Purchasing a property, refurbishing it and renting it on Airbnb can be an excellent source of income. However, many people spend all of their money on the property itself. They either forget to budget for refurbishment, or they don’t see the value in it. This article tells you why refurbishment is so important, gives you our top Airbnb refurbishment tips and walks you through one of Moving2Madrid’s Airbnb refurbishment success stories.
Why invest in refurbishment?
To put it simply, investing in refurbishment will increase your return on investment (ROI) when you sell a property. Moving2Madrid has purchased properties for over 800 clients, and we have found that, on average, every 1€ invested yields a 1.5€ return. This is when one sells a property and doesn’t take into account the additional profit that refurbishment yields when letting a property short term.
How complete does a refurbishment need to be?
Many people make the mistake of over or under investing in refurbishment. Meaning they did not make enough changes to maximize their ROI, or they invested money in luxury fittings that don’t have much resale value, like super expensive bathroom tiles or Jacuzzis.
We group refurbishment into three levels:
- Full refurbishment- This involves making structural changes when necessary (knocking down walls), redoing the floors, investing in air conditioning, remodeling the kitchen and bathrooms, buying new furniture and lighting.
- Redecoration- This involves making cosmetic changes to an apartment, such as adding new rugs and furniture.
- Ready to go- This is when we purchase properties that are ready to be lived in or rented out, with little to no changes made.
This is a property that was fully refurbished. It is in the sweet spot (1,000€-m2) for refurbishment investment and does very well on Airbnb.
We have found that the “Sweet Spot” for refurbishment is Level 1: A full refurbishment. On average, you can expect to spend 1,000€/m2 for a full refurbishment. To learn more about the costs of refurbishment, read Apartments before and after our refurbishments.
Our favorite strategy is to look for apartments that no one wants. These can be purchased at a discount to more desirable properties. This is particularly true in the Madrid market, as most of the apartment stock was constructed before air conditioning was popular. Thus you have a lot of layouts that are very narrow and deep. These older apartments only have a couple windows facing the street (to keep the heat out in hot summer months). The more interior rooms are dark and often cramped- problems easily fixed with a structural refurbishment.
The important thing is to run the numbers before you purchase a property. If you need help doing this for your Madrid property purchase, arrange a free consultation today with one of our property specialists.
Why is it so important to refurbish before listing on Airbnb?
Airbnb has become huge. Its value is now greater than that of Hilton International (the world’s largest hotel chain), Hyatt (the world’s second largest hotel chain) and the prestigious Mandarin Oriental chain combined. As Airbnb has grown, it is increasingly competing with big hotel chains. In the past it was perfectly acceptable to rent an apartment with aging furniture and your personal effects spread all over the bathroom counter. The situation now is completely different.
Today, it’s not just customers seeking out higher-end properties. Airbnb itself is taking the initiative to bring its listings upmarket. It is in the process of rolling out a new program called Airbnb Select. This is a program in which Airbnb,
“Invites selected hosts with high ratings and reviews to be part of a curated collection of listings that undergo an inspection and professional photography process.”
Interestingly, they will even offer loans to help people refurbish their properties. These will be repaid through revenue made from future bookings. We predict that this will be excellent for the Madrid market, which still lacks high-end rentals. One of the reasons for this is that Spanish banks, unlike those in France and the UK, don’t offer financing for refurbishment when they issue mortgages. Additional liquidity provided by Airbnb would help some of the 80% that finance their Madrid property investment afford refurbishment.
So don’t just listen to us when we tell you how important it is to refurbish. Follow the lead of Airbnb!
Our top Airbnb refurbishment tips
Contrary to popular opinion, the maintenance on Airbnb rentals is relatively cheap. So there is no little to invest in things to reduce maintenance cost. It is much more important to focus on how short-term renters use an apartment.
1- The kitchen is not very important
People renting high-end apartments for a few days rarely cook. This clientele prefers to enjoy a city’s restaurants and nightlife, especially in a vibrant city like Madrid. Focus on basic ovens and refrigerators. There is no need for fancy food processors, microwaves or wine refrigerators. However, make sure you provide a coffee maker! A N’espresso machine can be a nice touch for higher-end rentals.
The kitchen floor should be porcelain and easy to clean.
This is an example of a good kitchen for a short-term rental. Simple appliances are all you need in this market.
2- Invest in a good boiler. This is perhaps our most important Airbnb refurbishment tip.
