Let-out strategies for property owners
Property owners looking to let out their flats or houses face an important decision: which letting approach is the right one? Whilst the classic long-term let to private individuals is the traditional route, alternative approaches such as letting as accommodation for tradespeople or a boarding house offer interesting opportunities. Each model has its own advantages and disadvantages, different potential returns and specific risks. Choosing the right approach depends on various factors: the property’s location, the time you can commit, your risk appetite and your financial goals.
This article provides an overview of various letting options for property owners, with a particular focus on letting properties as accommodation for tradespeople and workers. It explains how these models work, what returns are realistic, and what owners should bear in mind.
Traditional long-term hire vs. short-term hire
Most landlords are familiar with the traditional long-term tenancy. The property is let to an individual or a family who live there on a permanent basis. The tenancy agreement is open-ended, the rent is fixed, and the administrative burden is kept to a minimum.
Advantages and disadvantages of traditional letting
The biggest advantage of traditional letting is that it’s predictable. You have a permanent tenant, a fixed monthly rent and little hassle. Once the property is let, you mainly just have to deal with repairs and the annual utility bill settlement.
The drawbacks lie in the limited return on investment and the legal situation. Rent is capped by the rent index, and rent increases are only permitted within narrow limits. Furthermore, tenant protection is very strong in Germany – getting rid of an undesirable tenant can be difficult.
Hiring technicians as an alternative
Renting out accommodation for workers operates on a different basis. Instead of letting to a long-term tenant, the property is let fully furnished to a succession of guests who are working in the region. Stays range from a few weeks to several months.
The key difference lies in the terms of the contract. In the case of accommodation for tradespeople, these are usually, in legal terms, fixed-term contracts or commercial tenancies, which gives the landlord considerably more flexibility. Protection against unfair dismissal does not apply to the same extent as it does for residential tenancies.
Rental models for accommodation for construction workers
Within the trade labour hire sector, there are various models that place different demands on the owner.
Self-managed letting
With self-managed rentals, the owner handles all aspects themselves: marketing, bookings, handing over the keys, cleaning and guest support. This model offers the highest return on investment, but also requires the most time and effort.
The owner must list the property on booking platforms, respond to enquiries, draw up contracts and be available to help if any problems arise. This can work well for owners who live nearby and have the time.
The return on investment for self-management is typically 30 to 50 per cent higher than the standard basic rent. A flat that normally fetches €800 in basic rent can generate €1,200 to €1,400 a month when used as accommodation for workers – although the costs of furnishing, utilities, cleaning and maintenance must be deducted from this amount.
Leasing to professional operators
A convenient alternative is to let the property to professional operators of accommodation for workers. The owner lets the entire flat on a long-term basis to an operator, who takes care of everything else. The operator furnishes the flat, markets it, looks after the guests and bears the marketing risk.
This model combines the best of both worlds: the owner has a permanent tenant with a long-term lease, providing planning security. At the same time, the rent is significantly higher than the local market rate.
The return on investment here is typically 15 to 30 per cent higher than with a traditional rental. This is less than with self-management, but in return there is no effort involved and no marketing risk. The operator pays the rent reliably every month, regardless of whether the flat is fully let or not.
It is important to choose a reputable operator. They should have a proven track record, sufficient financial resources and be willing to enter into a long-term contract. A credit check and references are essential.
Location factors and the suitability of the property
Not every property is equally suitable for letting as accommodation for tradespeople. Certain factors significantly increase the chances of success.
Location and facilities
Location is key. Accommodation for construction workers is in particularly high demand near industrial estates, business parks or construction sites. Towns and cities with a high concentration of manufacturing companies, logistics centres or major infrastructure projects offer ideal conditions.
Transport links are also important. A nearby motorway junction is ideal, as fitters usually travel by car. Shopping facilities should be within easy reach, as guests will be catering for themselves.
Tourist hotspots or purely residential areas with no significant industry, on the other hand, are less suitable.
Property type and condition
Generally speaking, flats of around 40 square metres or more are suitable. Larger flats of 60 or 80 square metres or more can be let to teams, which increases the return per square metre.
The property should be in good condition. Fitters expect clean, functional accommodation. A newly renovated flat with modern bathroom facilities is ideal. A fitted kitchen is a must, as is a fully functional bathroom. The flat must be fully furnished, which will require an additional investment of around €3,000 to €8,000.
Calculation of returns and cost-effectiveness
The return on investment for a site accommodation unit depends on many factors. A realistic calculation should take all costs into account.
Revenue and costs
Monthly rental income typically ranges from 25 to 40 euros per square metre. A 60-square-metre flat can therefore generate between 1,500 and 2,400 euros a month. If you manage the property yourself, you should expect an occupancy rate of around 70 to 85 per cent.
The costs should not be underestimated:
- Furnishings: Initial investment of €3,000 to €8,000
- Utility bills: electricity, water, heating, internet (usually included in the rent)
- Cleaning: 30 to 60 euros per guest change
- Maintenance: Higher wear and tear than with standard rental
- Marketing: Fees for booking portals (10 to 20 per cent of turnover)
Once all costs have been deducted, a good occupancy rate yields a net return that is around 20 to 40 per cent higher than that of traditional letting.
Risks and challenges
As well as the opportunities, there are also risks that owners should be aware of.
Increased wear and tear and fluctuating demand
Accommodation for construction workers is subject to greater wear and tear than standard rental flats. A constant turnover of guests means more wear and tear on furniture, appliances and fittings. Mattresses need to be replaced more often, crockery gets broken, and electrical appliances wear out more quickly.
Demand can fluctuate. During economic downturns or when major employers in the region close down, capacity utilisation falls. Seasonal fluctuations also play a role – demand is often higher in summer than in winter.
Time required and legal considerations
Self-management takes time and effort. You need to be available, resolve issues and manage the organisation. Anyone who is unable or unwilling to do this should work with a professional operator.
The legal classification is important. The hiring out of tradespeople is generally regarded as commercial letting, not residential letting. This has tax implications and alters the legal framework. It is advisable to seek tax advice.
Renting out properties as accommodation for construction workers offers property owners in suitable locations an attractive alternative to traditional letting. With the right strategy, realistic expectations and professional execution, it is possible to achieve above-average returns with a manageable level of risk.
