By taking a house and turning it into a short-term vacation rental, you have the potential to make a serious amount of money. And no, the home doesn’t need to be on a private island in the Caribbean, or be the most luxurious cabin in Aspen. Short-term vacation rentals are so profitable because they compete with hotels, which are generally more expensive. You also can run the property by yourself, without having a property manager. Think about Airbnb, HomeAway, or VBRO. These sites are more popular than ever, and you should consider investing in one.
You’ve got to do your homework regarding:
▪ The legalities: Putting up your house as a short-term vacation rental is a pretty new concept; as such, the legalities regarding the process are pretty new. Many of these homes are in residential neighborhoods. Meaning, they are zoned as single-family homes. Many communities have laws that state you cannot rent it for less than one month. This is one small example of why it is so important you research the laws regarding renting out your home as a short-term vacation rental. Bookings are set in advance, and you do not want to get into legal trouble.
▪ The real estate market: You have to make sure that renting out the home as a vacation rental is going to bring in some profit. Finding that out shouldn’t prove difficult. You just need to check out the competition on websites like Airbnb and HomeAway.com. See what their nightly or weekly rates are. Also see how often they’re booked. Do not be hesitant to call a property manager or a realtor in that area to find out more specific information.
▪ Your profit versus the cost: Don’t be afraid to use a booking agent to check out the data regarding the competition. You’ve got to know how much of a profit they’re making; what you’re really looking for is their gross revenue.
Don’t forget to subtract the utility bills
You cannot forget to factor in the bills. For example, if the gross amount they’re bringing in is $60,000, you need to subtract the costs that they had to spend. When you rent out a vacation rental, you’re going to be paying the monthly utilities, such as the cable and internet, and water. You do not want to get the slowest internet, or the most basic cable, because most are going to want those two things during the time they stay there. Many people still have work to get done even when they’re on vacation, and shoddy internet isn’t a fantastic way to get good reviews. Also factor in landscape maintenance. That’s a big one that many considering this endeavor tend to leave out. Once you’ve calculated all of these things, ask yourself, “Is renting the house out as a short-term vacation rental going to bring me more income than it would as a traditional rental?”
Find a property in a great spot
You’ll want to know which type of property is going to have the most bedrooms, costs the least, but also has a couple of amenities. Do realize, that if you’re thinking about buying a beach home as the vacation rental, this doesn’t mean you need to be directly on the beach. Think about the costs. Purchasing something directly on the water may cost you more than you’ll actually get by renting it. You also don’t want something really far away from transportation.
A great way to find out which amenities your property needs in order to be profitable, you again need to check out your competition. What are they putting in their advertisements of their properties? You’ve got to really do your homework here. The number of beds, as touched on earlier, is a very important factor.
You’re going to want something that sleeps more than 2. A popular idea is adding bunkbeds to any one particular room. Anything that gives you “more beds” is a plus. Get creative.
The property should have something special
The house is going to need at least one great thing that separates and differentiates it from your competition. Because you’ll have a lot of competition when it comes to vacation short-term rentals. So, what does “having something special” mean? Well, for example, does it have a great view? Is it charming? There are many different things that differentiate one house from another, and yours should, too.
Don’t forget to furnish it
Generally, you’re going to have to do one thing or other to the house in order to make it specific for a traveler. You want it to be “homey.” For example, you’ll need to have a furnished kitchen and bathroom. Things like hand soap, shampoo, new toothbrushes. All of these things make a difference. Your guest needs to feel like they are “at home.”
After all, this is why they choose a vacation rental over a hotel. That being said, you’ll need to factor in the cost of furnishing the rental. You need good ratings in order for a short-term vacation rental to be successful. The goal is to offer things that your competitors don’t. Here’s a great video that will show you how to furnish a vacation rental. Remember, the guest should have everything that they do at their own house. That’s the beauty of why people rent actual homes; they don’t want to feel like they’re living in a hotel.
Consider hiring a booking agent
Many of the online platforms require that you respond within twenty-four hours. This is because many people who want to rent directly from an owner need to book quickly, just as they would a hotel. A hotel doesn’t have six days to get back to you, do they? No, they don’t. Now, if you use a booking agent, they’ll do it for you. Booking agents are not property managers, but they are similar. They deal with the phone calls so that you don’t have to.
Utilize the Evolve Vacation Rental service
A great booking agent you may not have heard of is Evolve Vacation Rental Network. What this company does is manage your listings as well; in addition to dealing with the phone call inquiries for you. Many people aren’t sure how to set up services such as Airbnb, HomeAway, or VRBO. However, you had better learn. If you don’t, you won’t be able to book your rental, because that is how people search for a rental, and book it.
