From 2010 onward, hopes for residential property revaluation have crashed on the rocks of various crises. According to the latest Istat data, the housing price index, averaging new and existing housing, fell by 12.79 percent between 2010 and 2021. The ruinous fall observed between 2012 and 2014 was only slightly offset by an observed recovery, especially in 2020 and 2021, particularly for new manufactured homes. For homeowners for investment purposes, one of the few pieces of good news in recent years has been the increase in opportunities to put their properties to income, which have multiplied thanks partly to new opportunities offered by technology.
The proptech of short-term renting
Taking advantage of the strong growth in demand for short rentals, a generation of new companies has arisen whose goal is to take charge, on behalf of the landlord, of the promotion and practical management of property rental transactions. Short renting, which drastically reduces the problems of tenant delinquency and gives the landlord more flexibility, involves a whole series of operations that constitute real work. For example, taking care of listings, welcoming guests, and managing housekeeping, to name the main ones. This is where realities such as Italianway (the first operator by the number of properties promoted), CleanBnB (listed on the stock exchange), Altido, and Sweetguest intervene. All companies have united since October 2020 in the Italian Association of Managers of Short-Term Rentals (Aigab), created to give voice to a sector that has now surpassed the hotel sector in terms of available beds. “Compared to a few years ago, the organized supply of short rentals has grown enormously,” Aigab president and Italianway CEO Marco Celani told We Wealth. The company, launched in Milan in late 2014, in about six years has put under contract more than 3,000 apartments in over 340 Italian destinations with 29,000 bookings and 90,000 guests. Compared to a few years ago, the offer of properties managed by specialized property managers today is much more capillary and has moved out of the big cities or renowned tourist resorts: “If at one time in Sardinia we were present only on the sea, today we also manage properties in the hinterland.”
The model on which the proptechs specializing in short rentals are based is that “the owner can forget about the management” of the property. Upstream, an agreement is decided based on two contractual alternatives.
The first, which is less used for tax reasons and because it commits the owner for more years, involves a company lease, which can proceed with sublets in accordance with the law. “It is a solution chosen only for properties in less good condition and when, on the part of the owner, there is less willingness to invest in renovation,” Celani said. More common, on the other hand, is the revenue-sharing model, in which the landlord and company share the proceeds of the rental business based on year-long agreements that also include the possibility for the landlord to have the property at his disposal for a certain period of the year. This is a more flexible arrangement that allows, according to Celani, to take advantage of what is one of the most significant benefits of short-term rental: the possibility of being able to get back possession of the property more quickly. No, it is not a question of yield, Celani emphasized, “I always say, the yield of short rent is not higher than the yield of long-term rent.”
Where best to buy, to make short rentals
When talking about short rentals, the centers that first come to mind are big cities like Rome and Milan, Italian art treasures like Florence, and, in general, major tourism hubs. Is it in these cities that it pays to buy if the goal is to realize the best returns? Not necessarily, said Celani. The purchase price is crucial for purchasing real estate for investment purposes to produce high returns. The chances of snatching a good deal in Milan, Rome, and other major Italian tourism capitals are slim. Therefore, one can consider the (notoriously expensive) investment of property in Milan as a low-risk bet that can produce an annual return of around 4 percent, Celani said-with the knowledge that the home can be resold very quickly.
If looking for a more substantial return, one does not get out of the golden rule of real estate investing: use experience and expertise to buy on favorable terms. What are the practical tips to keep in mind when looking for a real estate investment “designed for the short-term rental”? Celani’s first tip is to focus on a location that you find agreeable-a home that “we like.” His proptech experience suggests how this kind of investment turns out to be perfect, for example, for those buying a vacation residence. You use it one or two weeks a year and then turn it into an income opportunity for the remaining period. As for the most attractive areas to buy, Italianway’s ad said some of the best bargains can be found in seaside resorts that are a little less traveled.
Yield? Details also count
A crucial aspect of short-term rental yield comes from the renovation and choice of furnishings. These are no small details: the difference in the yield of an apartment furnished following the taste of the “target” clientele is crucial. “My advice is to rely on a professional, an architect who knows how to set up the furnishing and renovation,” said Celani, without necessarily following the owner’s taste.
