. Such an employee can use the agency’s database and offer to conclude a deal bypassing the cash register, as they say, “in the kitchen.” This can save you money, or it can deprive you of it; in such a situation, the risk of being deceived is very high.

Another popular option for deception, which is practically legal, is when the company’s realtor offers you an excellent rental option that suits you in all respects, and offers to pay a deposit as an advance. Motivating this is that it will be possible to move into the rented housing, say, only in a week, and an advance is needed so that it is not outbid. After all the formalities have been completed and the agreed period has passed, you try to move in, and to your amazement you learn that the apartment has already been rented out. And the money that you paid as a deposit “magically” passes as a consultation fee in the contract with the agency. The amount of the deposit is usually directly proportional to the greed of the realtor or agency. That is, there is still a risk of being deceived not only by fly-by-night companies, but also by well-established companies.

As you can see for yourself, there are a great many options for real estate scams, and every day new scammers appear trying to scam you out of money. In order not to get hooked by a scammer, just follow a few simple rules: re-read, and very carefully, everything that you sign when concluding a transaction, ask all private owners to confirm their right to carry out the transaction legally. Try not to make deals in the kitchen. And then you will have a great chance to make a truly fair deal.

Rent an apartment through an agency: pros and cons

Many people face the problem of renting real estate. This raises the question of how to look for housing. In this case, there are two options: either use the services of an agency to rent an apartment, or search for a suitable option yourself. So what is more profitable and safer: to use the services of intermediaries, or to find an apartment yourself?

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By searching for an apartment on your own, you will certainly save a significant amount of money, but you will also have to spend your time. The realtor takes on all the work associated with finding an apartment that suits you, calls the owners, finds out from them the details you are interested in and arranges a viewing.

Tips on how to rent an apartment correctly so as not to be deceived

Offer to buy a customer base. Fraudsters “developed” this deception not so long ago. Those wishing to rent an apartment are offered access to an online database of apartment owners. The realtor convinces you that the database is updated daily, but if you pay for access to it, you will only see a website containing long-outdated information. To partially protect yourself from unscrupulous agents, you can search for information on the Internet by studying reviews of defrauded tenants .

When searching on your own, you will need to find an advertisement from the owner, not a real estate company, set a time yourself and tour the apartments you like. Of course, in such a situation there are pitfalls, but many people prefer not to contact realtors. Region Hotel is a convenient, proven service for selecting apartments for short-term stays or long-term apartment rentals in many regions of Russia.

Is it worth renting an apartment through an agency?

What are the functions of the agency? Let's figure it out to decide whether it's worth using the services of a real estate office or maybe it makes sense to find the right apartment on your own? After all, if you pick up a newspaper of free advertisements and open the “real estate” section, you will find many offers, including rental housing, in any neighborhood and at any price, from economy class to housing in a good prestigious area. By contacting a real estate agency, you will receive exactly the same information about the availability of rental housing as in newspaper advertisements. Moreover, in such newspapers and other media there are a lot of publications from real estate agencies.

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Firstly, you need to contact those agencies that are ready to charge you for services only after concluding an agreement. It often happens that when you call about an advertisement, they begin to describe the advantages of an apartment, but in the end they say that you can view it only after paying the agency. And after payment it turns out that the apartment is not worth even a penny.

Investments in apart-hotels: profitability and pitfalls

In recent years, apartment construction has been actively developing in Moscow and St. Petersburg.
Apartments are legally non-residential premises, but in fact you can live in them or rent them out. The apartments cannot be permanently registered; places in kindergarten, school and clinic are not provided. But unlike apartments, apartments are cheaper, and, since there are no social obligations, they are located in more convenient places close to the center. You can’t build a residential building near the Kremlin, but apartments are fine. There are two types of apartments, but I would say even three:

1. Live on your own

2. Rent monthly or daily

3. Rent out daily in hotel format (apart-hotel)

I'll go over the first two and go into detail on the third.

1. Live on your own

If you don’t need a kindergarten, school, or district clinic, but want to live in a cheaper place, this is your format.

2. Rent monthly or daily

Apartments are the most convenient option for renting: they are cheaper than apartments, are often sold furnished, there is no need to “register” tenants, there are no or much fewer problems with neighbors when renting out daily.

You can rent it yourself. This is quite easy to do on a monthly basis, but it becomes very troublesome on a daily basis: someone has to check in guests, clean the rooms, wash clothes, repair plumbing, accept payments, etc. Independent daily rental is a second job or business, but not an investment.

In order to free the owners from worries, there is a management company (manager, concierge service). Often these functions are performed by an affiliated company of the developer who built the apartments. But if the developer does not provide such services, finding an honest manager is problematic.

Typically, the manager takes 20-30% of the revenue from renting a room for his services. Additionally, the owner pays for the maintenance costs of the apartments: reservations, cleaning, etc., as well as utilities according to the meters.

