Types Of Rental Properties
Rental properties arent one-size-fits-all. In the rental domain, you have three main sectors in which to rent or invest:
Each category can be broken down into branches of their own. Residential properties are homes in which people live and can include multi-unit homes, small apartment buildings, single-family homes, condos, luxury properties, and more. Investors especially first-time and novice investors typically go the residential route as its considered the safest and easiest method of investing in property.
Commercial-use properties are areas out of which businesses operate. Commercial spaces span in use, and the usual suspects are storefronts, industrial spaces, and office buildings. But even farmland is considered commercial property. Though apartments are indeed residences, most states have rules that stamp buildings as commercial if they reach over a certain threshold of units .
Mixed-use properties combine residential and commercial elements. One example of a mixed-use building is a two-story complex with a hair salon occupying the lower half and an apartment on the second story.
For this guide, well mostly be referencing the process for investing in residential rental property, but most of this information can be applied to any type of rental.
Ask For Five Star Reviews
We cant tell you how immensely important it is to have positive feedback on your vacation rental. These reviews are looked at by potential renters, as they want to hear the good and the bad from individuals who have actually stayed there. But how can you make sure that your guests are leaving reviews?
- People love giving their opinion online. The good news is a lot of people will leave a review automatically. But after three or four days, if there is still no feedback, dont hesitate to reach out to your guests to request a quick review of your property. And dont worry that does not come across as pushy or unprofessional. Guests know the importance of reviews.
- Dont panic over negative reviews. Lets face it you cant please everyone, and you will drive yourself crazy trying to do so. As long as its minor things, like I didnt care for the yellow cabinets instead of I saw a mouse in the kitchen never going back then you shouldnt worry too much.
- Learn from negative feedback. Instead of getting down on yourself about them, use them to make any necessary changes. You may also want to respond to the feedback if allowed and apologize for any inconvenience or disturbance that may have happened to upset them. This shows future guests that you care and are actively trying to resolve the situation.
The Secret to Getting Positive Reviews
Owning A Vacation Rental
For those interested in real estate investing, purchasing a vacation rental property offers a great way to get started. Although renting and maintaining one of these properties presents several unique challenges, it also presents benefits that can make your investment worthwhile. Not only does renting out a vacation property allow you to collect additional income, but many of your expenses can be written off for tax purposes. Furthermore, what you do with the property is up to you. This means that as you get older, you can choose to retire to your vacation property or use it as a personal getaway spot.
Although maintaining a profitable vacation rental property can be confusing, it can be beneficial if done right. Keeping up with the market and optimizing your rentals can challenging, especially on top of the regular maintenance and management that the property itself requires. However, by making the correct marketing, scheduling, and business decisions, you can position your property for success. Consider adhering to the tips listed above to maximize your profits and make sure that your vacation rental property is successful.
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Automate With Property Management Software
When youre trying to scale your vacation rental business, you need the proper tools that can manage your day-to-day operations but also provide guidance to developing a personalized strategy that will reach your long-term goals.
As you add more properties to your roster of rentals, property management software will help you efficiently run your business.
MyVR not only provides you with all of the tools you need to scale and automate your business, but our staff of industry experts are here to support you every step of the way in order to ensure you achieve your unique goals.
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Pick The Right Location
The area in which a vacation rental is located is the single most influential performance indicator. Its the homes location thatll most likely draw tenants to the propertynot the other way around. Therefore, vacation rental property investors will first need to determine where they want to invest before they even begin acquiring assets.
It is entirely reasonable to suspect that the location of a short-term rental will play an integral role in its profit potential, which begs the question: What dictates a good location? Better yet, what do investors need to look for in a market to make a purchase with confidence?
While there are countless things to look for in the perfect vacation rental property location, there are two universal factors that must be taken into consideration:
- Proximity To Local Attractions
Prior to buying a vacation rental, prospective investors need to determine the health of the market. A market analysis, in particular, can go a long way in telling you a lot about what to expect from a location. Using a combination of historical and current data, proceed to evaluate every aspect of the community. Doing so should reveal price trends that can help determine your own propertys potential. Consider a number of factors: property prices, sale prices, recent improvements, property characteristics and the overall neighborhood.
