Many apartment renters think that they earn very well, but the reality is somewhat different

Renting an apartment that you own at first sounds very simple. Most people who own a property, in which they do not stay often, decide to arrange it as an apartment for rent ...

Renting an apartment that you own at first sounds very simple. Most people who own a property, in which they do not stay often, decide to arrange it as an apartment for rent without much prior thought and calculation, writes in his blog Tomislav Zovko, co-owner of Irundo, the leading short-term rental company on the domestic market, which we transfer in its entirety.

Why do we mention computing?

Because many apartment renters think they make very good money, and yet the reality is somewhat different.

As in any private enterprise success is measured by the final result after calculate all income and expenses that business venture. It is often the case that apartment renters measure their performance on the basis of only one piece of data, which is the amount of gross revenue from overnight stays sold.

It’s not realistic to just look at the money a renter has received from their guests but it is it is necessary to face the costs as well. Just some of the regular expenses that each renter has are web channel commission, utilities, cleaning cost, cost of washing and ironing bed linen, maintenance and state fees. Extraordinary costs such as repairing various faults often occur, and most landlords do not include the cost of their own time used for this purpose at all. Many do not count the investment and annual depreciation.

In order to get a real account of earnings or profit, it is necessary to include a number of costs that are common in renting an apartment. Below we bring two examples of calculation of income and expenses on the example of a private landlord for a one-bedroom apartment.

Example 1. The landlord is not in the VAT system and has hired external associates:

Income 1bdr apartmentseason
Season 5 months no. days150
Average occupancy80%
Average price per night€ 90,00
Br. nights sold120
Average stay - in days3
Br. shift of guests in season40
Total income€ 10.800,00
Costsseason
Internet sales channel commission - approx. 15% (e.g. booking.com.Airbnb.com, Expedia.com.)€ 1.620,00
25% VAT on Internet channel sales commission€ 405,00 
Guest check-in (100 kn per check-in)€ 540,00
Apartment cleaning€ 600,00
Washing and ironing bed linen€ 400,00
Detergents€ 80,00
Consumables (toilet paper, shampoos, tea, coffee and sugar)€ 200,00
Directing€ 800,00
Annual Cost of maintenance and / or repairs (materials and hands)€ 500,00
Residential - annual package (2 categorized beds)€ 80,00
Tax flat rate (2 categorized beds)€ 80,00
Total expenses€ 5.305,00
Operating profit for approx. 6-7 months of engagement€ 5.495,00
Cost of own time of season preparation, coordination, communication with guests, workers, etc. (based on 10 hours per week x 6 months, cost of working hour 75 kn)€ 2.400,00

Example 2. The landlord is not in the VAT system and does everything independently:

Income 1bdr apartmentseason
Season 5 months no. days150
Average occupancy80%
Average price per night€ 90,00
Br. nights sold120
Average stay - in days3
Br. shift of guests in season40
Total income€ 10.800,00
Costsseason
Internet sales channel commission - approx. 15% (e.g. booking.com.Airbnb.com, Expedia.com.)€ 1.620,00
25% VAT on Internet channel sales commission€ 405,00 
Detergents€ 80,00
Consumables (toilet paper, shampoos, tea, coffee and sugar)€ 200,00
Directing€ 800,00
Annual Cost of maintenance and / or repairs (materials and hands)€ 500,00
Residential - annual package (2 categorized beds)€ 80,00
Tax flat rate (2 categorized beds)€ 80,00
Total expenses€ 3.415,00
Operating profit for approx. 6-7 months of engagement€ 7.385,00
Cost of own time of season preparation, coordination, communication with guests, cleaning, washing and ironing of bed linen, etc. (based on 25 hours per week x 6 months, cost of working hour 75 kn)€ 6.000,00

Many will be surprised that the time spent working for their own business is included in the costs. But it is very important to understand because your time = money.

Through this simple calculation, each landlord can get a short answer to the question of how profitable it is and whether to hire an agency to take over the management of their apartments. Contact us to face revenue and expenses together and find the best strategy for your successful business.

Author: Tomislav Zovko, Irundo / Photo: Patrick perkins, Illustration: HrTurizam.hr

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