14 years
I don't know if there is any single worldwide formula for rent. Take into account things like employee wages, utilities, etc. in the break-even point too...
Choosing a house
Start a Hostel
Hello there.
I'm looking for a house to start my hostel and I'm facing difficulties to determine how expensive is a rent. Is there any formula to know that? Like, the rent's value should be close to the revenue of 20% occupancy of the hostel, 30%, 40%?
Thank you
Fabster
- Comments
14 years
After all the monthly operating expenses, I wouldn't consider a place if you couldn't break-even at 40% occupancy. But that also depends on the location of the property. Also, don't forget about the typical 2.5% inflation increase in annual rent.
14 years
@CAPhouse So you mean that a hostel running under 40% occupancy is impracticable? It's a important info for me, since I'm brand new in this business... All you guys agree?? Thanks CAP!
14 years
No, no. I set a goal that if the property can break-even at 40% occupancy, then its good. If the break-even point is any higher, then it may not be financially smart. The average occupancy rate here is 80%, so that gives a good buffer.
14 years
CAP, I found a place and now I will start a negotiation. According the value asked, it will break-even at 34,5% occupancy. Good?
13 years
maybe is too late to advice you but might be useful for others... I'm Brazilian also, from Rio!
So, the rents here or abroad are about 0.6% (normally between 0.4% or 0.8%) of the value of the property.
Commercial properties can cost more in Brazil because of the "luvas", if you do not pay them, the rent is higher, up to 0.8% of the value of the property, more then this is not acceptable.
Also, as said, you need to know your occupancy rate to know if you are able to pay your bills. Given a certain rent, in certain building, in that location... you will see other hostels around prices, what they offer, and then speculate how much can you price your daily rates... Also the occupancy rate of that location, and put fees in paper also (20% of total income in Rio), costs to keep staff and etc., and check if the rent worths. Maybe in a area with lit lower occupancy rates, and much lower rent, the hostel will give more profits.
:o
thx,
lu
13 years
You are right in that knowing the occupancy allowed for a property is crucial. However, I had to give up on a property because the city could not tell me what occupancy they would allow. Without that number, it's impossible to know if it will be worth it.
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