Owning a vacation rental property
Owning a vacation rental property has endless benefits, although it comes with risk if mismanaged. Locations of these rentals tend to vary; some spots are seasonal, while other areas are open year-round. Some individuals use these rentals to bring in additional income, while others use them as a method to vacation for free. In this article, we will describe the advantages of owning a vacation rental home along with the risks associated with this form of real estate investing.
Different Types of Vacation Rental Properties
The options to own a vacation rental location drastically vary depending on the state. Living on the coast determines whether you have access to the ocean. While others have access to mountains and deserts.
Beach rentals. If you’re along the coast in a desirable area such as Florida or California, the price of these rentals can be steep. If you’re in a warmer location, these rentals can be fully functioning all year. However, beach points like New Jersey are empty during the cold winter months.
Man-made beaches along a lake. Unfortunately, living in the mid-west or similar states may limit your ability to visit the ocean. However, these lake beaches can offer all the same benefits, just without the ocean waves.
Mountain houses. Excellent option for individuals who like to hunt or simply just enjoy nature and the woods. The rental rates for these properties vary depending upon the month.
Advantages of Owning a Vacation Rental Home
A way to generate additional income. If it’s a desirable area that can be used all year, it can bring in much more money than your standard rental property.
Vacation at an extreme discount. Some vacation homeowners will visit their rental on days when it’s not rented to a tenant. Therefore, having the ability to vacation for cheap or at times even for free.
Comfort feeling of it being your second house. If you have a shed, you can store your personal items that way when you stay at your vacation rental it feels like your home.
If the house is rented the majority of the month there’s tax benefits. Such as operational write-offs, like cable, utilities, and other relevant expenses.
Ability to build equity while operating expenses are covered. Over time the values increase and the homeowner builds equity with each mortgage payment.
A way for investors to diversify their assets and real estate investment profile.
Potential Risks Associated with Owning Vacation Rentals
Falling short on finding short-term renters. There are expenses associated with owning a rental; if the place sits vacant, it can cost the homeowner money.
As mentioned before, not all vacation spots are ideal for year-round trips. Some locations will sit vacant during the down months.
Property damage. However when there’s clear damage like a broken window you can hold the renter responsible. However, if they damage things that the eye can’t see such as flushing unnecessary items down the toilet, destroying the pipes.
Cost to keep the home fully furnished, repairing any damaged furniture or appliances.
Maintenance and upkeep. You want to ensure your place is in perfect condition for each renter. This includes hiring a cleaning crew in between each tenant.
Higher insurance cost. Short-term rental properties tend to require special insurance or higher premiums. In addition, the homeowner runs the risk of being liable if there are any injuries or emergencies.
Security risks. Considering it’s so many people that come and go, you want to ensure the safety of your short-term renters. A good way to limit this risk is by using rotating lock combinations.
How to Properly Manage a Vacation Rental Home
If you live near your vacation rental property, you have the option of managing the home on your own. However, it can be overwhelming overseeing operations from placing tenants, making repairs, and even cleaning the home between short-term tenants. Although the best way to manage these properties will be to hire professional help.
Therefore, use a property manager to oversee placing tenants, a tax expert to ensure you are utilizing each writeoff, and a cleaning crew to get the place up to high standards. As we mentioned before, operating expenses can be deducted from your income. Therefore, having a property manager ensure things run smooth is well worth the investment.
Is it Worth Owning a Vacation Rental Property?
There’s endless benefits of owning a vacation rental home, as long as things are managed properly. Most of the time, the best way to approach owning a vacation rental home is to hire the professionals to oversee daily operations. A vacation home can stimulate extra income and give you the ability to vacation at a comfortable spot for a reduced amount or even free. Most of the operating expenses are tax deductible, so hiring an property manager can pay for itself.
Before purchasing a vacation rental, weigh out the pros and cons. Additionally, determine the most ideal location for pleasure and profit. A location that can be visited all year long is more appealing than seasonal locations. Ensure you are able to make ends meet if the place sits vacant, that way you minimize the risk. Therefore, it’s certainly worth owning a vacation rental home if approached correctly.
This article is written by Ryan Bullock who is a co-owner of Buying Property 215, a family-owned real estate company!
