We all would like to have full flexibility while investing, however, when you invest in real estate this probably will not work.
If you plan to make your house or apartment a source of stable passive income, you cannot live in this apartment for longer periods of time. You should instead leave it available for rentals to generate a reasonable ROI.
No property occupied by its owner for 6 months will provide the expected income.
It is important to evaluate your needs and adjust the way you invest in real estate to use your properties wisely.
How to do that?
Let’s imagine you plan to accommodate yourself with a property in Northern Cyprus to spend half of the year there and enjoy a nice climate. At the same time, you plan to rent out this beach-front house or apartment for the summer season to make it work for you or pay off your mortgage.
And let’s assume that you want to invest 1.000.000 pounds.
What you could do as an investor, is to buy your dream house and use it for the maximum of time the management company would allow you, without minimizing your income.
I would recommend it to be no more than 3 weeks during the summer season (most of the management contracts do not allow to use more summer days for owner’s stays anyway).
The remaining days should be rented out in all the pick summer months to maximize the sale of the room-nights during the most expensive seasons. What costs 300 pounds in the summer, may cost 100 pounds in the autumn, while maintenance cost usually does not change.
For the rest of your stay in destination you should move to another location. And here comes the diversification.
Your main investment should not cost you less than 1/2 – 3/4 of the budget.
Why not less? To not multiply maintenance costs and to earn more per night.
If I am not clear, let me explain.
Imagine you own 3 small studios in the city centre and you charge 75 pounds per night, per 2 guests in each of the studios.
If you rent them all, per day you earn 3 x 75 = 225 pounds.
For each of those properties, you paid up to 100,000 pounds. Let’s make it 3 x 100.000 = 300.000 pounds.
And now imagine you own a single, yet fully equipped, spacious and comfortable apartment in the same location, for which you charge 225 pounds per night, per 2 guests.
For this one, you also paid 300.000 pounds.
How much do earn if you rent them all on the same day? At the end of the day, do you get the same amount of money?
No, you do not.
3 apartments = paying 3 x maintenance cost. 1 apartment = paying 1 x maintenance cost.
The more exclusive and of higher quality the apartment is, the more you may charge for it, once you pay almost the same amount of money for maintenance and for your management contract.
Here we come back to the basics.
You planned to buy and rent, as well as to buy and enjoy the summer for 6 months of the year. So now let’s take care about you.
We have 1,000,000 pounds to invest. Let’s spend them wisely!
My proposal is:
There are at least two schools of investing and I suppose in this blog I will be talking only about the two…
The ones I understand and fully accept are:
I bet you already know that I prefer the second one.
As long as you are not Elon Musk or Jeff Bezos, I suppose that you, same as me, are not the multi-billionaires who may rent a jet whenever we wish or buy a company by sending an email to our broker.
To be honest, I would not even like to become one because enjoying life is more than crucial to me.
I will give you here a lot of hints and tips that come from my understanding of business and life.
I hope you will join me on the journey.
And I will be happy to discuss all the topics with you, both here under the post and on Facebook (posts, group).