Monthly renting of apartments is less profitable than daily rent: the monthly price is approximately equal to renting an apartment, and the daily price is 2-3 times higher. When renting on a daily basis, the manager’s honesty is critically important: so that he does not rent out apartments in secret from the owner.

In addition to working for interest, some managers offer income programs. The manager rents apartments and rents them out as much as he wants, and pays the owner a set percentage of the cost of the apartment or a fixed amount per month. In very rare cases, the manager even undertakes to buy the apartment after 5 years.

3. Rent out daily in hotel format (apart-hotel)

In this format, apartments (i.e. rooms) are rented by the management company only on a daily basis under the hotel brand. The owner is deprived of the opportunity to rent them out on his own. The management company offers the owner to work for a percentage of revenue (25-30%) or according to an income program.

Revenue

Revenue depends on the location of the apart-hotel. It is preferable that it be located 5-10 minutes walk from the center or from the metro (stations not very far from the center).

Revenue is affected by seasonality. For example, in St. Petersburg the highest prices and occupancy rates are from May to July.

But not all 365 days there will be guests in the room. During the season, occupancy is higher (for example, 90%), and in the off-season it is lower (for example, 30-60%). On average for the year from 60% to 80% depending on the hotel and the efforts of the manager.

Revenue is affected by area and room categories. 14-16 sq.m. - this is a very small economy category room, from 20 sq.m. comfort is already coming. The category requires appropriate repairs and equipment of the room.

For example, the average monthly revenue (not profit!) from renting a room up to 20 sq.m. in St. Petersburg it can be 40-55 thousand rubles. Hereinafter we take for calculations a room up to 20 sq.m.

Expenses

Expenses must be subtracted from revenue. They include the operation of the room (for example, 200 rubles / sq.m.), utilities according to meters. You can count on 40-50 thousand rubles. in year.

Please note that when renting out a room on a daily basis, it is subject to accelerated depreciation: it ages and deteriorates. It needs to be repaired every 5-7 years. Repairs may require 300-600 thousand rubles. and more. These amounts must be distributed over the years when calculating the return on investment in the room.

We must not forget that leasing non-residential premises is certainly a business activity. The tax office will certainly find out about you from Rosreestr data. Therefore, you need to register an individual entrepreneur or LLC.

If the revenue is small (less than 700-900 thousand rubles), then it is better to pay 6% of the income. If more, incl. when you rent out several rooms, it is better to take out a rental patent (approx. 50,000 rubles per year).

In addition to the 6% tax, you need to pay insurance premiums of 28,000 rubles. + 1% on income exceeding RUB 300,000.

And... the most important thing: 25% of the proceeds to the manager. But he will not offend himself: he will take his remuneration first, then pay for operating expenses, and only then pay you.

Profitability

After paying all expenses, the profitability from renting a room can range from 8% to 15% per month. This is much more than when renting out an apartment (3-4%).

But we must not forget about the increase in room rates. From the foundation pit to commissioning it increases by 20-30%. And then it grows according to the market. I would base growth at the inflation rate, i.e. 3% now.

Taking into account the lower room rate growth, the total return on investment in an apart-hotel room can be up to 12% per year. This is much better than a deposit and comparable to some shares on the stock exchange. With the entry into the apartment market, investments in apartments become less interesting: who wants to receive 3-4% per year on an apartment if the yield on apartments is many times higher and without hassle.

Many citizens confuse investment in an apartment and psychological reassurance. If you buy an apartment to have it (but it’s reliable, stable and won’t go to waste during a crisis), but you don’t consider the profitability/return on investment, then this is no longer an investment. This is the satisfaction of the psychological desire to own things.

But let's leave psychology for psychologists. Our goal is to get greater returns with less or the same risk, to get rich in a simple way. Apartments are more suitable for this.

Prices

I will not tell publicly where and from whom to buy apartments, since I am not an agent and I was not paid for advertising. I provided my clients with detailed calculations for one object for review.

At the construction stage, small studios (14-16 sq.m.) can be purchased for 2.5 million rubles, 20-22 sq.m. - 3-3.5 million rubles. Somewhere it may be more expensive, but the range is clear.

Underwater rocks

1. Apartments may not be built

This is the main risk. Let us remember the defrauded shareholders.

2. Poor location of the apartment complex

There will be few guests and revenue.

3. Dishonest management company

Dishonesty can be expressed in the fact that the management company will rent out its apartments, while yours will remain idle. To protect against these situations, there are computer programs that book rooms “evenly.” But it has long been proven that the human factor defeats any computer.

I have already written about the secret rental of apartments.

4. Negligent reception of guests: poor cleaning, impoliteness, etc.

5. Inflated rates for using the room

How to avoid being left without income. See reviews of the management company's existing facilities.

How to avoid getting stranded:

When purchasing apartments, you need to choose them carefully, do a comparative analysis and detailed calculations yourself, and do not blindly believe the developers’ calculations
check the management company

Kiyosaki's scheme for buying real estate on credit

Due to high loan rates, it doesn’t even work on apartments. Yes, it is possible that your monthly rental income will exceed your loan payments.

