MAKING IT, SPENDING IT: MAKE OR MAR MONEY CHOICES – Investing In Vacation Rentals

Vacation rentals have become incredibly popular over the last few years, according to my findings.

These are furnished apartments, houses, or professionally managed resorts, or complexes that are rented out to local or foreign tourists as an alternative to hotels. These short-term rental properties are stocked with basic amenities, and stay is usually no more than 30 days.

Getting into vacation rentals can be relatively easy, especially, if you rent your home to test the waters. This can provide a more profitable option for property owners compared to traditional long-term rentals.

Research shows that vacation rentals gives 130 percent more revenue on average than traditional long-term rentals.

Having a home in the right location can be highly lucrative, especially, in the high season. And how much a vacation rental will earn can vary depending on location, size and amenities, according to a player in the short-term apartment sector, Tiwalade Ogunji.

Profitability

According to Ogunji, apartments vary. “We have two bedrooms, three bedrooms and some four-bed rooms, depending on the family size you want. For instance, a two-bedroom apartment costs N60,000 per night. Multiply N60,000 by, let’s say, 20 days, which will give N1.2 million. So, as the number of rooms increases, so does the price.

Business Capital

Rental vacations are capital-intensive. Depending on the location you set up the business, it may take N10 million or more to start. According to Ogunji, building cost a lot, and before you can erect a building, you need land.

“The location of the land will determine how much it will cost to erect a building. For instance, you cannot compare the land in Ikeja to that of Abule-Egba. The same structure in Ikeja and Abule-Egba might cost you the same amount to build, but the cost of land will not be the same. Land in Ikeja may cost you about N100 million, but that in Abule-Egba may not be up to, because Ikeja is a high-brow area compared to Abule-Egba.”

Regulatory Compliance

To get involved in this service, you need to register the company with the Corporate Affairs Commission (CAC). You also need to get a license or permit to operate the business from the appropriate agency in your locality.

In Lagos State, the government visits apartments at regular intervals to check what they do and ensure they comply with regulations.

Advice

It is in your interest to own the building for this business. If it is leased to you, the owner of the building, after discovering how profitable the business is, may refuse to continue with the set agreement, which may put you at a loss.