How To Run A Successful Vacation Rental
By JD Esajian on June 17, 2016
Owning the right vacation property can provide years of enjoyment and surplus income. However it can also drain you of time and energy if it is not run properly. Renting a vacation property is much different than the average single family in your local neighborhood. The basic concepts are the same but there are a few additional steps that you need to stay on top of. For starters the need for a reliable team is much more pronounced on a vacation rental. Since you are most likely fifty plus miles away you can’t react every time there is an issue. You also need to know the best methods for finding tenants in the local area. A vacation rental has significant benefits but only if there are solid systems in place. Here are five tips to help you run your vacation rental property.
- Set Goals. What do you want out of your vacation rental? Do you want to use the property a few weeks a year for personal use? Are you looking to use the property as a long term addition to your portfolio? What level of personal involvement are you willing to offer? There are many different goals and strategies based on the individual owner. What is right for someone else may not be right for you. Every year you should take a moment and assess your goals for the property. These goals will help guide you with your decisions throughout the year. If you are looking to simply break even and use the property during the year you would take a different managerial approach than if you were trying to maximize cash flow. Your goals should be clearly defined even before you make an offer on the property.
- Know The Numbers. A vacation rental property has additional numbers and expenses that a typical rental property does not have. Because of the distance of a vacation rental there is a greater reliance on your team. You need to start by having a solid property manager firmly in place. They will help run the property but will also eat away at monthly cash flow. You also need to consider the turnover rate with vacation rentals. Most rentals are used for one, maybe two, weeks at a time. With every new tenant you need to have the property cleaned and looking great. All told there are several additional expenses that you as the property owner need to be aware of. There is nothing wrong with breaking even with a vacation rental but you need to know what you are getting into. Understand that you are on the hook for all monthly utilities, lawn maintenance, furniture, repairs, house cleaning and property management. The income will be higher in peak rental periods but the expenses will be increased as well. Always stay on top of all the numbers all the time.
- Local Laws And Restrictions. The laws of the town your vacation rental property is in may be completely different than the laws you are accustomed to. It is important that you stay on top of what is going where your vacation rental is located. It is not uncommon for a new law or rule change to completely catch you off guard. Certain towns may have specific guidelines on the number of people you can rent to or necessary improvements you are required to make to the property. In addition to annual fee requirements you also may need to send a letter to the neighbors every year informing them of your intentions with the property. In most cases your town will notify you by mail of any policy or rule changes. However it is a good idea to visit the area website and subscribe to the local newspaper publication just to stay in top of these changes. The more you know about the local area the easier it is to find tenants.
- Management. It is not enough to hire any local property manager you need to find the right one. Your property manager acts as your eyes and ears for the property in your absence. It is critical that you trust that they have your best interests in mind at all times. In addition to your property manager you also need to find a good real estate agent, contractor, handyman and painter to help run your property as smoothly as possible. Even if your team costs a little more it is always important that you find the best help you can for your property. They are the ones that will handle almost everything with the property. By spending time, and money, calling around when you need something done it takes away from your local real estate business. The importance of a good property manager and local team cannot be stressed enough.
- Tenants. A vacation rental property is no different than any other rental in that finding good tenants is critical. With a vacation rental you are looking to keep your property filled year round. During off peak months this can be a real challenge. You need to constantly find new methods to reach people and advertise your property. There are times when you may lean on your local real estate agent and other times you find tenants on your own. In a perfect world you will be booked months ahead of time and not have to worry about potential vacancies. This only happens if you and your team constantly promotes your property and stays on top of advertising.
Vacation rentals offer the potential for great returns but they are also a lot of work. Use these five tips to help effectively manage your next vacation rental.