I was right for once

It’s been a long time since I posted here and I am very chuffed to note that what I said in my last post (15 Dec 2008) was correct.  They did book but they left it to the very last minute, and some agents had a better year than 2008.  The market ended up pretty much unaffected, but the ski market - now there’s trouble.  A holiday is important even when there is a recession on, but a second holiday is one of the little luxuries that people give up, even if they are very rich.  We are back to where we were with regard to the Euro/Sterling exchange rate.

Villa rentals in 2009: a scary world but you’ll be OK

Ho ho ho. 3 reasons for a pessimistic Christmas and a miserable new year:

• The pound is 1.10 to the Euro and falling
• Demand looks like it will be slack because of the global recession.
• Your costs are on the up (and see first point above).

But all is not lost. 4 reasons to be optimistic

• Europe is set to benefit from the decline in long-haul tourism: those who feel unable to stretch to a fortnight in Hawaai might downsize it in France instead.  (And they might quite like Europe and stop going to Hawaai for good).
• The pound might well recover against the Euro (or you might say: the Euro will also collapse) because a) the Germans will have a serious car industry problem which may make the Detroit situation look like a tea party. b) The Italians have too much public debt c) etc etc (x 27 countries)
• In the UK market the holiday is now seen as a necessity rather than a luxury and flitting away for the odd week long break is now normal, not the preserve of the ‘jetset’.
• Anyone who has the nous to offer in Euros to the European market is of course unaffected – just so long as you can spend those Euros.  And that shouldn’t be a problem!

So, more reasons for optimism than pessimism.

Villas in Umbria

Some of the villas in Umbria I wrote about in my last post are still empty for the summer.   Does Umbria book up at the last minute or are there some serious bargains to be had there?  If bookings are not what they should be then go and check it out – it is really lovely.

Why I like Umbria

I recently went to Italy looking for villas and liked Umbria a lot. I saw some of the nicest landscapes I had ever seen and ate certainly the best pasta (home made with wild boar, olive oil and black truffles for €6, ridiculous really).

The area is popular with holidaymakers from Rome, but not many people outside Italy know about it, meaning that the villas are relatively inexpensive to rent (compared with Tuscany at any rate!) Almost all the villas I saw in Umbria were converted farmhouses. In the old days the people would live upstairs and the animals downstairs so they always have a flight of steps leading to the first floor. Local planning laws in Umbria are that almost no new building is allowed and whatever is allowed must be in keeping with the red-brick and stone look of the traditional farm houses. Restoration of farmhouses is painstaking and often done very cleverly so that every inch is used to the best effect – not that space is really an issue here!

The less rent you ask for, the more money you will make.

Quinta do Lago is one of Europe’s best golf and luxury villa resorts.  So why is the market in rentals going down there?  Answer: because half the concrete poured in Europe in 2006 was in Southern Iberia.  This pattern is repeated across Southern Europe.  Demand is declining because there is an oversupply.

The trap: you will be encouraged to ask for a lot of rent.  The following are responsible:

• People you know.  They stand around in pubs and at barbecues and say ‘I/my mate/my cousin get(s) £9000 a week for his villa’.  This is bollocks, made up to impress.
• Estate agents.  They do want you to buy the house, you know.

Do not ask for a lot of rent.  Are you happier with 2 weeks let at £5000 or 15 weeks let at £2500?

If you let cheap then you are not undervaluing your property.  You are  investing in next year’s tenants.  The strategy you need to adopt is one of building up your clientele.  I know a man with a nice villa in the South of France who does nothing.  Old customers approach him every August and by September he is fully let for the next year.

Making money from your holiday villa: tip 3: don’t use a lettings agent

Why pay someone else to do what you can do yourself? There are several sites that let you advertise your property direct to the public, taking out the middleman. ‘Owner direct’ type sites will typically charge a relatively small amount (say, £100 per year) and then the enquiries come direct to you: you then deal directly with the customers. If you do it right, you save yourself a lot of money. If you do it wrong, you get no lettings or worse! Some tips

• Do consider professional photography. It makes a big difference. If you don’t go for a professional then make sure that your pictures are as good as they can be. Sites are full of amateurish rubbish pictures that make houses look tatty.
• Be realistic about pricing. This is the subject of the next post! I keep saying this, but in most parts of Southern Europe there is an oversupply so if your prices are too high, you will get no bookings at all. This really does happen, a lot.
• Dealing with the public is hell and many clever people prefer to get somebody else (an agent) to do it for them. Some problems you will encounter are people leaving a mess, people paying late, and people complaining, all of which are very stressful.
• Owner direct sites are starting to get a bad reputation in some quarters because some owners take liberties: they do not tell customers when there is building work nearby and allow the house to fall into disrepair. This is becoming a problem.

If you want to save the money and deal yourself then know that the role of the agent does add value to the deal: the agent will typically produce richer and better-behaved vetted customers, and will haggle with them for you, and will argue with them when they complain.