People on vacation tend to take a lot of showers. In a house with multiple bathrooms, people will likely take showers at the same time. In properties with limited bathrooms people will take showers consecutively. Make sure your boiler is up to the task!
3- The showers should be user-friendly
Remember, expect people to take a lot of showers consecutively. Make sure your showers are user-friendly. There should be ample drainage both in the shower, and even in the bathroom floor.
NO! This elegant Italian shower looks beautiful but it is expensive and completely impractical when the floor floods.
4- Invest in air conditioning
This is another extremely important Airbnb refurbishment tip, particularly for Madrid. As we mentioned above, most Madrid apartments were designed before air conditioning became popular. In fact, many apartments in Madrid still lack air conditioning. This can be a real problem in the summer, which is also the height of tourist season, when temperatures can exceed 40 degrees celsius (104 degrees Fahrenheit).
5- Invest in central heating
Surprisingly, many Madrid apartments lack central heating. Small electric heaters are not a good solution. They are not good at regulating the apartment’s overall temperature, they are very expensive to operate and they introduce an unecessary fire hazard. Any money spent on central heating will offer you a much greater return. Moreover, the City of Madrid has recently introduced regulation requiring all Airbnb’s to provide heat. So you must provide it to avoid a fine, or having your Airbnb permit taken away.
6- Ensure there are ample power outlets
Because the apartment stock is so old, many of them lack outlets. When you do your refurbishment, keep in mind that Airbnb customers travel with phones, cameras, computers and portable speakers. They will all need to be charged- typically at the same time.
7- Select neutral colors for walls and natural woods for furnishings
Although bright colors can “pop”, studies show that most people prefer a neutral, natural look. If you want your Airbnb to have a low vacancy rate, make sure its decor appeals to the broadest segment of the market.
You can save money on your initial investment, plus minimize wear and tear, by using laminated wood. Unlike hardwood, laminate flooring does not fade in the sunlight and is resistant to stains, impacts and scratches. Bonus Airbnb refurbishment tip: make sure the flooring captures the flow of light.
8- Choose accent pieces to add character
This is a great way to make apartments “pop”, and is much more forgiving than employing bright colors. Start with one statement piece such as a painting, colorful piece of furniture or pottery item. Use this statement piece to select complementory colors for other items in the room.
9- Optimize your hallway space
As a property owner, the last thing you want is for baggage to bang against your walls and furniture. Make sure your refurbishment allows for plenty of hallway space between the front door and the bedrooms.
10- Use a variety of textures to add extra interest
Again, this is a good way to differentiate your apartment from the herd of Airbnb listings. Decorative fabrics can be used in throw pillows, slipcovers, window coverings and wall hangings.
11- Mirrors are your friends
Hang them in strategic spots. This is an easy and cheap way to add light and make your place appear more spacious.
Case Study: An Airbnb refurbishment success story
This is an example of an apartment we have refurbished. Our client has listed it on Airbnb and we manage it. They followed all our Airbnb refurbishment tips and it has a low vacancy rate. Here is what they did right:
User-friendly shower
Unlike the fancy shower above, this one will not flood the bathroom. BONUS: its use of neutral colors and natural materials.
Comfortable, good quality beds
Although a fancy kitchen is not important for short term vacation rentals, comfortable beds are. The natural light is an additional plus.
Well functioning, attractive sofa bed
How many times have you wrestled with a tricky, or even broken, sofa bed? In an Airbnb it is vital they function smoothly and reliably. This one has the added benefit of fitting seamlessly into the living room decor.
Excellent choice of accent piece
This unique wall covering is simple, but differentiates the apartment from other Airbnb listings. The rest of the room decorations complement it perfectly.
Optimized kitchen
As you can see in the photo of the kitchen above (taken at this property), the kitchen is well-designed but doesn’t waste money on fancy appliances that short-term renters will not use. Moreover, as you can see from its Airbnb listing, it even has a N’espresso machine. Even George Clooney would be comfortable in this apartment!
Want to learn more?
If you’d like to learn more refurbishment tips, we suggest you read Top 25 Home Remodeling Ideas to Attract Renters From the Pros.
Madrid is currently the best European city for Airbnb investment. If you wan to earn additional income from investing in Madrid property, but don’t want the hassle of managing your refurbishment, we can help. We work with a partner architect that is very experienced at refurbishing Airbnb’s. CONTACT THEM TODAY to arrange a free consultation.