Invest in a Vacation Retreat that is Self-Sustainable and Even Profitable

March 17, 2012

by: Federico José Fernández

It is a fact that owners of condos and apartments in such places as Tamarindo tend to rent their properties for vacationers more and more. According to Costa Rican newspaper La República, in an article about the subject published on Monday, March 12, 2012, 25% of tourists that left the country through the international airports in San José and Liberia in the last five years, stayed not in a hotel, but in a house or condo. The offer of vacation rentals in private individual properties has increased in the past five years. This is reasonable as the building of such properties flourished between 2006 and 2008 and, now that tourism is picking up, owners find in its rentals a way to get a current return from these assets. For vacationers, this is attractive as well because they get to choose from a variety of options, some of them roomy and luxurious houses, at prices that are usually lower than what hotels offer.

The possibility to get rental income out of the property is an additional incentive for buyers willing to get a place for their personal enjoyment for a couple of weeks a year but wish to share the experience with renters.

To illustrate this with an example: a condo priced at USD$450,000.00 could be rented at an average of USD$1,500.00 a week. In the most expensive weeks (Holy Week and New Year’s Eve), this price could double. A property manager can arrange the maintenance at a fixed monthly fee of around USD$100 and rentals by receiving a commission that usually is 20%. Right now, an average occupancy rate of such a property could be 30% – 55%. This occupancy rate might be higher with good promotion and marketing tools via the Internet or other strategies. Such a condo has the following costs: an HOA fee (Home Owners Association fee) of around USD$300, and yearly property taxes of around USD$1,000.00.

Based on these figures, if such a condo was rented 55% of the time, including Holy Week and New Year’s Eve, it could generate around USD$45,9000 worth of gross rental income. If you subtract the rental commissions and assign a secure number figure of 20% from this income to the maintenance, the funds received would be USD$27,540. After taxes, a property in these conditions could be making a yearly profit of around USD$20,000.00. This represents around 4.5% return per year. This does not take into consideration the appreciation of the real estate.

It is up to each owner what portion of time it is allotted to rent the place, to enjoy it personally or by family and friends, or to just leave it unoccupied. It is definitely true that these investments are self-sustainable in terms of their maintenance and, of course, owning and enjoying a home in paradise is priceless.

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