You’ve just made a property investment, and you’re hesitating between seasonal rental and annual rental? Each has its advantages and disadvantages. Read our article to find out what you need to know about your apartment to make your choice, and discover our calculation of the profitability you can expect.
What is an annual rental?
The concept and features of long-term leasing
Annual rental is THE “classic” rental option, which involves renting a furnished or unfurnished property for a minimum period of one year. It is mainly aimed at people who want a stable, long-term income.
Once you’ve bought your apartment, you’ll be looking for a tenant, a student, young professionals or anyone who doesn’t want to become an owner.
Annual rental offers you greater financial stability thanks to regular rental income throughout the year.
The advantages and disadvantages of annual rentals
- Advantages:
- Regular , more stablerental income over the long term
- Easier management of your apartment (less turnover, less frequent maintenance, etc.)
- Simple delegation of property management to a real estate agency for 6 to 8% of the rent received.
- Cons :
- Lower rental income and profitability than seasonal rentals
- Risk of non-payment potentially reduced by setting up guarantees (deposit, guarantor)
- Less flexibility in managing your home (you can’t dispose of it personally during the lease)
- Possibility of disputes with tenants in the event of non-compliance with the rental contract;
What is vacation rental?
Short-term rental concept and features
A seasonal rental is a furnished rental, usually for a few days, weeks or months.
Generally speaking, your accommodation can be found on booking platforms known as OTAs. Are you familiar with the names Airbnb, Abritel and Booking? Perhaps you’ve already booked with them…
This mode of operation has exploded in recent years. Nothing could be simpler than creating an ad and managing your rentals remotely. No contract, no unpaid bills.
Your target audience will be travelers looking for a vacation or a relaxing stay in your city or region, as well as professionals who prefer fully furnished accommodation to a single hotel room.
This rental formula allows owners to rent either :
- their second homes all year round;
- more and more a property specifically dedicated to this type of “Airbnb” rental;
- or their main residence when they go on vacation;
The advantages and disadvantages of seasonal rental
- Advantages :
- Possibility of generating much higher income in high season, thanks to rents that are often higher than those on the traditional rental market. The profitability of your investment will be significantly higher. Rents can easily be multiplied by 3 or 4 in the high season.
How is this possible? France regularly tops the world tourism rankings, and many foreigners with high purchasing power dream of discovering not only the capital Paris, but also our coasts, mountains and, increasingly, the countryside.
- No risk of non-payment, as payments are made on the booking platforms and therefore paid in advance;
- Flexibility in managing your investment (you can renovate it, occupy it yourself or lend it to friends and family as you see fit);
- Cons :
- Without a global strategy (tourism and professionals on the move), rental income can fluctuate and be uncertain depending on tourist demand and the seasons;
- More complex management (finding customers, frequent maintenance, handing over keys, etc.)
- Full delegation possible to a concierge specialized in short-term rentals with a minimum cost of 15%. See our article on the price of an Airbnb concierge.
- Regulatory and tax constraints specific to this activity;
How do you choose between seasonal and annual rentals to maximize rental profitability?
To determine which rental formula is best suited to your personal situation and objectives in terms of renting and personal life, several criteria need to be taken into account:
- The location of your investment: a property located in a tourist area with high seasonal demand is more likely to generate high seasonal rental revenues. Conversely, a property located on the outskirts of a large city may be better suited to customers looking for a stable annual rental property.
- Type of property: some properties are better suited to seasonal rental (seaside or mountain apartments, vacation homes, etc.), while others are better suited to annual rental (properties close to schools, public transport, etc.).
- Your personal objectives: if you’re looking for a combination of flexibility, profitability and a little risk-taking, seasonal rental is probably for you! Many analysis tools, such as AirDNA, will help you minimize this risk. Read our review and watch our video on the AirDNA Rentalizer.
- On the other hand, if you’re looking for a stable, long-term source of income, regardless of profitability, and with very few constraints, annual rental is the way to go.
Calculating rental income for a seasonal rental vs. an annual rental
Let’s say you own an apartment that you’re not sure whether to let on a seasonal or annual basis. Here’s an example of how to calculate rental profitability for each formula (this is a simple calculation without taking taxes into account)
- Holiday rental sales :
- Average price per night: €95 for a 2-room apartment;
- Average occupancy rate over the year: 70%.
- Annual rental income: €95 x 365 days x 70% = €24,275
Of course, you will have to subtract a number of charges, including the following:
- Holiday rental charges :
- internet subscription: 12X 30 = 360 € ;
- heating, electricity: 12 X 200 = 2400 € ;
- condominium charges: €800 ;
- property tax: €500 ;
- insurance 12 x 20 = 240 € ;
- cleaning costs if you delegate this part (we strongly recommend it) 200 X 12 = 2400 € ;
- commissions from booking platforms between 15 and 17% of sales, i.e. around €4080 for the example;
- cleaning products, coffee, tea, toilet paper etc… 1200 € ;
- subscription channel manager 12 X 60 = 720 € ;
NB: These amounts are given as examples, and may differ if your property is located in the south of France or in the mountains.
- Seasonal rental profit :
It amounts to €11,575, or almost €1,000 a month. Of course, this can be optimized with the use of a website, which can both increase your sales and significantly reduce platform commissions. This is an excellent lever for increasing your profitability. 🙂
- Annual rental sales :
- Monthly rent: 500€ for a 2-room apartment in the provinces, not in Paris.
- Annual rental income: €500 x 12 months = €6,000
- Annual rental charges :
- condominium charges: €800 ;
- property tax: €500 ;
- non-occupant insurance 12 X 15 = 180 € ;
- Annual rental income :
It amounts to €4,520, or around €380 a month.
Which rental should you choose for your apartment?
When you compare the different types of rental, there’s no doubt that short-term rentals will make your property much more profitable.
It will enable you to generate cash flow that you can :
- or reinvest ;
- or pay off your loan faster;
We can only encourage you to create your ad and launch it either with the help of a channel manager for maximum benefit, or to contact a concierge in your town.
In large cities, this practice is regulated by law. Please find out more about this practice before making your investment.
