A vacation rental can be a great investment — if you do it right. If you don’t do it right, it could end up disastrous. Buying a property is a big decision regardless of your plans for it. But if you do this right, you can make some money while gaining a free vacation home or paying off your mortgage.
There are a few things to think about before anything else. First off, consider your motivation. Are you looking to make a profit, or are you just looking to break even so you have a free place to vacation throughout the year? Or, are you making a long-term investment and looking for a place to retire down the line?
These are important questions, mainly because it’ll affect your strategy and how you manage your property. Making a profit on a vacation rental requires commitment and a lot of work, but if you just want to offset costs until you’re ready to retire, you can be a bit more relaxed about your strategy.
The next thing to think about — seriously think about — is the costs inherent in owning and renting out a property. Zillow estimates that 60-75% of revenue from vacation rentals goes into upkeep of the property. First of all, there are all of the normal costs that come with owning a property: repairs and general maintenance, property taxes, and insurance. And don’t forget the mortgage payments (although that’s pretty hard to forget about, the bank makes sure of that).
There’s also marketing costs, booking fees, cleaning and maintenance costs. And if you’re not up for doing all the work yourself, you’ll need to hire a property manager.
Speaking of which, it’s easy to overlook just how much work goes into managing a rental property. There’s marketing, managing reservations, cleaning and maintenance, coordinating with guest arrivals, and dealing with any problems that may arise (there will always be problems, you can count on that).
Many people opt to hire a property manager to handle all of the in-person work, and if you don’t live nearby, that’s likely your only option. But this gets expensive real fast. If you don’t want to do that, based how hands-on you want to be you can automate or delegate most or all of the work. If you do opt to have your home managed by a professional property manager then having your property or properties under management automated with a Parakeet system will allow your property manager to spend more of their time increasing bookings, generating more revenue for you and monitoring your property in real time to keep your asset protected.
If you don’t have marketing experience, you can always hire someone — an inexpensive option would be to hire a recent graduate who wants to gain some experience to put on their resume. You can totally learn how to do that yourself, but that’s something to think about: do you have time to be learning marketing and growing your business in addition to your other responsibilities?
A lot of the management type stuff you can automate or manage remotely. For reservations, using a platform like HomeAway or Airbnb will let you skip all the hassle of managing scheduling and payments. This is relatively inexpensive and for most people, is 100% worth it.
As for cleaning, you can hire a cleaning service that comes in after each stay. This can get expensive though, so if you’re the type who doesn’t mind cleaning and doing laundry, you can save some money doing it yourself.
Maintenance is a lot harder to deal with remotely. If something breaks, you’ll need someone in the area to go fix it. This is where a property manager comes in handy. Or if you have a really good friend in the area, you could pay them to go handle problems when they arise.
Automating as much of the work as possible is obviously ideal. Thanks to technology, this is becoming easier and easier. It used to be a huge pain to coordinate key dropoffs with guests — not to mention unsafe. Think about it: if a guest has a key to your place, what’s to stop them from duplicating it and coming back a few months later to rob you? This is a possibility even if you use a lockbox. Using something like Parakeet, you can automate this entire process, letting you manage check-ins from everywhere and giving you peace of mind that your property is safe and secure.
When it comes down to it, the key to making a vacation rental work is figuring out a system that works for you and your situation. But obviously, maximizing revenue makes everything else easier. When you’re bringing in more money, you can afford to hire people to do the work for you, freeing up more time and money to focus on marketing or general improvements like adding more amenities.
Here are a few ways you can up your revenue and help ensure that your vacation rental is a good investment:
1. Take professional photographs. This is the number one most important thing. Did you know that Airbnb sends out people all over the world to photograph listings, for free? That should give you an idea of how important this is.
It doesn’t have to be expensive, you just need someone who knows what they are doing and has a camera better than your smartphone’s. Professional photography can make a mediocre property look great, and a great property look luxurious. This will go a long way in attracting guests.
2. Offer competitive amenities. When it comes down to it, you’re competing with hotels, most of which have a ton of money. You need to provide a comparable experience, which means WiFi, cable, and a flat screen TV are an absolute must (this can give you an advantage as well, since most hotels still charge for WiFi access).
Providing washer and dryers, a fully stocked kitchen, and a thorough DVD collection or free Netflix can also give you an advantage over hotels. And don’t forget the little things — for example, providing a hair dryer will make some guests very happy, and it’s a cheap item to buy.
3. Provide a personalized experience. This is one way you can blow hotels out of the water. For example, you could make a welcome packet that includes your favorite local restaurants, special spots (like a secret, secluded beach), tips — basically anything you would tell a friend if they were staying at your place. If you invest in time to do this once, you’ll never have to worry about it again, and it will make your guests very happy. Happy guests leave great reviews, and great reviews attract more guests, and so on.
4. Follow up with guests. This is a very simple way to increase revenue. There are a lot of studies that show that online reviews have a massive impact on consumers. The more happy reviews you have, the more likely people are to choose your property. When a guest leaves, send a quick email asking them to leave a review. Something that takes you two minutes can have a large impact.
And the most important of all:
5. LOCATION!! We all know the adage “location, location, location.” It’s a cliche because it’s true. Especially with rental properties. Before investing in a property, research the most profitable places to rent out vacation homes. Do more research than you think you need, because this is the most important decision of all.
One thing to consider is seasonal rentals. It’s ideal to have a place that people want to visit year-round. If you have a place on the ski slopes, it will sit empty all summer, and that is a lot of lost money. The longer the tourism season, the better the investment. Every day your place sits empty, you’re losing money.
You also want an ideal location within the town or city you choose. If it’s a beach town, people want to stay on the beach. If it’s in a city, people want it to be easy to get around. If you can’t walk to attractions, you should at the very least be near a subway stop or public transportation hub.
Investing in a vacation rental is a big decision and a lot of work. But if you do it right, you can automate, delegate, sit back and let the money roll in.