What is dynamic pricing?
Dynamic pricing is a big part of a booking agent company. What does this entail? Dynamic pricing is something that hotels have been doing for ages; they change the price based on the time of year it is. They’ll also change the price throughout the year if a big event is to take place, or something of the sort. For example, a festival. They know that this is coming, and so they’ll increase the rate.
Likewise, if it is a dead season when people rarely come to stay, they’ll lower the price to offer an incentive for people to visit and book. This is another great way to price your short-term rental. Check out what the hotels are charging; most of the time, they have a calendar that shows an idea throughout the month to the year, of what they’ll charge.
Wheelhouse is a great tool to use if you want to create your own listings. But, keep in mind that if you price it too low and somebody books a whole lot of time, you can’t uncharge them later. Don’t short yourself. Wheelhouse is so great because is prices dynamically for you. They have incredible algorithms that are very precise regarding what you can get for the rental at any given time.
Don’t forget to do your taxes!
A regular bookkeeping system requires you to deal with occupancy taxes. What are these taxes? These are taxes that a hotel would have had to have; between twelve to thirteen percent is the norm. Even if you charge the guest for that expense, you’ll still eventually have to pay the government that money (so it’s a bad idea to spend it all!). You’ll ultimately have to pay it.
My Lodge Tax is another great tool to use. This service does your bookkeeping so that you don’t have to. This is useful because setting up occupancy tax is stressful. You’ve also got to get a license to do it. It can take hours.
Calculate all the costs
The actual purchase price is only part of what you will need to spend. You will also have to pay utilities, HOA or condo fees, property taxes, insurance and the cost of furnishing a new home down to the spoons and forks. If you’re in a resort area, you may also need or want skis, snowboards, kayaks, water toys or other gear.
Be realistic about the potential profit
You can make a whole lot of money owning a vacation short-term property, as is the point of this article. But, do remember that renting out a vacation home comes with expenses. You will need to pay for cleaning between tenants, advertising and perhaps property management. If you’re part of a resort rental program, it will take a percentage.
Have a plan for emergencies
If you don’t visit the house often, make sure someone does. A water leak can be devastating. If you’re renting, repairs need to be made quickly, so get to know a good handyman or property manager. If there is a hurricane, you may need someone to put up shutters before the storm and remove them afterward and secure the home if it suffers damage.
Additional benefits of a vacation rental
In terms of complexity, vacation rentals are more difficult than traditional rentals. Yet, don’t let that deter you, because they have the potential to make a lot more money. You also won’t have to worry about evicting anyone; vacationers want to go hoe at the end of their stay. With traditional rentals, that is their home. They aren’t going anywhere unless you evict them, and that is a lengthy, expensive process. They are also very common; if you’re a landlord renting the traditional way, you will have to evict a tenant at some point or other during your landlording days. The laws are impressively set up to protect tenants rather than the landlords, so it can be very difficult to evict someone.
Also, you get paid right away with vacation short-term rentals. Even if they book a stay a year from now, you get paid instantly. Another way that you’ll never have to worry about collecting rent.
Protect the home when it is vacant
Vacant homes attract thieves. Take steps to keep your home from looking empty. Consider lights on timers or asking neighbors to occasionally park in your driveway. Make sure someone picks up mail and fliers so its not obvious no one is home.
What’s the story?
In short, be sure to do your research if you want to invest in a vacation short-term rental. You’ve got to make sure the property is going to bring in enough profit to make it worth it, and you’ll want to remain within legal laws while you do so. Find a great property with a decent number of beds, and at least a couple of amenities that the travelers will be searching for. Furnish the home, and remember to pay your taxes!
You’ve got to know all of the rules. Not all homes can be used as rental property. Homeowner or condo associations may set rules for rentals, as may cities. Some resorts may require you to use their programs, which set standards for interior furnishings and amenities, but the property handles the logistics for a percentage of the rent. If you plan to rent out your property, it’s especially important to research all these rules before you buy.
If you want the rental income, it’s important to choose a home that can be rented at the frequency you need to cover expenses. That means both choosing a community that allows vacation rentals and then making sure you’re set up to take advantage of the rental potential, from furnishing the unit to having a plan for advertising and handling tenants. You need to know before you buy whether you will rent the home when you’re not using it.
You have the potential to make a lot more money making your property a vacation rental than you will the traditional renting route, as long as you do it correctly.