Close To Attractions
What Permits Or Licenses Are Required To Operate A Florida Vacation Rental Property
The state of Florida requires that all vacation rentals hold a current license issued through the Florida Department of Business and Professional Regulation .
The Florida DBPR issues short-term or transient rental licenses according to these limits:
Vacation Rental Condominium
A license will be issued for a unit or group of units in a condominium or cooperative.
Vacation Rental Dwelling
A license will be issued for a single-family house, a townhouse, or a unit or group of units in a duplex, triplex, quadruplex, or other dwelling unit that has four or fewer units collectively.
The location of the property/unit, the number of units involved, and who operates the property/units determines who holds and maintains the license:
A Single license may include one single-family house or townhouse, or a unit or group of units within a single building that are owned and operated by the same individual person or entity, but not a licensed agent.
A Group license is a license issued to a licensed agent to cover all units within a building or group of buildings in a single complex.
A Collective license is issued to a licensed agent who represents a collective group of houses or units found on separate locations. A collective license is limited to 75 units or less and is restricted to counties within one district.
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How Do I Price My Vacation Rental Property For Maximum Roi
While we have already discussed the key traits of a good pricing strategy, the main objective of your pricing should always be to maximize your profit and return on investment.
This can be done by being informed about what your competitors are doing, tracking demand fluctuations in your propertys location, staying up to date with the latest industry news and trends, and taking advantage of dynamic pricing tools.
Its Not Allowed Everywhere
If youre serious about getting into the vacation rental game, be careful where you buy your property. Many cities, municipalities, and homeowners associations have strict regulations around rentals — particularly the short-term kind.
Some places ban short-term rental activity altogether, while others have rules for how long or how often a property can be rented out. Some also require certain licenses in order to operate a rental in the area.
If you have a potential property in mind, study the local rental policies before jumping in. Start with your citys building committee and any HOAs in the neighborhood.
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Do I Need A Property Manager
If your rental property is far from where you hang your hat, it may be in your best interest to hire a property manager. For a monthly fee, managers act as your representative and usually deal with rent collection, maintenance, tenant interactions, and possibly more depending on your agreement. This doesnt mean youll be fully removed from everything to do with your rental, as your property manager may need to contact you for updates and requests pretty often. For more information about the property management process, watch this video:
You Can Write Off A Lot Of Your Expenses
If you rent the home out for more than 14 days, its considered a business for tax purposes. That means you have to pay taxes on the income it brings in. But it also lets you write off many of the expenses youll incur to repair and maintain the property.
You can deduct almost any “ordinary and necessary” cost of doing business. You can even write off hosting fees charged by Airbnb and other platforms.
Heres a good list of items you might consider writing off as a rental investor:
- Hosting fees.
- Property management fees.
- Mortgage interest.
This isnt an exhaustive list, so talk to a financial advisor or accountant to maximize your deductions.
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How Can You Increase Your Vacation Rental Income
As a vacation rental owner, you need to ensure your guests have the best experience possible to make a successful rental.
Another way to make money with vacation rentals is by adding more units to your property. Lastly, another way of increasing your vacation rental income is by optimizing your listings for more search engine traffic.
How To Become A Vacation Rental Host
When deciding how to make money on vacation rental property, consider how much of your home you are willing to rent. Will it be the entire property, a couple of rooms, or a separate part of the house like a garden apartment or an above garage studio? Whatever you decide, make sure that your vacation rental site is clean and of a good enough standard to rent.
When assessing your property and determining suitability, check for things like:
- Size of the space
- Structural problems.
You will need to check the legalities associated with becoming a vacation rental manager. You may need to obtain permission from a local housing authority or purchase a special permit that will allow you to use the property for short-term rentals.
Check for any restrictions or codes that may need to be observed and make sure you comply. You will also need to have the correct insurance and pay the appropriate taxes on the rental revenue you earn.
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Dont Tighten The Purse Strings Upfront
We totally get it, you purchased this property to be an investment and not a cheap investment at that! Youre telling me that I need to spend more money now, after closing? Well, we hate to break it to you, but yes. Unless you purchased the top-dollar rental that was professionally staged last year and left turn-key, chances are that youll need to upgrade your vacation rental with simple luxuries, and bring in services that take your business venture to the next level. skip the cheap colored linens, 90s comforters, mountain of coordinating throw pillows, and start with a base of classic, crisp lines, and color palettes.
