5 Tips to Successfully Rent Vacation Homes
Destination Villas Reveals the 5 Easy Tips to Making a Vacation Rental Property Profitable.
Smart homeowners will want to consider utilizing both methods to fill vacancies and create rental income from two revenue streams. Editor and vacation home owner, Tori Miilan offers a wealth of vacation rental tips to increase vacation rental income.
There are basically two methods of renting a vacation home: vacation rental by owner and vacation rental management service companies. Smart homeowners will want to consider utilizing both methods to fill vacancies and create rental income from two revenue streams. Editor and vacation home owner, Tori Miilan offers a wealth of vacation rental tips to increase vacation rental income.
“For the first time owner, my suggestion is to play it safe for the first year”, says Miilan. “Don’t go it alone”. It is a good strategy to have your rental listed with a local management company who can bring in immediate reservations and manage the property, especially if you are more than two hours away by car. You will want to have the local expert available to provide the reservations and maintenance from the day of closing. It is also wise to promote it your rental yourself using online vacation rental directory’s like DestinationVillas.com or VacationHomes.com. After all, who is better equipped to promote the property than the owner. During that critical first year you make connections with management services in the area, build a client base and test the water. Even if you find you are booking at 7% occupancy or higher on your own, why turn away rental income by cutting ties with the management company.
Reservations you take yourself create immediate income and cash flow. The owner keeps 100% of the rental income to apply toward the mortgage, grounds maintenance, electric, phone and furnishings. One important tool to taking reservations on your own is to have the ability to accept credit cards but many owners get along just fine by accepting personal checks or paypal.
Management companies can take anywhere from 15% - 45% of your rental income in exchange for their services. They also traditionally hold that income until the month after the guest has departed, holding up funds you could have in the bank. It is hard to imagine having a positive cash flow under those circumstances, but it can be done.
Before you buy, read these 5 easy vacation rental tips to ensure financial success.
Vacation Rental Tip #1: the 25 Week Factor
Calculate how many weeks you will need to have rented to break even. Be sure to make those calculations using actual rental rates that homeowners are getting. Milan suggests the minimum of 25 weeks as a break-even cost if you are carrying a mortgage amount of 250,000. That would create an income of 30,000. Remember, you have mortgage, taxes, electric, upkeep and departure cleaning fees to pay for. It is best to over estimate rather than underestimate.
If you have a year round resort area and can rent up to 52 weeks of the year, a good gage is to rent at 80% occupancy or 42 weeks of the year, leaving time for you to enjoy the home, make home improvements, etc.
Always ask yourself How much of the costs can you cover on your own? How much must come from rental income
Vacation Rental Tip #2: Stay Away from Risky Mortgages
A 30-year fixed mortgage at a good rate is always your best bet. Too many consumers got into trouble by taking out ARM mortgages that have now put them at risk. Lock into a payment you can count on and think long term no matter how long you plan to hold the property. Make sure you can ride out a downturn in the market or rental popularity when making a mortgage desicion. Make extra payments to shorten the term of the loan when ever you can.
Vacation Rental Tip #3: Create a By Owner Vacation Rental listing on line immediately.
Begin taking rental by owner reservations from the day of closing. List your property on several online sites for maximum reach. That allows you to screen your incoming guests and create cash flow immediately. I closed on my first vacation home the day after Christmas and had rental income within one week of closing. Online listings allow you to take charge of your rental income, and create immediate success. The investment in the online listing is minimal and is covered with only one nights rental income. So sign up on several. Some even offer free lifetime listings.
Vacation Rental Tip #4: Research Nightly Rates
You will want to find out what the going rate is in your destination area. If you are just starting out it is a good idea to be flexible to start getting bookings. However we do recommend that you do not overprice or under price your vacation rental rates. Overpricing can result in lost reservations. Underpricing by too much can drive down rental rates in your resort area and hurt the market value of your home. A good rule of thumb is to stay within 10% of the average nightly or weekly rate. And remember to be willing to negotiate - some income is better than no income.
Vacation Rental Tip #5: Location, Location, Location
The Number one question a renter will ask prior to booking is: How far are you from the Beach (lake, ski slopes or attractions) from your unit? If you are currently shopping for a vacation home, we suggest you think like a renter. How important is it to have an ocean or bay view? To be walking distance to the ski slopes? To be beach block (vs. three blocks away)? Purchase in an area that is popular with vacationers and you will attract more rentals. If you already own property, find the best features of your property and showcase them. Describe in detail how conveniently located you are or the amenities and attractions that only your community can offer. This will help your property stand out in the crowd. Don't have the best location - highlight your floorplan, remodeling, privacy or any other feature that is deemed of value to renters.
Tori Milan