# Apartment for rent – we calculate income and expenses

If you conduct a survey among ordinary Russians “What would you spend a million dollars on?”, Almost 90% of our country’s residents will confidently answer “I will buy two or three apartments, rent and I will live happily on these incomes”.

Indeed, to receive a stable, sufficiently high profit and not work, having all their time at their disposal, is a cherished and understandable dream of most of the city dwellers who are forced to work to make ends meet. And your own “extra” apartment, which can be rented out and bring a stable income, may become a chance to make this dream come true.

It remains only to figure out which is more profitable – to rent an apartment for a long time (at least for a month) or daily? The question is actually not idle, since many landlords, in pursuit of more profit, make a choice in favor of an apartment for rent, realizing how much more difficult this option is after calculating the net profit for the first month of such “unearned activity”.

So, let’s calculate the costs and incomes from leasing apartments for daily rent using the example of an ordinary Moscow one-room apartment in a nine-story panel building located somewhere near the Proletarskaya metro station, in one of the most attractive areas of the capital for tenants – Tagansky.

## Income

On average, you can rent such a one-room apartment in the capital for \$ 600-1300 per month, the price will depend on the quality of the renovation, the availability of furniture, living space, and so on. Let’s take an average of \$ 1,000 per month..

A one-room apartment for daily rent in one of the central districts of Moscow in a typical house will cost a tenant from 50 to 130 dollars per day, also depending on the livability of the housing. We also take the average cost – \$ 100 per day.

At first glance, renting an apartment for daily rent is three times more profitable than for a long term, because the income can be more than \$ 3,000 per month. But not everything is as simple as it seems.

First of all, it is worth remembering that not a single owner will be able to rent out housing for all 30 days a month. Competition in the market for short-term rental of residential real estate is currently quite strong, and demand is not always stable, in addition, the owner will need some time to put the apartment in order after the departure of the next tenant.

According to the statistics of real estate agencies, on average, such an apartment is in demand only 15-20 days a month, so the income will already be significantly lower – about 2,000 thousand dollars. It is also worth considering the generally accepted discounts for permanent residents, for example, who regularly come on business trips from other cities or rent housing not for a day, but for at least 5-7 days. “And what? – the owners of Moscow real estate will ask, – it’s still twice as high as the profit from long-term lease, so the issue has been resolved. However, you should not rush – it is better to accurately calculate all the current costs associated with the provision of housing for rent.

## Expenses

Firstly,already at the initial stage, the cost of arranging an apartment, which is supposed to be rented out, will be significantly higher than costs in the case of a long-term lease. Grandma’s furniture, current taps and shabby wallpaper will not contribute to the popularity of the apartment, and a tenant planning to pay a rather large amount for just a day of stay will prefer to look for other options.

Lutokhina Ekaterina. Nostalgia. 2006

So you will have to part with the furniture dear to your heart, but already outdated and lost its attractiveness, make at least cosmetic repairs, change taps and attend to the purchase of bed linen, towels and a minimum set of dishes. In addition, do not forget that in an apartment rented for a day, the presence of a modern TV, a microwave oven, an electric kettle, and so on is welcomed. Of course, the presence of all the above household appliances will help raise the rental cost, but at the first stage it will require significant financial investments, which can only pay off over time..

It is almost impossible to calculate the exact amount of expenses that will be required for the improvement of the apartment, it all depends on the initial condition of the housing.

Secondly,each new inhabitant, having paid such a rather large amount, of course wants to live in a clean apartment, and sleep on washed and ironed linen. So the owner will have to spend on washing, cleaning, washing powder, and this is not counting the loss of time that will have to be devoted to putting the apartment in order. In addition, after the departure of the next tenant, you will have to buy soap, toilet paper, and monitor the presence of an air freshener. Of course, you can hire a person to deal with this issue, but this means a significant decrease in income, which is already melting before our eyes, so more often the owner prefers to cope on his own. The cost of hygiene products can end up around \$ 30..

Thirdly,so that the apartment is not empty, it will have to be regularly advertised – to place advertisements in various publications, on thematic sites, to post advertisements near the entrances. All this will also cost, albeit insignificant, but still included in the costs – about 10-20 dollars..

Fourth,the most significant nuance is the rent and utility bills. In the case of renting an apartment for a long time, the costs of electricity, hot and cold water are usually borne by the tenants. This approach is quite understandable – the counters, of course, are installed, so how much you wind up, you pay so much. In the event that the apartment is rented by the day, the owner will have to pay all bills for electricity and water. And temporary residents will definitely not save money, so as a result, the landlord will have to subtract at least \$ 50-100 from income, which will need to be paid for electricity and water supply..

Fifth,temporary residents will not take good care of their housing, and it is unlikely that it will be possible to demand compensation from them for a broken cup, a flood or broken household appliances. Most landlords prefer not to conclude a deal for the provision of an apartment for a day with an appropriate agreement, so it will not be possible to prove the fact of damage to property in court, and the costs of buying new things will have to be paid from their own pockets.

At sixth,experienced landlords working specifically in the field of short-term rental housing, advise you to immediately insure the apartment against such serious problems as fire or flooding. After all, it is impossible to guarantee that all temporary residents will be adequate people and will not smoke in bed.

Jacob Lawrence. Rent Strike. 1943

Seventh,in order to attract new guests, the owners of apartments for rent, often offer such a service as delivery from the station or airport to the place of temporary residence. Of course, it will be pleasant and convenient for nonresidents if they are immediately met in an unfamiliar city and taken to a place of temporary residence, so that such an advertising move will help increase the flow of residents. However, at the same time, travel to train stations and airports will add another item of additional costs..

Offended residents of neighboring apartments may well report such violent activity to the tax office or the district.

Eighth,By renting out an apartment for daily rent, the owner runs the risk of ruining relations with all his neighbors, who will definitely not like such a “cycle” of temporary residents, who often interfere with sleep after 22.00, arrange noisy parties, and so on. Of course, it is impossible to assess this problem in monetary terms, but moral damage from litigation with neighbors is definitely guaranteed. And one more thing – offended residents of neighboring apartments may well report such violent activity to the tax office or to the district police officer. So, if the short-term rental of housing is not formalized with the documents necessary according to the legislation, the owner may already face larger problems and quite tangible costs in the form of taxes and even fines.

Thus, even if we subtract from the average income provided by the provision of an apartment for rent, only those costs that are repeated monthly and can be expressed in a specific amount of money, the result will be that the net profit will be about \$ 1,500 thousand per month. Of course, this is a little more than you can get by renting out housing for a long time, however, these financial costs do not include the loss of time and effort..

After all, in the end it turns out that the cherished dream of doing nothing and making a profit will never be fulfilled, and providing an apartment for rent will require almost daily participation, will bring a lot of trouble and problems.

Of course, you can use the services of a real estate agency and shift all the hassle onto the shoulders of specialists, but the percentage that professionals will take for their services will further reduce profits and it turns out that the difference between rental income for a day and a month is completely imperceptible.

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