When considering real estate in Ballena, Costa Rica, potential buyers are presented with the opportunity to explore two different rental options for their vacation home purchase: that is, using it for short-term rentals (STRs) or long-term rentals (LTRs). Both options have their unique benefits and considerations, catering to different types of clients and their specific needs. In this article, we will delve into the possibilities of each option, highlighting the distinctions between STRs and LTRs in the scenic coastal region of Ballena.

Renting out your Costa Ballena property can be a lucrative venture, whether you choose to go the short-term rental route or opt for long-term rentals. Understanding the differences between these types of properties can help you make an informed decision.

Short-Term Rentals: Meeting the Needs of Travelers

Short-term rentals are ideal for property owners who want to maximize their rental income and have the flexibility to use the property themselves throughout the year. STRs are favored by various types of visitors, including tourists, backpackers, adventure seekers, and business travelers. These rentals offer a comfortable home base during their stay, allowing them to fully experience the tropical beauty of Costa Rica. Short-term renters often prioritize amenities such as furnishings, modern amenities, cleaning and maintenance services, entertainment options, and proximity to tourist attractions and beaches.

Christine Schiferl of Jaguar Property Management highlights that amenities like internet, air conditioning, and parking are frequently requested by short-term renters. According to AirDNA, the average gross annual revenue for a midrange, three-bedroom vacation rental home in Uvita was $66,100 in 2021, with an average daily rate of $266 and an occupancy rate of 68%. Luxury properties, on the other hand, had even higher revenue potential, with an average gross annual revenue of $101,500 for a three-bedroom home and $176,700 for a four-bedroom home.

However, managing STRs requires meticulous attention to maintenance, high-quality furnishings, and positive guest reviews. The demand for eco-friendly and sustainable rentals with water features (pool, river, waterfall, ocean, etc) is particularly prominent in Costa Ballena. Property owners must ensure regular cleaning and maintenance, handle guest inquiries and bookings, and address any issues that may arise during guests' stays. If you choose to manage the property yourself, be prepared to invest time and effort into marketing, guest communication, and property upkeep. Alternatively, you can hire a property management company, which typically charges a management fee and a rental commission. Property managers can assist in enhancing the reputation of STRs, but owners who spend significant time at their rental property during high season may see lower rental income.

Long-Term Rentals: Stability and Ease of Ownership

Long-term rentals cater to individuals or families planning to live in the area for an extended period, such as retirees, digital nomads, expats, and families relocating to Costa Rica. These rentals provide stability and consistency through longer-term lease agreements, often lasting six months or more. Long-term renters typically prioritize amenities such as fully equipped kitchens, laundry facilities, storage space, and access to community amenities.

LTRs in Ballena are in high demand, with rental rates averaging around $1,000 per bedroom per month. Larger homes command higher rates, and the shortage of long-term rental properties contributes to their high occupancy rates. Owners opting for LTRs have the choice of hiring caretakers or house sitters for their property, who may pay slightly less for a monthly rate but will take more care of the maintenance of the property; or they can engage the services of a property manager and rent out their home for the market rate while they are away.

Choosing the Right Rental Strategy

Property owners in Ballena can adopt a hybrid rental strategy that combines short-term and long-term rentals, maximizing income generation opportunities. Monthly rates during the low season can be advantageous for LTRs, while STRs are more suitable for high season periods. Property managers can play a crucial role in finding tenants for LTRs through social media platforms, saving costs associated with online rental platforms.

Considerations and Costs

Property owners should be aware of the associated costs of owning and renting in Ballena. Property management fees typically amount to around $250 per month, while property maintenance costs range from $250 to $600 per month, depending on the property's size. Other costs include Airbnb's 3% commission, annual property taxes (0.25% of the property value), luxury home tax (0.25%-0.55% of the property value), income tax (typically 10% of net income), and a corporation tax of around $400 annually.

