Real estate investors: 3 strategies to increase your rental profitability

You are a short-term real estate investor, and are very vigilant about your profitability. It's natural. But not always easy.

Whether we learn real estate along the way, with the inevitable beginner's mistakes; or that you made the right choices directly on paper. It is not always easy to achieve the desired level of profitability, and to increase this rental profitability. It's frustrating, but normal. We operate in an unstable financial and economic environment, which always has surprises in store.

As an owner and host on Airbnb myself, I am perfectly aware that it can be complex to obtain the best financial performance for your property , depending on the period and demand.

Unlike hotels, for an apartment, it is more difficult to have perspective on the performance of the market (even with one or two properties). Indeed, it's difficult to know if we sold too quickly, if we could have sold more expensively. Hotels have dozens of rooms each night, which allows them to follow the evolution of trends little by little.

But thanks to the revenue management that I apply to this activity, I maximize the financial performance of my property. The major advantage of income management is that it allows you to increase your profitability with the same apartment, in the same condition in the same location. Simply by improving the price. Magical, no?

As part of her inter-blogger event, Claire from the blog investiaufeminin.com asked me for my best real estate tips. I must admit that I am not comfortable with the notion of tips (too tactical, long live strategy!) so I am going to share what, in my opinion, are the best strategies to become the undisputed master of pricing your property in short-term rental and explode its profitability – without spending hours.

1 – Have differentiated pricing to increase your rental profitability

Differentiated pricing consists of varying your price according to the periods and the level of demand in your city. The law of supply and demand is no longer to be proven and your customers are used to seeing prices fluctuate.

If you don't do this, you run two risks: 

• either you pass on a turnover during periods of high demand because your customers would have been ready to pay more
• either you miss out on turnover during periods of low demand because your customers will not book (competitors will have lowered their prices)

 Either way, you lose financially. So what solution? 

I wrote a 40-page book which explains to you for free how to implement differentiated pricing in your business (download at the top or bottom of this page) but I still want to give you a few marbles here.

• first follow the events in your city : these are opportunities to increase the price
• keep in mind your average reservation time : if you see that reservations are not arriving or arriving much more quickly, be alert and dig deeper
• finally, question your customers (even if you don't meet them in person) to identify all of their reasons for coming. Indeed, the demand for your apartment can be impacted by internal events of private structures (training center, annual seminar of a company, etc.) This is all information, not accessible on the internet, but very valuable for your pricing strategy.

2 – Do price tests

Why carry out tests to increase your rental profitability? All revenue management experts know it: no matter how much we make the best forecasts, the best calculations and estimates, nothing replaces the customer's decision to take out their bank card. And to allow him to express his views on a price, it must be visible online! This is why it is necessary to test prices, upwards or downwards (on a limited scope, to reduce the risk). This is the ultimate way to know if your customers are sensitive to it.

In this context your best enemy is yourself: the fear of not selling can be stubborn . This is one of the main obstacles to overcome when you launch your revenue management strategy.

However, remember your very first real estate investment: the fear was very present! You went anyway and I imagine you don't regret it.

So now is the time to re-invoke that courage, which accompanied you in your early days, to finally launch tests on the pricing of your short-term activity. 

Obviously, I don't recommend that you jump into the void without a rubber band. Rather, check the elastic carefully, and jump afterwards. 

How to do it? 

To test an upward price :

• first choose the right strongest period of your calendar or an event period in your city
• study the competition
• then increase your prices over a limited period initially and while remaining consistent with the rest of the competition (in particular, by remaining lower than your competitors who are more qualitative than you in terms of service)

Please note, you can also obviously test the price drop to check that it brings you additional sales. 

In the same way, choose your period carefully: ideally rather a period and a property for which you estimate a real risk of not selling. 

3 – Keep a watchful eye on your market

As mentioned above, it is more difficult as an investor to know the macro trends of your market in real time, but be careful it is not impossible. 

It is even rather highly recommended. 

My recommendation? First of all, you cannot miss consulting the site(s) you use (airbnb, booking, shelter, etc.).

Put yourself in your customer's shoes and research your city : 

• what are the prices,
• what is the value for money,
• what are the cancellation conditions,
• cleaning costs,
• and finally (crucial) what are the customer reviews of competitors (good or bad). 

Also look at your few main competitors: have they already sold their nights during this period? if not what are their prices? All this will give you an idea of ​​the state of the market on these dates.

Subsequently, there is also a less manual and much more professional (and professionalizing) solution to know the state of the market (airbnb), it is Airdna.

I'm simply in love with it (don't tell my husband...). It's fun and educational. You can take the subscription for a month or two while you understand your market and cancel it at the time of your choice. 

What benefits? you obtain a precise vision of your city:

• the level of demand,
• average prices,
• occupancy rates for properties similar to yours. 

If this interests you, I could soon write an article which details the use and implication in your activity of each of the indicators present on aidna. In other words, what to do specifically with each of the figures.

Do not hesitate to tell me in comments if this interests you.

This article takes part in the inter-blogger event “My Best Real Estate Tips” organized by Claire from the blog www.investaufeminin.com. If you liked this article, please share it. You will help me to make this blog known.