Dont Forget Property Insurance
Property insurance is an important part of any vacation rental investment. Vacation rental insurance can protect you from losses that occur at your property while it is rented out.
For instance, if a renter falls and gets injured during the stay, they could sue you for damages if you do not have a policy in place. This is why its important to invest in a good quality insurance policy to protect your investment.
You may think that your homeowners coverage would offer adequate coverage for this scenario but look carefully at what will and wont be covered.
Whosoever tells you property insurance isnt essential especially when you are dealing with a vacation rental property is telling you a big lie. You do not want to be caught off guard with unexpected financial issues that you dont expect.
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Are Vacation Rentals A Good Investment
Is a vacation rental a good investment for you? To decide, you first need to determine your goals for the purchase. Do any of these apply to you?
- Is it your dream to own a property in a vacation destination?
- Are you seeking a particular return on your investment?
- Do you want to diversify your portfolio with a home that will appreciate in value?
- Are you looking for an investment vehicle that offers tax advantages?
Ill cover all of these topics throughout this article to answer the question are vacation rentals a good investment, but Ill start by telling you about my vacation rental investment journey.
My husband and I started our vacation rental adventure in 2007 when we fulfilled a dream to purchase a property in South Haven, Michigan. At the time we didnt have aspirations of making money as we really just wanted a home in Michigan to enjoy with family and friends and any rental income was going to be a bonus. We felt it would be ok if we covered 80% of the expense of the house with rental income as this was a long term investment that we knew would appreciate over our lifetime and in the short term we would benefit from a tax perspective.
Ways To Improve Your Airbnb Hosting
Short-term vacation rentals provide an opportunity for people to make money by welcoming guests into their homes. In this competitive landscape, which is highly dependent on reviews and references, in order to have a successful business, you need to provide your guests with the best experience possible. To be truly effective as an Airbnb host, it is necessary that you provide hospitality and service that leaves a lasting impression on guests.Below are 5 ways that you can improve your Airbnb hosting skills.
1. Keep the units spotless
Your Airbnb should always be clean for your guests. This means the bathroom should be spotless. Wastebaskets should never have anything in them, there shouldnt be any dust anywhere, and there should be no sign of previous guests. If you use a cleaning service that makes checklists of what needs to happen during each visit, it will help ensure nothing gets missed.
2. Communicate clearly with guests
Providing as much information before and during your guests stay can help to create a better experience. It is important that you provide very clear instructions upon check-in and have house rules in place for them to know what to expect. Once they arrive at your place, provide very clear instructions on how to use equipment such as kayaks or sound systems so that guests have access to everything they might need to know about your home.
3. Help guests get an authentic local experience
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How Much Will A Vacation Rental Owner Make
How much money a vacation rental owner will make comes down to not only having a great house, but more importantly having a great property manager. We had always self managed our rental properties but in 2017 we recognized that technology was rapidly changing the industry and we either needed to get on board or turn to a professional property manager. We decided to continue to self manage and invested into technology that would automate our processes and also provide us access to more OTA channels and create a Book Direct strategy. Some of these key solutions include:
- Myvr property and channel manager software
- Home automation smart locks, thermostat and smoke detectors
- StayFi wireless internet splash page for guest email capture
- Increased presence across social medial and email advertising campaigns
While there are a lot of tools and data on where to set your rental rates its not an exact science for single family homes as each has unique features that might make it more appealing than the property next door. Whether you self manage or work with a property manager, constantly evaluating your rates is one of the keys to the profitability of your investment. I can speak from our experience that initially we didnt charge nearly enough for our rentals and it cost us thousands of dollars each year.
Are Vacation Rentals Profitable
Investing in vacation rentals is an excellent way to earn some passive income. But can you make good money with a vacation rental property? Essentially, vacation rentals can be profitable because they are popular with people renting properties for a short period.
The primary factor that affects profitability is location. Why? Profitability is based mostly on occupancy level, demand, competition, and rate, so the more attractive the location, the higher probability the vacation rental will be profitable.
Besides, short term vacation rentals can outpace long-term rental properties when it comes to potential rental income. Thats why a vacation rental is a good investment for those who want to start investing in real estate.
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