Property Investment Pro Aleksandr Voronkov Lays Out Overseas Rental Property Management Types (2024)

Investing in foreign rental property is now easier than ever: many countries offer streamlined legal processes, reduced barriers to entry, and increased accessibility for international investors. While many prospective owners might think the purchase itself is the hardest part of the journey, effectively managing and maintaining the property can present unforeseen challenges that have a major impact on ROI.

Aleksandr Voronkov (also known as Aleksandr Genadinik) is a real estate expert and the owner of PT Darshan Group Indonesia, a construction company that focuses on high-end properties in Indonesia and helps clients turn real estate into successful investments. Aleksandr has seen many owners struggle with choosing the right management approach.

In this article, Voronkov explains popular rental types and property management tactics to consider.

The Rental Dilemma

Many new property owners may get stuck in a tough spot trying to figure out which rental strategy will work best for them. And it’s not surprising – the array of rental options, from stable long-term leases to appealing yet demanding short-term rentals, can feel like navigating a maze without a map.

According to Aleksandr’s experience in the market, property owners tend to focus on three major rental types and consider their pros and cons to choose which one suits them.

Short-term rentals

Short-term rentals through platforms like Airbnb are a popular choice among investors. This is a way to capitalize on your property by renting it out on a short-term basis. During peak seasons, you can earn significantly higher rental income, while off-peak periods are suitable for strategic marketing to maintain occupancy.

Pros

• Higher-income potential. Short-term rentals yield higher income per night compared to long-term leases.
• Flexibility for property use. You can use the property yourself for personal stays when it's not booked.
• Easy rate adjustment. Many owners adapt rental rates based on demand, maximizing income during holidays or local events.

Cons

• High turnover. Frequent tenant turnover means more time and effort spent on cleaning, maintenance, and managing guest arrivals and departures.
• Regulatory challenges. Some areas have strict regulations or zoning laws regarding short-term rentals, which could lead to legal complications.

Long-term rentals

Long-term rentals can provide stability and consistent cash flow. They attract tenants seeking stable housing arrangements. This might be a good choice for those who own property in suburban areas or want to avoid high tenant turnover.

Pros

• Stable income. Long-term leases provide a consistent and stable monthly cash flow and predictability.
• Reduced turnover and management. There's less need for tenant screening and property turnovers.
• Lower vacancy rates. Tenants tend to stay for extended periods.

Cons

• Limited flexibility. Owners have less flexibility to use or access their property since it's occupied by long-term tenants.
• Potential for rent control. Some regions impose rent control laws, limiting the ability to adjust rental rates based on market demand or inflation.

Seasonal rentals

Seasonal renting, prevalent in tourist destinations, allows property owners to take advantage of peak seasons. Let’s say you own a beachfront property in a tourist hotspot. You can strategically advertise and adjust rental prices during peak tourist months.

Pros

• Peak earnings potential. Some owners charge significantly higher rental rates during peak seasons, sometimes by 500% or more.
• Convenient dual use. You can leverage the property for personal stays during off-peak times.

Cons

• Intensive operational demands. Managing seasonal rentals often comes with increased maintenance, marketing, and logistical coordination during peak seasons.

The Management Dilemma

As you can see, property management comes in as a major ROI factor no matter the rental type. Picture property management as the foundation of a sturdy house. Regardless of the design or structure (rental scheme), a strong foundation ensures the entire property stands resiliently, safeguarding your investment.

“Typically, rental property management includes overseeing tenant acquisition, handling lease agreements, addressing maintenance issues, collecting rent, conducting property inspections, and ensuring compliance with local regulations. Yes, that’s a handful. And it’s up to you to control all these processes yourself or hand them off to a third party,” explains Aleksandr.

Here, owners usually go down two main routes: conducting personal management or hiring a property management company. Let’s break down both options:

Self-management

Managing a property independently involves overseeing tasks like bill payments, maintenance, and tenant interactions. While it offers more financial control, it can be challenging, especially when dealing with remote properties. Tax management and legal responsibilities further complicate the matter, if you’re not well acquainted with the local legislation as a foreign investor.

Besides, remote maintenance is tough to manage. You’ll have to rely on local contractors or property management services, coordinate repairs and inspections from a distance, and troubleshoot other issues from miles away. This option demands significant time, effort, and expertise on the part of the owner.

Bottom line: Self-management might be a good option for those investors seeking total control over property tasks and having enough time on their hands to deal with every aspect of property management.

Property management company

Hiring a property management company eases the burden for owners. These contractors handle various responsibilities, including tenant screening, property maintenance, rent collection, and legal matters. Although you’ll have to pay a regular fee (usually a percentage of the rental income), the benefits often outweigh the costs, especially for distant or multiple properties.

Bottom line: Hiring a property management company can be the optimal choice for those who want to delegate property-related tasks and maintain a hands-off approach to property oversight.

Navigating the Options

Every rental type and property management strategy has its advantages and drawbacks. “There’s no universal recipe for high ROI here,” says Aleksandr, so you might want to weigh in all the pros and cons before opting for an approach that fits you best.

When asked how an owner can address the agonies of choosing, Aleksandr boils it down to several factors that can steer the decision-making process:

• Property location. Geographical factors heavily influence rental types. Properties in tourist areas might favor short-term or seasonal rentals, while long-term rentals suit residential neighborhoods.
• Owner's involvement. Investors willing to dedicate time and effort may prefer self-management, while those seeking convenience often opt for property management companies.
• Market demand and seasonality. Look into the local market's demand patterns and seasonal fluctuations. This insight helps in choosing the most profitable rental type.
• Financial goals and risk tolerance. Investors with higher risk tolerance might explore short-term rentals for potential higher returns. On the other hand, if you’re seeking stability, you might lean towards long-term rentals.

Once you map out these key considerations, you’ll have a clearer vision of your rental property investment approach. And if you’re still struggling, you can always request consultations from experienced real estate advisors or seek guidance from property investment professionals. Sourcing insights from experts with the knowledge of the local market where you own a property is also a huge plus. Remember, knowledge is another important investment: it will pave the way for successful property management, leading to a boost in returns and sustained growth.