Renting your Punta Cana house or apartment to tourists and vacationers for the night or week instead of the traditional 6 month or yearlong contract given to local residents can appear to be very lucrative. It looks easy, but is it the best choice for you?
Before jumping on the short-term rental bandwagon, it makes sense to look at the pros and cons. It’s true that you can charge a lot more by renting short-term; however, it’s a different business model that suits some owners and locations better than others. Here are a few factors to consider:
Low occupancy rates
We are seeing ridiculously low vacancy rates. In fact Punta Cana has had a staggering low vacancy rate of 50 - 60%, according to local property managers. This steady downward trend in vacancy rates is not something new to seasoned local property managers.
Although fees are high, and we agree the work certainly is worth it, some local managers cannot make ends meet. Punta Cana, after all, is not such a cheap place to live in. Vacation rental managers usually supplement their incomes selling excursions and other services, but with the low occupancy rates, many have been known to not report bookings on apartments in order to pay up on employees and offices. If you decide to work with short term vacation managers, work with reputable, small companies with low overheads such as unnecessary rental offices, and a manageable amount of properties.
With long term rentals, you have copies of your rental contracts, have access to your tenant contact information, and aware of all funds received at all times.
Read before you sign the dotted line!
Asides from sharing your Homeaway.com leads with other owners, many local managers refuse to give you access to the tenants occupying the property. We have seen cases where an owner has decided to end services with a management company and they have removed the tenant bookings to other properties and refuse to turn over keys and return funds until an excessive amount of money has been disbursed by the owner. Make sure you read all the management cancellation penalties and make sure you get everything you discussed in writing.
How intensively do you want to manage?
Punta Cana properties have a high amount of humidity, and they need constant upkeep from the coastal elements. Aside from the maintenance, the amount of the work associated with property management occurs when tenants turn over. With short-term rentals, you have a lot more of that. You will also need to be on top of your marketing and advertising because you’ll need a constant stream of new tenants. Some landlords are more than willing to forgo the higher rates rather than have to deal with constant turnover.
What are the costs involved?
Short-term tenants require that you provide a lot more in the way of amenities than long-term tenants do. Utilities are a given, including TV and wireless if you want to stay competitive. Don’t forget the toilet paper! Beyond the apartment itself, you’ll also want to consult with your insurance agent and/or accountant about how renting short-term may impact your taxes and insurance.
How will it affect your property?
Keep in mind that rapid tenant turnover associated with renting by the night or week can take its toll on your property. Even normal wear and tear becomes more urgent because first impressions are so important. Expect to perform routine upgrades like painting much more frequently than you would with a long-term rental property. This, of course, is yet another thing that impacts your cost of operation. Finally, be aware that some people use short-term rentals as a party house, which can lead to untold damage and ill will from the neighbors.
What does your competition look like?
The same online opportunities that make short-term rentals such a viable option also mean you are likely to face plenty of competition. It pays to do your due diligence and find out, the volume of visitors your particular Punta Cana community attracts, as well as the other options that are available to them before making the commitment to turn your property into a short-term rental.