The practice of rental arbitrage, otherwise known as Short-let Rentals involves renting and subletting apartment units on a daily or short term basis. Commonly referred to as short lets, this type of residential real estate investment has garnered unprecedented attention in terms of growth. Apartments offerings include a variety of options, ranging from self contained to bedroom flats, bungalows, detached and semi detached duplexes. Depending on location, property type and season, Short-let rentals can generate upwards of a 100% ROI. According to The Guardian, “the global short-let rental market size is valued at $99.38 billion as of 2021, which is expected to grow at a Compound Yearly Growth Rate (CAGR) of 11.1 per cent till 2030.”
A survey carried out by the Financial Derivatives Company (FDC) proved that pricing of residential real estate went up by 10% between the last quarter of 2020 and second quarter of 2021. With Lagos being one of the fastest growing markets, the surge in demand for short lets resulted in a rent spike in certain target areas within the Island axis; Ikoyi, Victoria Island and Lekki specifically, as well as in Ikeja. In similar vein, following the Lagos Short Let Report by Estateintel, the Lagos short let market has grown by 263% over the past three years, with the aforementioned locations emerging as the majorly demanded short-let hubs. Lekki Phase 1 has specifically performed outstandingly at an 80% occupancy rate, compared to Ikoyi and Victoria Island at 60% and 70%, respectively.
With a significant impact on the residential real estate market, Short-let Rentals have shown a steady growth rate of annual guests numbering 572,000 to 1.2 million, with active listing from 62,000 to 100,000 within a year. One of the poignant factors that are contributive to the growth in demand of Short lets remains the COVID 19 Pandemic of 2020, which prompted a lockdown that negatively affected the activities of hotels. Other contributing factors include accessibility to occupants and a high income opportunity for investors. A major appeal to occupants include the provision of comfort and relaxation, tasteful furnishings and aesthetically appealing luxury accomodations, steady electricity and a serene environment.
Whilst Short-lets are a fast paced trend that have become embraced by a vast majority of the global populace, it is not without challenges. Operators are often posed with maintenance issues, provision of high end security, steady power supply and keeping up with trendy interiors within their facilities. In order to provide impeccable customer service, it is essential to ensure the quality maintenance of your Short-let.
Here are a few tips that can ensure the maintenance of Short-let Rentals:
- One way is to enforce payment of a caution fee, to ensure that occupants strictly avoid abuse of property, as well as to encourage adherence to standard property policies. It is understandable that mishaps can occur, however, it is necessary to enforce such policy in order to curb such occurrences.
- Whilst there are accommodations best suited for parties and large gatherings, it is important to the overall sustainability of your short let property to ensure that no permission is granted to occupants to host parties consisting of a large number of persons, as this could result in unaccounted damages to property.
- In alignment with constituted laws, the consumption of illegal substances is a punishable offense. Hence, it is only reasonable for operators to make certain that consumption of hard drugs is prohibited within property premises. This should equally apply to smoking, as it could lead to fire outbreak and damages.
- Avoidance of noise pollution in order not to constitute nuisance to surrounding occupants. One of the primary features that appeal to tenants is the privacy, peace and quiet that the environment offers, and as such, decorum is to be maintained.
- Payment of a pre-stated fine in the event that occupants flaunt property policies.
These tips, when enforced by short-let operators will guarantee sustenance of value, proper management and longevity of apartment units.
Within the Lagos residential market, the increase in demand hinges primarily on the flexibility of payment, which is an obvious deviation from the usual annual rental payment option. As compared to the mainstream residential market, the short-let space has experienced an influx of operators as well as occupants, on the basis that it serves as a great option; an alternative to traditional hotels.
With Nigeria having recorded the fastest growth in the African market with an increase of 325% in the year 2016, it is safe to say that residential real estate will continue to be impacted by the steady rising demand for apartment units as it provides market opportunities for investors within this node.
