Dear All,

As most of you on here have either bought, are in the process of buying or are still looking for a property in Hurghada/Red Sea I thought this would be the best place to ask this question.

I too am looking to buy a property in Hurghada, either a one or two bed apartment for personal use but mainly to rent out. However I was speaking to a friend of mine last night who raised some very valid points with me that may or may not have been raised on here already. If it has I appologise for raising it again. (The link would be helpful)

If it hasn't perhaps it's just me missing something (which isn't unusual ;-). His point was it's all well and good buying an apartment on the Red Sea but unless you get a rental guarantee (which you're paying a premium for anyway) who's going to rent it and look after it for you? Who's going to meet your potential tenants at the airport?, give out and collect the keys, Do the pre and post inventory checks for anything stolen or damaged? air the apartment once every couple of weeks as it might be left closed for weeks and you don't want your tenants entering a smelly apartment with dead flies on the floor?, clean it before and after the tenants leave? you get the gist!

I really couldn't answer him. His other point was the key is not just finding the tenants (which isn't going to be easy with soooo many apartments available) but getting them to return or recommend your apartment to others. As he owns holiday rental properties he makes sure the experience is a great one for them. He buys basic essentials for the tenants for when they arrive (water, tea, coffee, milk, bread, fruit etc) and if they're from Italy he buys a couple of Italian Mags, from Spain, Spanish mags and so on. He also puts a what's on leaflet in the apartment and a map of the area with places of interest. He tells me that people always have a great hassle free time and always return and recommend his properties.

Now I know most developments I have looked at have some kind of management and rental service but my question is to what standard would it be managed to and how much will this extra service cost? What kind of marketing are they going to do to rent out your apartment and as you're not there how are you going to manage and check this. I have a feeling (I may be wrong) that this service is just a carrot to real us in but once all the flats are sold and they move on to their next project this side of the business and in my opinion the most important will be forgotten about by the developer.

Views please

Regards

Organics1

Dear Organics

Your friend is 100% right and makes a very good point. The reality is that most people will be dissapointed by the rental returns they are able to achieve - let alone the hassle and stress. This is why it is advisable to buy in a professionally managed rental scheme.

For instance at Ancient Sands Golf Resort at El Gouna, which is now close to pre release, we are designing a rental management scheme that will remove all the management headaches and maximise the income. The key is the operator and their experience, track record and ability to run the programme. Our rental management scheme will be run by an Orascom subsiduary. Orascom are the owners of El Gouna and the largest hotelier in Egypt. They have 14 hotels in Gouna already with over 2,000 beds and this scheme will be a major addition to the portfolio. Occupancy rates at El Gouna were 83% on average accross the destination and because of the existing relationships with tour operators etc the occupancy should rise very quickly to these kinds of levels (perhaps allowing for a 2 year build up period). It is the operator who will do all the things your friend identifys as a problem or a hassle.

Unless there is a credible operator in place with a track record then a rental management scheme is likely to be purely a marketing strategy by the developer to help them sell units and you are right to be sceptical unless you are happy to manage it yourself.

The costs of running a proper rental mangement programme and doing it properly are high though - basically costs are the same as running a hotel. You should expect approx 50% of the gross income from rooms to go to the operator to cover their profit ,costs and maintenance / service charge / utlities etc on the units. If the developer is just basically running a letting agency and saying you will get the lions share of the income then the tour operators are not going to be interested, the income levels will dissapoint, and ultimately the scheme will collapse with no one making enough money to justify keeping it going. I've seen it happen too many times to mention all over the world.

If you are worried about the income then I suggest you wait until you find a credible scheme run by an experienced operator. Pyramisa are running something at Sahl but I was put off by the guaranteed income levels which had been reflected in the v high psm asking prices for units. A well run scheme shouldnt need a guarantee to sell it and the guarantee should certainly not be reflected in unit prices. Most developers offer a guarantee (and we will too) because some people like it as a safety net but it should always be a ratchet guarantee anyway and should never be the major factor in your decision. More important is the quality of the operator and an assesment of whats likely to happen after after the guarantee period runs out - and in fact whether the guarantee is worth much. I wouldnt want to rely on a guarantee from most developers but Im happy that with a market cap of $4 billion and being majority owned by the 11th richest family in the world that Orascom is worthy of my trust.

