5 Factors to Look Out for When Choosing Arbitrage Properties

If you are thinking about expanding your vacation rental business you might find there are many aspects that you need to bear in mind. In this blog post, our Team at Zeevou have synthesised five factors to look out for when choosing arbitrage properties.

1. Customer Segmentation

First of all, you need to know who it is that is going to be staying in your property. Will you be targeting:

  • Corporate executives,
  • Contractors,
  • Family visitors,
  • Tourists,
  • Traveling nurses,
  • Or academics?

Each of the abovementioned groups has certain requirements which should be considered while thinking of adding a property to your portfolio of vacation rentals.

2. Amenities

For each segment of your customers, you have to provide certain amenities. However, there are a few facilities which are guaranteed to always be welcome.

Parking

Having a private parking space in a safe and secure corner is always counted as an added value for the majority of your guests, especially for local tourists and those who are on a business trip.  

Internet Access

Nowadays, the importance of having internet access is equivalent to having a bed or a bathroom in your vacation rental. It is quite essential to be able to provide Wi-Fi internet access and to ensure that the signal is strong enough to enable guests to use their mobile phones. If a guest is to complain about something, you’d rather have them complain about not having a bed and a mattress, than about not having internet access or having a poor signal.

Room Size

Size of the room is one of the factors to look out for when choosing arbitrage properties. With regards to the size of the bedrooms in the property, make sure it has enough space for a double bed to fit, and ideally additional space for a foldable bed.

Common Spaces

Check the sanitary facilities.  Make sure there are enough showers and bathrooms for the maximum potential occupancy of the property. As regards the kitchen and common areas, there should be enough sitting and working space for at least half of the guests to be able to use them simultaneously at any given point.

3. Location

Depending on the customer segmentation, you need to think about different factors when trying to select a good spot. You need to try and predict the buying pattern of the guests who are going to stay at your vacation rental. Each segment has specific requirements.

Proximity to Public Transport

One of the most important factors for tourists is the Bus Stop and Metro Station accessibility. In addition, being in the main zone of public transportation is also vital for them as no one wants to stay in outer zones of public transportation when time is at a premium.   

Proximity to Tourist Attractions

The further away from tourist attractions the property is located, the less popular your vacation rental would be. Tourists are in the city to spend time visiting attractions, not to look at underground tunnels and other bus passengers.

Proximity to Central Business Districts

If you are trying to target business travellers, try to see what areas of town are likely to attract them. You need to be located in the vicinity of the central business district; there is one or other areas with high concentrations of offices.

The Average Age in the Neighbourhood

Considering the average age in the area is quite important as you may otherwise find yourself located next to a retirement home. In this case, you risk facing heightened complaints from neighbours about the noise caused by frequent check-ins and check-outs.  Therefore, it is better to avoid districts which are exclusive to one specific age group.

Seasonality

Depending on the location of the building, the flux of your customers may vary throughout the year. This seasonality may lead to fluctuations of the income that you are generating from the rentals. A building close to the sea has the highest occupancy rate in the summer, while the one close to the mountains is appropriate for skiing resorts, and would thus be most popular over the winter months. A centrally located vacation rental offers the best accommodation for the tourists. Location bears a direct impact on the seasonality of your business.

4. Operations

Thinking about your ability of serving your guests to an appropriate standard down the line is one of the factors to Look out for when choosing arbitrage properties. Will you be able to

A. Find a local cleaning company in the vicinity of the property?
B. Manage the check-ins and check-outs remotely, either through meet & greets or via a self check-in mechanism?
C. Check the property for damage shortly after each check-out?
D. Find maintenance personnel who are able to respond promptly when required?

5. Does the Deal Stack?

Similar to every business owner, you need to check whether the income is likely to be higher than costs associated with renting the property as you are considering adding to your vacation rental portfolio. Below you can find a list of items to take into account, which we will go into in more detail in upcoming blogs by Zeevou.  

  • Rental level
  • Predicted bills
  • Insurance costs
  • Turnover costs
  • Upfront investment
  • Software costs
  • Staffing costs
  • Nightly rates
  • Occupancy levels
  • Seasonality
  • Return on investment
  • Return on risk

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