Some sites to look at and use:

• Owners Direct
• Holiday Rentals
•  VRBO

Making money from your holiday villa: tip 2: use a lettings agent

Your villa is costing you big money and you need to recoup it quick. Get some tenants in. A good lettings agent can help you with:

• how much to charge: the market in most places is oversupplied, which means that if you ask too much you will get nothing, but of course if you charge too little you will end up with too little money

• where to get tenants from. Do not underestimate how awful tenants can be. Strangers can really leave a mess. They sit on your furniture with their swimming trunks, they do disgusting things, stop thinking about it. When your agent rings you up and says ‘Great news! I’ve got some tenants for you!’ you can lean back and say ‘Who are they? What do they do for a living? Where do they live?’ and if you don’t like the answers, tell them to find somebody else. And if they don’t find somebody else then it’s their fault. They charge you a lot of money, so you can behave like that. It’s your house and it is costing you a lot of money.

Agencies take 10-20% commission: they act as principals in any deal, so the customer pays the agency, and the agency pays you (less, of course). The agency expects you to present the house in a certain state and gets very upset if there is building work next door. Examples are:

Villa Retreats (who offer villas in most places),

Palmer and Parker (Smart villas in France, Spain, Portugal and Caribbean)

Meon Villas – very large mainstream tour operator

Some will take your villa for the whole season but then of course they will offer less and you will get it back in a worse state.

Using an agent should be the ‘guaranteed cash’ option but often isn’t. Remember that lettings agents are really estate agents, and so many of them do what all estate agents do, which is to exaggerate how much they can get. Remember also that everything you have ever heard about how much other people get for their houses is bollocks and they are showing off. If you believe either then you are in danger of ending up with nothing! Believe those who give cautious estimates: however little the tenants are paying, at least they are paying something. Golden Rule Number 1 is THE LESS YOU CHARGE THE MORE YOU WILL MAKE – see the next post.

Making money from your holiday villa: tip 1: use a local property manager

Why bother using a local property manager? The answer is because they instill confidence in tenants and letting agents. A local manager is in charge of organising all services including cleaning, pool maintenance, gardening and so on, and also has the keys and a float so that repairs can be done quickly without the owner (who might be abroad) having to be tracked down. That is much more important than it sounds, even in this age of easy communications: people must be reassured that if the fridge breaks it will be repaired the same day, or that if the pool turns green someone can deal with it double quick. There is nothing worse for a tour operator than having an upset customer on the telephone saying ‘I told them about this 2 days ago and nobody has done anything about it yet.’

Chaos in Portugal

The Algarve Resident highlights the issue of new government regulation in Portugal. Owners of holiday villas in the Algarve have been told to register with local tourism authorities apparently to allow regulation of standards. New rules state that owners who want to let their villas to holiday makers must ensure that they have a similar standard of safety and amenities to hotels.

Apart from the fact that most of the holiday villas in the Algarve are not intended to be hotels but second homes for their owners, there is a practical problem in that most of the local tourist authorities do not have manpower necessary to issue the permits required, and so some reports have it now that any house for which an application has been made and which then cannot be inspected should be considered to have passed inspection. Or something.

There is a great deal of confusion among owners and property managers as to what the regulations are and what is expected of them. Rumours abound and MPs and ministers have been lobbied but to no avail. Many letting agents have been heavily fined, but of course there is nothing that can be done, because it is impossible to register a villa.

Any sensible person welcomes any regulation that will ensure the safety of holiday makers, but the level of confusion surrounding this is leaving owners and managers exposed and seems certain to cause damage: anything that makes the letting of holiday acccommodation more difficult is likely to have a neg: ative impact on tourism on which the Algarve relies. It may seem blase to say that there was not a problem originally, but the new season will start with no houses actually having been registered, although frequently their owners have tried.

How to make money from your holiday villa

Don’t feel guilty about owning a villa! With this blog I am hoping to share what I have learnt (not just owning property but also dealing with owners as a letting agent). Treat it as an investment: you can make money from it and enjoy it at the same time.

Here are a few general pointers. I’ll go into detail in subsequent posts.

1. Use a local property manager. A good local manager looks after your house when you aren’t there and takes care of repairs, maintenance and so on. S/he advises you on property laws and finance, and puts you in touch with agents.
2. Use a letting agent. You won’t get as much money as you could if you don’t know what the market is doing. If you don’t know what the market is doing then you don’t know how much to ask for the house: too much and you get no bookings, too little and the house is full of bad (cheap) tenants who could be paying you more.
3. Don’t use a letting agent. Do it yourself. Websites like owners direct will give you a good idea of what rents you should set, and all you need to market very effectively and at very low cost.
4. Don’t have unreal expectations about letting. Expect mid-July to end-August to be full, but anything else is a bonus.
5. Set your rent low. Europe is oversupplied and many houses stand empty through the summer. Do not believe the talk in the pub. The less you ask, the more you will get.

Like I say, more details about these points in future posts.