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Why Owners Charge What They Do
Seven years ago we bought a villa in Florida. Wow we thought, us, villa owners, can’t be bad.
Then we started to advertise and rent out our piece of heaven. At first we had no idea what to charge so we looked at websites and picked a figure quite near the bottom rate of what other owners were charging. Off we go we thought, the money should start rolling in now. And it did, wonderful. But, there was a slight snag. WE WEREN’T MAKING ENOUGH TO PAY OUR BILLS.
Help we thought, OK, next year we will put up the rates a little – still not enough. Two years now and still no profit. Something had to be done.
So, we asked the advice of a good friend who runs a business. “Well”, he said, “It’s obvious to me, you’ve never done a profit and loss balance sheet”. He showed us what to do and we made our very first spread sheet. We listed absolutely everything we spent on the villa and in the income column, everything we received in rental.
We suddenly realised to our horror, exactly where we were going wrong. The outgoings were way in excess of the income. First there were all the taxes; Tourist Tax, Sales Tax, Real Estate Tax and Tangible Tax. Then there are two licenses, DBPR License and the State License. Then there are Management Company fees, Accountants fees, Maintenance fees, Lawn cutting fees, Pool Cleaning fees, Home Association fees, Pest Control fees, Community charges, Huge Insurance fees and website hosting fees. Of course we also have to pay the sites we advertise on as they are businesses too and do not run as a charity. Incidentally, none of these fees are optional, they all HAVE to be paid or we would be breaking the law.
All this without even starting on Utility bills; telephone, cable TV, Internet connection, Gas, Electricity (Huge cost with air conditioning running 24/7), Water (Yes we have to pay for that – all of the water that goes in the pool). So if you add onto that the maintenance of the villa, decorating, replacement of goods when the wear out, replacement of linen and towels on a regular basis, you can see why we charge what we do.
Once we had finished our spreadsheet we could see why we never made any money. So now, every year end we add up all the costs and divide them by 30 (The number of weeks we normally rent the villa) and we get a breakeven price. We were amazed at how much we had to charge per week to pay for all this. We have to make a profit just to be able to improve the property and it’s contents to give our guests the best of everything we ourselves would expect in a luxury villa.
So now we charge a realistic figure to cover all our costs, and guess what, we still rent for approximately 30 weeks of the year !
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