Why Small Is Beautiful

Wednesday, October 24, 2012

Dear Reader,

The locations where owners generate strong rental income are sometimes surprising. You might figure that a place like Cancun would offer huge rental potential. After all, it’s easy to get to. Millions of tourists fly here every year.

But you face two problems. First, Cancun is home to more than 25,000 hotel rooms. That’s a lot of competition. And the type of tourist that wants to spend time in Cancun is very often a spring break or bachelor party crowd. They generally prefer all-inclusive hotels where they can eat and drink as much as they want without worrying about the tab.

Boutique destinations with much lower tourist numbers can offer a lot more potential. On Costa Rica’s southern Pacific coast, you’re a three-hour drive from the closest international airport. You won’t see any spring break or bachelor crowds. This area attracts well-heeled independent travelers seeking a tranquil hideaway or an eco-adventure.

A new road is opening this place up to tourists and property shoppers. But you won’t find Cancun-style resorts or chain hotels on this coast. Instead, it offers small boutique hotels and upscale B&Bs. So, despite lower tourist numbers, you’ll find much less competition on Costa Rica’s South Pacific. And that means handsome profits from vacation rentals.

This piece of coast is gorgeous. Towering mountain peaks plummet down to long stretches of sandy beach. Forest packed with exotic wildlife blanket the mountain slopes. It’s the kind of place where it’s easy to find an empty beach. Visitors and home owners spend as much time outdoors as possible, swimming, surfing, fishing, bird watching, or simply relaxing in the tropical afternoons.

The little village of Ojochal offers more than local fare. There’s a French restaurant, a coffee shop, Internet café and well-stocked deli. You can buy fresh-baked bread, smokehouse chicken and even fine champagne. That’s because the village sits close to Pacific Lots, a community with more than 200 homes.

One Pacific Lots owner decided to rent his three-bed three-bath vacation home when he wasn’t enjoying it himself. It’s proved a huge success. He works hard at it. He advertises heavily on rental websites and in local newspapers. He drops cards into local restaurants and pays the restaurant a little commission if it brings him renters.

He answers queries straight away. He gathers feedback and testimonials. He goes the extra mile to get renters. He’s fully hands-on, seven days a week. Around half his renters are repeat customers or referrals.

He charges up to $2500 a week for his house. That sounds like a lot. But a family or group of friends could easily pay more than that for a couple of rooms in a decent hotel.

The owner rented the house for 48 weeks last year, using two vacant weeks in October to carry out maintenance. He charged $1500 a week from September through November, and $2500 a week over Christmas, New Year and Easter. He earned $88,000 gross over those 48 weeks.

And with the low carrying costs in this part of the world that translated to almost $80,000 net. His property taxes run around $500 a year. Insurance, utilities, cleaning, gardening and pool maintenance rack up only $500 per month. The owners’ fees in Pacific Lots cost an average $30 a month. Plus, he’s doing his own rental management.

Other owners in Pacific Lots also rent their homes. One home is fully booked for the next two years. Some owners rent short term to tourists. Others rent longer term to fellow owners building their own home.

For our owner, this started as a way to make his vacation home cover its costs. But it’s worked out so well that he now uses this house purely as a rental. He built another house elsewhere in Pacific Lots that he uses himself.

Margaret Summerfield

P.S. It’s now easier than ever to own a home in Pacific Lots. Until now, you bought a lot and built a custom home. But they just launched new turnkey homes. The start price is only $140,000 (including the lot). Buy today and the developer will build your home in six months. You can rent it immediately – and start generating a nice income. We’ll tell you more about these turnkey homes in the next few days, so stay tuned.


Posted Under:

costa rica, rental yield, southern zone, rental opportunity

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