Santiago Terry - CádizBuy to Let
This is skin in the game project because:
A. We are bullish on short term rentals, due to their rental revenue predictability.
B. This unit has a big advantage that can host 6 persons (usually these size apartments can host 4) - therefore daily rental for bigger groups can generate more revenue.
C. We already own one short term rental in Cadiz which is doing better than expected and generates ~10% NET anually just from rent. (although, keep in mind that last months were high season months)
Why invest in this apartment?
High Profitability Rate (IRR) = 10.54%: recurring income plus goodwill with its sale.
High profitability Cash on Cash: 6.24%: high monthly recurring income.
Ready to go into action: Furnished
Very versatile: able to house a couple, small families and even groups of 6 people.
Location: close to all the monuments, the Playa de la Caleta and points of interest in the city.
One of the cheapest opportunities: maximum revaluation capacity.
Information about the apartment
We return with a new opportunity in Cádiz, a city that we love and that has proved its profitability, due to the high income provided by vacation rentals with respect to the price of land.
It is an excellent opportunity since it is in the Old Town of Cádiz, which as we know is the district most demanded by tourists, since it is the one that contains the main monuments and points of interest of the city. The property is located just 20 meters from the Plaza de Mina and a few steps from the Alameda, very close to the most emblematic beaches of the city.
Regarding the property, it is a spacious apartment, well built, with high ceilings, and with striking exposed beams. It consists of a large living room with integrated kitchen, a room from which a loft has been made to locate another bed and a bathroom. In this way, the space has been used to the maximum. That will allow us to host up to six guests, obtaining a multipurpose piece of furniture that will allow us to host from a couple to small groups and families. That will allow us the income at night and the occupation.
The property is in very good condition and you will only need a few tweaks to make it perfect and put it into work very soon.
Finally, it is important to note that the property has a beautiful Andalusian patio that is also being fully restored along with the common areas of the building (the bill has already been approved and paid)
This new opportunity is very close to our previous opportunities Carmen Coronada and Ático Tavira.
The apartment is completely renovated and furnished, although it is true that we will make a minimum investment to leave it perfect, since it shows the wear and lack of maintenance of it. Keep in mind that the ultimate goal of the investment is the sale, and in this sense it is essential that we leave everything in perfect condition, not only for the enjoyment of the guests, but so that the final buyer doesn’t have to do absolutely nothing to the apartment.
As we have indicated, this property represents an excellent investment opportunity due to the following characteristics:
- It is a spacious apartment, with a bedroom and a bathroom, there was taken advantage of the height of its ceilings to add a loft and be able to place a bed there to place 2 additional guests. This will allow us to maximize the income of the property so that we can charge per additional guest.
- It is one of the cheapest apartments we have acquired in Cádiz.
- The property has a striking Andalusian patio that is being completely renovated.
- The property is very well located, in the old town. Very close to the Alameda de Cádiz and a few meters from the Plaza Mina. All points of interest and monuments of the city are very close, as well as the famous Playa de la Caleta. The property is very close to our Carmen Coronada, which all guests state the good level of its location.
- The house is located on a ground floor, which is expected to comply with possible legislative changes. In that case the house would meet all the requirements.
|Purchase price of the property (including renovation)||122.400,00 €|
|Cost of initial works||12.000,00 €|
|Taxes, paperwork and other initial legal costs||0,00 €|
|Company Constitution and Registration||0,00 €|
|Other property acquisition costs||4.356,00 €|
|Other expenses||0,00 €|
|Minimum cash||600,00 €|
|Brickstarter Fees (Only purchase)||10.073,69 €|
|Yearly rent income||17.652,92 €|
|Amount to be received for the sale||179.315,62 €|
|Gross Margin (Sale Price - Purchase Price)||20 %|
|Total dividends accrued||0,00 €|
|Dividends paid||0,00 €|
|Dividends in portfolio||0,00 €|
|Rental income||17.652,92 €|
|Brickstarter Commission||1.051,55 €|
|Annual Property Tax||281,50 €|
|Total expenses||8.188,93 €|
|Operating return||9.319,99 €|
|Financial results||0,00 €|
|Result before tax (Operating result + Financial result)||9.319,99 €|
|Net profit||7.921,99 €|
|Revaluation of the property||20,00 %|
|Current calue of the property||148.532,00 €|
|Number of reservations||48|
|Occupancy rate||52,10 %|
|Average Daily Rate||89,96 €|
|Estimated annual income||17.652,92 €|
|Customer satisfaction rating||90,00 %|
|Number of guests||238|
To carry out the market study, once again, we have selected properties with similar characteristics to this one that we propose in terms of location and typology.
It is a very flexible furniture typology, which will allow us to accommodate from individual travelers or couples, to small families and groups of friends of up to 6 members. This will give us the flexibility to establish a base price per night for 4 people and increase these rates per additional person. This practice has been very useful in other opportunities like this, such as the one in Corona Street in Valencia or Carmen Coronada in Cádiz itself, and has allowed us to increase revenues significantly.
For this study we have tried to take as wide sample as possible, and for this we have focused on all the opportunities located in the center of Cádiz with a capacity of 5 to 6 guests.
As we know, the most predominant are those with a room and a bathroom with a maximum capacity of up to 4 people. Although, as we have already said, we will be able to compete with this type of real estate, we have decided to eliminate it from our analysis, since we have two additional places for guests, which will characterize our apartment.
As we can see in the graph 1, having taken a sample of 22 apartments with a maximum capacity of 5 guests, and many others with a maximum capacity of 6 guests, the first thing that attracts attention is the positive evolution of the average monthly income until reaching a 2019 average of € 1646.
We see how this type of property has a slightly lower occupancy, to properties with a capacity of 5 guests, but a significantly higher average income, up to € 18138.
If we analyze the average occupation throughout the year, we can observe how the season extends from February, with the beginning of the carnival, until the end of October, the months of November and December, being ones with the lowest occupancy. If we study the evolution of the average monthly income, we can observe a slight upward trend that has been maintained since the beginning of 2016.
To sum up, we can conclude that this apartment is an excellent investment opportunity due to the high profitability per square meter we can obtain, having taken advantage of the high ceilings, to place a loft to place 2 additional guests.