It's worth noting that the rental market in Bahia Ballena is driven by tourism, with seasonal fluctuations in demand. The high season, occurring from December to April, brings peak tourist activities and higher rental demand, while the low season from May to November sees fewer tourists and reduced rental demand. Rental rates vary based on property location, size, condition, amenities, and rental duration.

Case Study: A Lucrative STR In Uvita

To make informed decisions when renting out a property in Costa Ballena, it is crucial to comprehend the dynamics of the rental market and gather firsthand insights from experienced property owners. In our pursuit of deeper understanding, we had the opportunity to interview Amie and Chad, who have been effectively renting out their property in Uvita for the past two years. Despite living in the United States full time, they reserve two to four weeks annually for their personal use, a practice they diligently plan in advance with the assistance of their rental management company, Vacasa.

Casa Ballena Pearl, in Uvita, is owned by Amie and Chad. Photo from Vacasa

According to Amie, they initially opted for short-term rentals due to the high demand for vacation homes in the Uvita area. They found that tourists and digital nomads were drawn to the natural beauty of Costa Ballena and sought comfortable and well-equipped accommodations during their stays. By offering a fully furnished three-bedroom home with amenities like a private pool and a spacious outdoor patio, Amie and Chad were able to attract a steady flow of guests.

Chad emphasized the importance of maintaining a strong online presence through listing platforms and social media channels. They actively promote their property by showcasing stunning photographs of the surrounding landscapes and highlighting the unique experiences guests can enjoy in the area, such as whale watching tours and hiking trails. This strategic marketing approach has helped them stand out among the competition and increase their booking rates.

Amie shared that while managing short-term rentals can be time-consuming, they have developed a reliable system to streamline the process. They carefully screen guests, maintain open communication, and provide a detailed guidebook with local recommendations to ensure a pleasant stay. By offering exceptional customer service and promptly addressing any issues that arise, they have earned positive reviews and generated repeat bookings.

However, Amie and Chad also recognized the potential of long-term rentals for their property. They found that some guests, particularly digital nomads and expats, were looking for extended stays in Costa Ballena. These individuals sought a comfortable living space with the necessary amenities for remote work, such as reliable internet connectivity and a designated workspace. Amie and Chad adapted their property to cater to these needs and successfully attracted long-term tenants.

During the low season, when short-term rental demand tends to decrease, Amie and Chad noticed that the demand for long-term rentals remained steady. They highlighted the advantage of having consistent rental income throughout the year, even during periods of reduced tourist activity. By adjusting their rental strategy and marketing efforts accordingly, they were able to maintain a steady occupancy rate and maximize their rental income.

Casa Ballena Pearl, in Uvita, is owned by Amie and Chad. Photo from Vacasa

When asked about their decision-making process regarding rental rates, Chad mentioned that they regularly monitor the market trends and competitor prices in the area. By analyzing comparable properties and considering factors such as location, amenities, and seasonal demand, they ensure their rental rates remain competitive and appealing to potential guests. Additionally, they offer discounts for longer stays, which has proven effective in attracting guests looking for extended vacations or temporary living arrangements.

Amie and Chad stressed the significance of building positive relationships with local service providers, such as cleaning companies and maintenance personnel. These partnerships have enabled them to maintain the quality of their property and promptly address any maintenance issues or guest requests. By working with reliable professionals, they have established a reputation for delivering exceptional guest experiences.

Amie and Chad's experience in renting out their property in Uvita showcases the potential for both short-term and long-term rentals in Costa Ballena. Their success is a testament to the importance of understanding the target market, adapting to their needs, and leveraging effective marketing strategies. Whether you choose short-term or long-term rentals, it's crucial to establish efficient management systems, provide excellent customer service, and stay attuned to market dynamics to maximize your rental income in Costa Ballena.

Final Thoughts

When contemplating real estate investments in Ballena, Costa Rica, buyers must carefully consider their rental strategy. Short-term rentals offer the potential for higher income but require diligent property management, while long-term rentals provide stability. No matter which rental option you choose, it's essential to consider the specific requirements and preferences of your potential renters. Contact our expert real estate team for more information about what types of properties can make a successful investment for your needs.