Rental yields - points from a potential long-term IV

I often keep an eye on what is happening on the Roda Golf forum as it seems like the obvious place to get an idea of what we may expect on Corvera.  Although I have predominantly bought on Corvera for investment purposes, it was for the medium to long-term and not to "flip-on". 

At the time of committing myself to purchase at Corvera I had assumed that I would receive a reasonable rental yield for my property whilst in the long term the value would naturally appreciate as the resort developed and the surrounding infrastructure was built.  However over the last year I have really been concerned about the poor rental yields that Roda seems to be giving - have a look on any rental website and availability is not a problem and the rates are extremely competitive (and way below what I was led to believe they would be). 

It's not that I necessarily expected the mortgage to be covered but I am surprised at how bad the figures appear to be.  The most recent thread on the Roda website seems to confirm this whereby long-term rentals of 500 to 550 euros a month appear to be offered for apartments that are furnished to a high standard.  With furnishings likely to cost at least 6000 euros and monthly community charges amounting to about 120 euros this seems like a pretty poor deal considering the capital outlay.  However as the post suggests, they expect the demand from owners to be high.

I thought that at Corvera we may be able to secure some tenancy from contractors for a couple of years eg airport or on-site but it really doesn't seem worth it.

I know that there are contributors to this forum that own properties on both sites - is the rental situation really this bleak?  Is there any other way of securing rentals?

i too agree with you mr unhappy about rentals being offered by the poster on roda thread.
500 -550 euros per monthis a joke.
we were sold out on our penthouse below totally between april and october this year for £300 - £500 per WEEK never mind euros per month.
think they are just chancing that someone will go for a long term deal.

Thanks for the feedback Arky25, it would be a big big plus if there was a significant income from rental. Mr unhappy mentioned that there might be communal costs amounting to around 120 euros per month, can anyone tell me what the other running costs are likely to be on a two bedroom apartment, taxes, utility fees etc? Any feedback would be much appreciated.


kev

I just looked at a rental site for Roda (  www.rodagolf-rentals.co.uk/resorts/villasearch.asp?Resort=Roda_Golf_&_Beach_Resort  ) the average price appears to be around £350 per week. When I looked at  the availability for a few of the apartments, I would say around half of them have no bookings for the next year, with the rest possibly averaging a weeks booking. Are these typical? or does anyone know if there is another explanation for the apparent low bookings?


kev

Perhaps it's symptomatic of the current economic climate but I think that moreover it's due to the region not being known as a general tourist area to the UK market.  To me it really underlines the importance of having the De Vere hotel up and running and the PGA of Europe in residence (as mentioned by a recent thread).  In addition, you could probably assume that the bookings that have been made are for personal use.

It seems that the thread on the Roda forum that I originally commented upon has been changed due to the forum rules.  In my opinion, although it is of course blatant advertising, it is offering a much needed service to owners who are seeing very little returns in the tourist market. 

Arky seems to be creating a very good return in comparison which is encouraging but I guess that you really need to be pro-active in your own marketing to achieve this (such as creating a website and networking).  I will imagine that many Roda owners will be offering their apartments for rental to Corverians as completion time nears.

** EDITED - Commercial post **

We spoke to pablo about the monthly fees he mentioned possibly somewhere between 120 to 150 euros per month,after which you pay for gas,electric,water plus internal maintence when required.on top of all that you have your taxes such as (rates,), income tax,and possibly wealth tax.

I'd say a big part of next years rentals being low is that a lot of people don't know when they can go yet. It's different to booking a charter holiday from a tourist office. We've been to Roda 3 times this year alone, and each time we waited till we knew when we could get the time, and then simply took a few weeks checking to get  the cheapest flights on those days to Alicante/San Javier from Dublin. Only then would we look at rentals available.

I reckon a better analysis would be to see how this years bookings went in general. If most of the apartments on ownersdirect or holidaysabroad or the site mentioned by Kev2 were half/third booked for the year, then I'd say most of those owners were happy enough. And this is before the hotel/shops etc are ready and the Roda brand gets better known, which surely it will as it is a lovely resort and a very good golf course.

I can't speak for all here, and I'm not an investor so I have a different approach to those in general, but I'd say most "lifestylers" would not expect the rentals to pay the mortgage, but if it paid around 50% of it it will be a nice bonus as in effect it will halve the mortgage - if we can get one. And unlike a lot of the other (non golf course owners) lettings in the area, we will all have a 12 month potential as the golf course will be in perfect condition in the Murcian winter.

I agree with your points Frank - I have looked at availability throughout the past year and with the exception of July, it seemed to me that booking any accommodation would not be a problem.  My experience of visiting this year was that the golfing facility was encouragingly busy but the rest of the resort seemed fairly empty.  What was it like when you visited this year?