Hope this helps. By the way Orascom do have another scheme in Sahl called Cape Citadel but I dont know whether the units they are selling around the hotel they also own there will have a rental management programme attached or not. The hotel looks amazing though and may be worth a look.

Regards

Jeremy

Hi Jeremy,

Thanks for your reply which really goes along what my friend was saying.

I know you talk about El Gouna a lot and are very pleased with their product. You obviously have some connection with the new development going on there but I'm not sure to what extent but I wish you luck with it. I have never been there but I have to say when I talk to people about El Gouna they all have good things to say about it.

Can I ask, the people who already own a property in El Gouna as rental investments, do they not have the same problems which I was talking about in my thread? or is there a management company already there which takes care of everything? Do the owners source their own tenants or is there a rental company who does is there as well?

Regards

Organics1

Hi

I own in El Gouna and know several people that rent their properties out. In El Gouna there is a choice of several management companies, from decent size ones to "one man bands". All charge differently - generally around 25% I think. Some have good websites, some don't have any. Interestingly some people have never had British people stay in their apartments, mainly wealthy Egyptians, Italians, Gernans etc. People have quoted between 50 and 70% occupancy rates. One friend now has got James Villas involved and I understand that has been quite successful. Other people advertise themselves on various lettings sites with varying degrees of success. Some people want to know whose renting their apartments, others are happy to do nothing, let the management company sort everything out from picking up at the airport, arranging repairs and filling the fridge. Just depends on how much involvement you want. I'm sure there will be many management companies springing up in the Hurghada area, but the key to getting a decent rental return is buying in a prime location. Hence my preference to buy in places like El Gouna and Sahl Hasheesh.

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Thanks you for your post DistantDreamer,

Another positive comment about El Gouna and agree with your Location, Location, Location comment.

I also agree that unless some quality independent, European standard, management companies open in Hurghada I think landlords will have problems. I certainly don't want that 3am call to say the fridge isn't working or the washing machine is leaking!

Keep the thoughts coming.

Kind regards

Organics1

My company is involved in a JV with Orascom to develop the second residential golf community at Gouna but I have no day to day involvement with them or their staff as the JV is a separately managed entity.

As for existing rentals at Gouna there are several agencys but I believe they are all of the letting agency variety and with therefore mixed success I believe. Many owners advertise their units on the internet and either manage the bookings and rentals themselves or outsoursce the management.I did some research when I bought my phase 5 white villa and was advised that I should expect about 20-25% occupany if I used a local lettings company. Some owners do better Im sure and some worse.

For a rental management programme to work best in a resort environment the units should all be grouped in one location and be of standard quality so that the program operator can essentially operate as a hotel would doing deals with tour operators to fill rooms on a long term basis. This is how we will operate at Ancient Sands where the hilltop village which will consist of circa 250 studios to 3 bed apparts will essentially operate like a hotel with all the normal hotel facilities. In this way the scheme can achieve hotel occupany levels which were 83% last year. Owners will be able to have a period of own use each year without it affecting their yield. The programme will be optional and it will be relatively simple to opt in or out of the programme so buyers can choose if they are more lifestyle or investor orientated.

I wish you all the best in your property search.

Jeremy

The other thing you must consider is flights. Especially from the UK with airlines stopping their service to Hurghada. Check flight prices because if an all inclusive hotel package deal is cheaper than a flight only and then you have to add on apartment rental, food and drinks the price difference could be enormous and will put people off renting. So you could then look at long term rental but you couldn't use the apartment and the income is very small in Hurghada.

sorry...i woud like to ask u..why el gouna? did you see also all other place?...I think also Sahl Hasheesh, can be nice for u..
Think about it..
bye

I always found it very interesting at the time of starting this thread how very few responces there were to some very valid points

I guess everyone on here must have a plan already which they're not sharing

We have this service in El Gouna. I used to rent my apartment out and I found the clients myself. I used Best Service Co. in El Gouna who held two sets of keys. One for the cleaners and one for the clients. They organised taxi pick up at the airport so the client paid for this service, around LE120. They gave the taxi driver the key. They organised fridge stocking and I just emailed the client's shopping list. No extra charge apart from the client paying the shopping bill. They organised the cleaning and laundry which I paid at the time it was LE14 per hour for cleaning. There was no other charge. They would accumulate the bills for laundry and cleaning and I would pay when I was in Egypt. Laundry was next to nothing but I did loose a lot of towels.

I am not sure if this service exists in Hurghada. If not then there is a massive market for it.

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