Tamarindo rental investments are very popular among income investors and rightfully so. Renting living space to other individuals is one of the oldest professions in the world, and it’s still a very lucrative business to be in today. We note five main reasons why investors may want to invest in “rentals”:
1- Consistent and high income:
Since having a roof over one’s head is a vital necessity, the cyclicality of the demand for properties is greatly reduced, regardless of economic conditions. In a recession, tenants may receive a rent cut to keep occupancies at high levels, but overall, the income tends to remain relatively resilient and consistent over the full cycle. Additionally, short term holiday rentals are always in high demand, especially with the advent of AirBnB, Booking.com, Home Away etc.
2- Long-term appreciation:
Well-located rentals are a limited commodity with ever growing demand. The result is price appreciation – often well in excess of inflation with growing rents and values. Moreover, there’s a clear trend toward ever lower ownership rates and therefore rentals continue to benefit from an ever-larger demand pool.
3- Benefits from rising interest rates:
Unlike most other property sectors which may under certain conditions suffer from rising interest rates, rentals tend to always win here because higher interest rates make it harder for people to buy their own home. Therefore, when interest rates rise, the demand for rentals increases – allowing landlords to raise rent.
4- Inflation protection:
Real estate and especially rentals can serve as valuable hedges against the risk of accelerating inflation. Leases are generally no longer than one year long – allowing for regular rent increases when warranted.
5- Leveraged returns:
Leverage may boost returns, but also amplifies risks. That said, since rentals tend to produce relatively consistent and predictable income, investors are commonly able to get away with moderate leverage over the full cycle without sinking the ship. It may result in greater asymmetrical risk-to-reward outcomes over time.