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In the first part of this article, real estate broker Cherita O’ Dell shared the basics of investing in real estate in Barbados. She explored the appeal of property investment, especially for those looking to generate rental income or achieve capital appreciation. However, like any investment, real estate comes with risks. In this article, we will focus on the pros and cons of long-term vs. short-term rentals as well as the main risks and challenges investors may face.
Deciding between long-term rentals and short-term options like Airbnb depends on your financial goals and risk tolerance.
O’ Dell explains: “Long-term rental is predictable, slow, and steady in terms of providing passive income. It can be extremely beneficial if you secure a tenant who is timely with their payments and treats the house well. It can frustrate you however, if your tenant pays sporadically. You then have to pull your pocket unexpectedly to ensure that your loan payments are made on time. This can certainly impact your own cash flow.
“Furthermore, it can be a nightmare if you secure a delinquent tenant who chooses not to pay at all. The eviction process in Barbados is a slow and painful one. As a result, you can end up falling behind on your financial obligations and risk losing your property”.
Meanwhile, the real estate broker says short-term rentals can result in a high yield in a short space of time thanks to strong demand and occupancy during the main tourist season. With the daily rental rate highest between December and April, it is easy to surpass yearly revenue gained via a long- term rental.
O’ Dell, however, cautions that this market is unpredictable thanks to seasonal occupancy declines and world events. In addition, expenses can also be high if there is property damage or unexpected high utility bills from misuse.
“Maintenance must be continuous if you want to secure positive reviews which in turn attract future guests. You must be consistent in your offering and standard otherwise it could be challenging to achieve positive reviews and high occupancy,” she advises.
O’ Dell identified five main challenges:
To counter these challenges, investors can take some proactive steps.
“Borrowing within their means and staying far from the top end of what they qualify for is wisdom. They must take into consideration how they will have the capacity to pay for their investment if they lose their job or something unforeseen happens. Planning is key and diversity in other investments is key,” O’ Dell advises.
She also encourages investors to conduct their due diligence into the integrity of the property they are buying to ensure there are no unforeseen structural, plumbing, or electrical issues.
O’ Dell adds: “Confirm that the area is a viable rental area and investigate what comparable properties can achieve on a short-term nightly or long-term monthly basis. Ensure that the property is desirable, sellable, and priced right so that it can easily turn around if it had to be put on the market.”
For those considering their first real estate investment in Barbados, O’ Dell makes it clear that careful planning and research are key.
“Confirm your budget, inclusive of legal fees, taxes, insurance, and maintenance costs. Conduct thorough research. Focus on location, property type, and condition based on your preferred investment objectives,” she says.
O’ Dell also advises investors to work with a realtor who can help them to understand market trends and guide them through the process.
“Think long term and start with the end goal in mind, “she advises.
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