But there are problems:

1. 2 years of waiting for construction

You will give money, you will pay the mortgage every month, but there will be no income

2. When purchasing with a mortgage, the down payment will not be 15%, but 40-50%

For their own safety, many developers divide the price of apartments into 3 contracts: construction, finishing and furnishing. Moreover, the last 2 make up 20-30% of the total price of the apartment. A mortgage loan will be given only for construction. You will have to pay for finishing and furnishings separately.

Thus, you will invest 40% of your funds in the mortgage, which in no way corresponds to R. Kiyosake’s scheme for free purchase of real estate on credit. Let me explain: Kiyosaki puts down a 10% down payment, the rent covers the mortgage payment, and he gets the down payment out by refinancing the loan. Namely, he makes repairs, the value of the property increases, and he increases the loan amount by the amount of the increase in value. An increase in credit withdraws from the account.

So when you think your rental income covers your mortgage payment, don't rejoice! Don't forget that you invested 40% of your funds - they also cost money. They could be invested alternatively. Therefore, profitability should be calculated on them. You obviously won’t get any free real estate, but rather you won’t make enough money.

Conclusions:

apartments - a modern format for investing in real estate with a yield of up to 12% per annum
apartments are much more profitable than an apartment and a deposit
it is more convenient when the management company will rent out the apartments for you
choose your apartment carefully and do the calculations yourself
You won’t be able to buy apartments for free according to Kiyosaki’s scheme
buy apartments with your own money, otherwise the return on your investment will be lower and you will not earn enough

To rent an apartment

The rental process has many nuances. Only an experienced, sensible and reasonable person can take them all into account. The average tenant does not always fit this definition. Therefore, he often overpays rather than renting housing to benefit his own budget.

What is the best way to rent an apartment - through a real estate agency or on your own?
How to find an apartment without intermediaries - 4 proven methods
Method 2. Using newspapers and magazines
Method 3. Through ads
Method 4. Among friends and acquaintances
How to rent an apartment from the owner - step-by-step instructions for beginners
Step 2. Contact the author of the ad
Step 3. We arrange a meeting and inspect the property
Step 4. Conclude a lease agreement
Step 5. Record the meter readings at the time of conclusion of the contract
Who can help you rent a good apartment - review of the TOP 5 real estate agencies
How to avoid becoming a victim of scammers - 4 useful tips for renters
Tip 2. Cooperate with the landlord only through an agreement
Tip 3. Don’t pay a deposit before the transaction is completed
Tip 4. When collaborating with an agency, be sure to check it
Conclusion

26 Apr 2020 glavurist 175
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Tips on how best to rent out an apartment

If you don’t care who to house, then you can contact a real estate agency, they will find someone willing to rent an apartment for you, you won’t have to pay anything, because... realtors will collect payment from the renters, and you will not lose anything. After all, as a rule, agents take money from tenants; the owner is still in a privileged position in our country. Exceptions are those cases when elite “luxury” apartments with European-quality renovation are rented. The cost of renting such housing can range from 100 thousand to several hundred. Then the realtor will charge the owner half the monthly payment for the referred client.

It’s easier to contact a real estate agency, if only because they have much more funds for advertising. And the mechanism is worked out to the smallest detail. Moreover, do not forget that many advertising portals have become paid. They can charge you money even for the initial placement of an apartment, and other ways to enhance your ad will definitely be paid. Avito and Tsian are especially different in this sense. There is also a risk that your phone number will end up in the database of endless mailings through special parsers, which every day look for new numbers on the network to advertise anything. Therefore, with an agency you don’t have to pay a penny, don’t be afraid of strange SMS, and don’t answer calls from inappropriate clients at night. Plus, you yourself explain to the realtor who you want to have as a tenant! Accordingly, it’s up to you to rent out the apartment yourself or through an agency! But carefully evaluate your capabilities and the availability of time required for this process.

Pitfalls and main risks

To publish this note, I needed to piece together all my knowledge. This took a lot of time, and therefore, I hope that the work was not done in vain and the article will serve you well. So that today you can independently understand all the intricacies of the daily apartment rental business.

And then, after some time, I came across a very good apartment at a fairly reasonable price. I called the owner and made an appointment for an evening inspection. I will say this: the neat renovation, as well as the friendliness of the owner, is captivating, and therefore on the same day we signed a lease agreement.

The number of employees depends on the number of apartments in management. One administrator can simultaneously service 3–6 apartments, and a cleaning lady can serve the same number. The manager will cope with a load of 15–18 objects.

Sublease. The profit obtained from the difference between withdrawal and delivery is approximately half as much. The most accessible and common way to start earning money if you don’t have your own real estate. In this case, funds are needed for the first month of rent. They may return in 10-15 days. At the same time, for resort cities (Sochi, Gelendzhik, Anapa, etc.) summer is just the season. And in the fall and winter, such a business is idle.