At the moment my optimistic estimate for rentals would be about 20 weeks at 500 euros a week for a 3 bed apartment.  Could anyone (if it's not too personal a question) tell me if I am wildly under or overestimating?

As a long-term IV and given the current circumstances I do expect to be able to cover the mortgage (or even the first year's costs such as furnishing, air con etc and those highlighted by moll) but I would like to be able to calculate how much it may cost.

In fact the delays by Calidona in completing the first phases have actually helped as there is less of a gap between completion and the opening of the new airport.  I expect a really positive effect from this as it's opening will be heavily advertised by the Spanish and bring forth the obvious benefits.  Any more news on this?

PS - I really ought to change my name on this forum as I feel that some people immediately assume that I am being negative - my fault for choosing it I suppose and I imagine that a few people have a number of suggestions!  Any ideas how I may change it?

Mr Unhappy (soon to Mr Happy, hopefully)

You will have to work at the 20 weeks but it is possible, furnish the property nice, get great pictures taken and market the property properly, have a good meet and greet service (not touting for business, but we will be there) and generally make the property very inviting, give friends, family and colleagues good rates in the first year and they will all come back. paying close to normal rates after that and they in turn will tell their friends and colleagues, etc.

Generally 20 weeks at 500 euros per week should be quite acheivable, start marketing and advertising now.

Don't change your name just yet, you make lots of sense and make some great points and very pertinent observations.
** EDITED - Advertising **

Mr UH,

To answer your queries.

I've been to Roda 5 times in the last 2 years, and it has gone from a golf course with building work around it to a great up and running resort. This year we went over in April - not too busy (but also the day the new clubhouse opened so still good timing), June - a bit busier, and September which was busier again, but still not heaving. But then again I'm not interested in a Benidorm type packed environment. There were a lot of empty apartments each time, but it is getting there, and I guess when Ph 4 and 5 and the hotel (when open) will make it even better and give it a bit more life. Plus, the more that people hear of Roda, the better the name it will get. It is streets ahead of the Polaris' of this world, and in my opinion it is better than La Manga, but without the name, or the fact that it is still not finished. I'd be very interested to see how well Roda is doing in about 5 years time. I suspect and hope very well. If there is one issue, it might be hard to get a round of golf as the course is already very busy, and that is with the resort only half finished and without the hotel - which I presume will get block booking rights.

BTW I don't have a property at Roda so I'm not trying to sell the resort.

We wouldn't expect 20 weeks a year rental at Corvera. If we did we'd be delighted. If we got 10-15 it will hopefully pay around 30-50% of the mortgage which will be a lovely bonus. Also, we would expect very little at all in the first year, at least and until both the course and club house are open. But we hope that the location, the quality of build, the Calidona name (from Roda and others), the course, the PGA affiliation, and the proximity to the new airport will be a big factor in letting it. We may find that we get a lot more 1-2 night short bookings because of the airport, and possibly less 1-2 week stays because we are that bit further from the beach. But in the current climate I won't pretend that there are a few doubts, but not just about Corvera, but about everything.

I have 2 two bedroom penthouses on Roda phase 1.  Both are on long term lets - I just got an e-mail from my management company saying that one of the renters has been offered a cheaper deal - as I currently get 500euros per MONTH from them this was rather annoying, however the management company said that due to the current situation that I should take what I can get. I have a good relationship with these people and trust their judgement.  People who think they are going to get 20 weeks at 500 euros per week are in for a big suprise.  I will now net 450 euros per month per property less 120 euros for Roda site management.  The properties you can see on the websites with only one or two weeks of bookings are not booked because of chronic oversupply - the two weeks that are booked are probably for their own holiday.  There is NO demand for these properties.  I am not saying that Roda is a bad place - far from it, its just that:

1. Its a building site.
2. Nobody knows about it anyway
3. People don't differentiate between it and the likes of Polaris (although they should)
4. Everyone on the development is trying to let out their property.

I bet that if you contact someone with a property on Roda and offer them a rediculously low price for a week in their property they will take it just to get anything.  Unfortunately Corvera will be the same except it won't even have a golf course for the first phases.

many thanks for your factual account of what is actually happening with the rentals , as a roda phase 4 owner it does appear that the reality of the situation is somewhat different to peoples expectations .
i would hope that rental yeilds improve as the resort  matures but at calidonas present rate of progress that would appear to be a long way off .
330 euros net per month less any wear and tear on a five star golf resort not a great investment return as i am sure you would agree .
a very sobering and thought provoking set of figures as these are FACT and not based on expectations of covering a mortgage (assuming you can get one ) let alone a deflationary price spiral in spanish property .

Thanks Frank - that fits in with my experience / feelings for the resort.

