Vacation Rentals

Vacation Rentals

Have you ever stayed in an Airbnb and thought how great it would be to own one? Vacation rental properties can be a great way to earn income, build long-term wealth and have something to enjoy at the same time. What other kind of investment can do that? But owning a short-term rental has a few drawback to consider as well. First, pick a location where you love to travel. Research the real estate market and make sure its something you can afford the down payment on. Next make sure you are aware of any local restrictions on short-term rentals. Then contact some existing hosts and find out what the monthly occupancy rate is for the area to help determine if the numbers make sense. I am happy to help during this process. I've gathered many resources to help determine the best vacation rental properties, including third party companies who offer local stats on any area and I can help you analyze a home's potential. Here are some pros and cons to consider. If you're interested on finding out more, give me a call!


The Pros

 You Make Extra Income
The biggest perk of owning a vacation property is the extra income you can make. The average host on Airbnb makes $900/month, and that can be passive income if you have maintenance, cleaning and managing team.

 You have your own vacation spot to get away
Choose a favorite place you like to visit and invest! Not only do you have a place to get away, but it can often times be paid for by other guests. This is a great perk that doesn't come with a regular residential long-term rental.

 Tax write offs on many expenses
If you rent the home out for more than 14 days per year, it's considered a business for tax purposes, so you'll need to pay taxes on the income. You can also write off many of the expenses to stock, repair and maintain the property, in addition to hosting fees charged by Airbnb and other platforms.

 You have a nest egg, or even a future retirement home
Your short-term vacation rental can be a great way to build equity wealth to ensure you have plenty of finances for retirement. And guests pay into this nest egg for you! When you're ready to retire you can sell and use the cash to cover your future costs of living, travel, healthcare, and more. Or keep the property and enjoy it when it's been paid down drastically or even possibly free and clear, and enjoy a relaxing retirement in a beautiful vacation spot. Either way, you win.

 Ongoing ensured maintenance
You've heard the horror landlord stories about long-term tenants ruining a rental and costing landlords thousands, and even tens of thousands of dollars in repair work when a tenant moves out. Long-term rentals with renters living in them take much more abuse and wear and tear. A short-term vacation rental is professionally cleaned many times per week or month, and your trusted cleaner can report any maintenance issues to get them taken care. Typically speaking, short-term renters are much more mindful of taking care of your property while they stay because if they don't, the consequence is paying a damage fee and/or a negative review, which can impact their future stays.


The Cons

 You have to manage the property
A vacation home may or may not be total passive income. It can be one of the most hands-on investments you can get yourself into and may require daily management. You'll have to clean it, or hire a cleaner, and restock the property between every guest. You could hire a professional property management company to handle all of the turnover tasks, repairs, maintenance, and other things needed to take care of, but it will be an additional cost. According to averages, short-term rental property managers generally charge 15%, but depending on the area and type of management needed, it could be as high as 40%. Managing the guest bookings can be easily done and doesn't take too much time. If you manage bookings yourself and hire a dependable cleaner, you can get away with avoiding those management fees. Your guests will be the ones to pay for the cleaning fee.

 You need to do some marketing
This will require you to list your home on any of the rental platforms you choose, and maintain the listing profile, optimize your listings information to appeal to the right audience, fill the home with comfortable and on-trend furnishings and decor, and most importantly, keep on top of area prices so you can list the property's rental fees just right. You might even need to run occasional discounts and promotions in order to fill the home and generate income during seasonal lulls.

 Short-term rentals are not allowed everywhere!
Do your due diligence before you buy your property! Many cities and homeowners associations have strict regulations regarding short-term rentals. Some areas ban short-term rentals altogether, while others may have rules for 30 day minimum stays. Some areas require certain licenses in order to operate a rental in the area. If you have a potential property or location in mind, study the local rental policies before going any further. Ask local Realtors, talk with the city's planning department or the homeowners association if the property is in one.

 You'll have expenses on the property
If you have to finance your vacation rental, you'll have to put at least 20% down on an investment property and have the extra mortgage payment responsibility. Know your numbers before you buy! Talk to a local rental host and try to find out what the monthly rental capacity is for the area. Research what similar properties rent for per night. Do the math of nightly rent times average nights per month, and make sure that amount more than covers your mortgage payment. You'll need to factor in utilities, lawn care, and general maintenance. There will be unexpected repairs, too. Make sure you can cover the entire mortgage payment in case of local disasters such as storms or wild fires.



Want to learn more about vacation rental properties?
email: merili@merililoucksrealtor.com   (559) 696-5199

Please be assured that your e-mail address will never be sold, shared or used for any other purpose without your permission.
Merili Loucks
REALTOR®

DRE#: 01921451
SME Real Estate

merili@merililoucksrealtor.com5200 N Palm Ave, #114, Fresno, CA 93704