AEC - I was just starting to feel more positive about the situation!  I did say that 20 weeks was optimistic.  Thankyou for your honest reply - did you spend much time trying to rent out your apartments yourself?  What are Calidona doing to help market the resort?  For example I believe that there is an important tournament at the start of November at Roda.  Has anyone heard of this?  Am I right?  Were there any mail-shots / e-mails to tell owners about this?  I fear that their relatively lack-lustre approach to marketing the existing resort does naturally have an effect on any potential purchasers LS or IV  (irrespective of the present financial climate).  I'm not a regular golfer - does Calidona advertise in any golfing magazines?  Does it advertise the resort in UK golf clubs?  How do other resorts manage?

In addition, I wonder how an influx of cheap long-term lets may effect the overall "feel" of the resort.  When the sales office were explaining the De Vere associations with the resorts, I wasn't envisaging the resort being occupied in this manner.  Of course AEC is right, it's about basic economics, this over-supply has pushed prices down but again I can't help feeling that the brand has not been bolstered by the developer.  Instead it is left to contributors like CIP to positively reinforce the brand.

CIP - thankyou for your advice, the only problem is that (and please don't take this the wrong way), I wouldn't really recommend a very incomplete golf resort with no facilities to my family or friends.  As the low prices at Roda show, they are relatively insignificant compared to the airfares that people with children of school age are forced to pay during the school holidays and holidays are too important to gamble a poor experience.

A quiet resort may be great for LS but without the supplementary income it does work out as an expensive holiday destination unless you use it fully.

Hi everyone,as an owener in CORVERA phase 3, golf is played out of season in SPAIN ie(sept-april),which should peak season because it is much cooler.
You should be looking for 500 euors per week not per month,then in summer time reduce your rate to 500 per month as golfers find it dificult to play in that type of heat,and also you should get some holiday makers and just golfers.

Hi everyone. 
I'm new to the forum, so only just finding my feet but have lots of questions about Corvera and the potential for rentals.
I'm a phase 2 owener of an apartment but am seriously thinking of trying to sell before completion, having entered into the agreement some 3 years ago almost, events in very recent times have spiralled the costs involved.
Anyone aware of anyone else who has sold already?

I'd really prefer not to sell as my partner and I are both golfers but unless I can see real potential it would appear to be a very reluctant  option, especially if rentals are not looking good.

Welcome
Sorry to bring you bad news but the answer will be that you cannot sell your contract,we have tried three times and the same answer came back from CALIDONA NO.
So like many others just sit tight and hope things improve and get built in a satisfactory time.

Just to say that if you are on phase 1 you should be allowed to sell your contract (if you can get a buyer), the same is true for some of those on phase 2 (me included), not all of those on phase 2 will be able to sell before completion as the contract in this respect was changed during phase 2, I can not recall the exact date off hand.


kev

Hello Everyone,

Just a couple of points regarding Mr Unhappy's questions about the tournament that is held at Roda in November (25th - 28th) - this is the annual PGA's of Europe International team Championship (Last year 120 pro golfers played from 28 countries) and he is right about there not being much publicity. Just google the event and you will find a fair bit of info about it last year, but struggle to find anything about it this year and it is only next month!

The PGA's of Europe do promote Roda on their website - have a look at the following link to see more http://www.pgae.com/roda.php and I'm certainly trying to do my bit for the area in releasing press releases about Roda and we are exhibiting at the NEC Golf Show next month and the flyer we give out has 6 golf properties featured and one of them is on Roda. When we were at the London Golf Show, speaking to golfers, hardly any had heard of Roda, but nearly all know the De Vere brand and when you mention that they get interested. It just takes time, I am sure once the hotel is built you will see a lot more publicity from De Vere - they will not want their hotel empty!

Sue

Thankyou Samantha, and I feel that it proves my point that it really is the agents that are pushing the sales and therefore the Roda / Calidona brand.  Unfortunately it means that individual owners who wish to rent out their properties are often left to their own ingenuity to try to gain any sort of return.

In addition I feel that your good work in explaining the De Vere association is let down by delays in building the hotel.  A google search of De Vere and Roda brings lots of different information regarding completion with dates ranging from 2008 to 2010.  Also if you visit the official Roda website, concerning Roda it has the sentence "this is a clear indication of the De Vere interest in the project" followed by a web-link that has no content related to it at all.  Why not state that the contract is signed?!  Why not tell us when the hotel will be built?  As a potential purchaser, alarm bells would ring and it's no wonder that some people who have purchased on a Calidona resort are anxious / annoyed / frustrated.  It's not good enough to say that this is the "Spanish way" when a solid UK brand has been used to sell the resort to people.

C'mon Calidona get your act together and show a firm commitment to your clients!