If You Only Rent Your Vacation Home Out Every Once In A While
The IRS has a special rule for properties that arent rented very often. If you rent your vacation home out for 14 days or less each year, you dont have to report that rental income or pay any taxes on it. Even if you rent your home out and make thousands of dollars in those two weeks, the IRS cant touch a penny.
Just something to keep in mind.
Now Your Vacation Rental Is Ready For Guests
Whew that was a lot of information! No wonder it was such a whirlwind getting our house ready for guests! I hope this has helped you think through the process and figure out what youll need to get started hosting your own vacation rental.
Be sure to download my handy checklist of what youll need to prepare for guests. And if Ive missed anything, let me know in the comments and Ill update this post to include it.
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Now that youre on your way to getting your house ready, next time well talk about how to create the perfect listing to get guests to come stay at your vacation rental. Until then, happy shopping and cleaning!
Tips: How To Turn Your Property Into A Vacation Rental
You dont need a hotel or a cottage to earn that extra income make a few extra bucks by turning your property into a vacation rental.
According to a report by Statista, in 2019, vacation rentals clocked up total revenue of $83,984 million.
With so much on the table and year-on-year increase in the number of people booking vacation rentals, it makes sense to leverage the lucrative businesss benefits. The massive growth of this market is primarily driven by a vacationer base drenched in the digital landscape.
Today, vacationers have a much higher expectation in terms of security, technological sophistication, and convenience.
Imagine a vacationer who can brew espresso or get alerts from the refrigerator when its low on bread. Such a vacationer is likely to speak volumes about your property. With a few swipes of the Smartphone, the vacationer can perform everything. Such a person is never going to forget the experience at your rental, and the odds of them sticking a shiny five-star review on your listing are high.
Your professionalism and the ability to understand the current market trends can be the difference between flipping the vacation rental lights off or on. Here are some actionable ways to turn your property into a profitable vacation rental.
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Your Own Vacation Rental
You do not actually need this, but owning your own vacation rental is actually a great way to start a vacation rental business. Just think about it. You possibly will be even more motivated to rent out your own vacation villa. You will prepare it immaculately, stock the kitchen, do the best, smartest and cheapest marketing to optimise your turnover and profit.
You will soon find out that a Vacation Rental is not really a passive source of income, which gives you the perfect opportunity to offer your services.
You will write down everything you have learned and then apply it to vacation rentals of other owners. That is how we started out as well. First we bought a villa in Spain, then we had a group of friends that also wanted us to rent out theirs. Then friends of friends. And now we offer over 3500 villas, of which most have a private pool, on the Spanish Coast.
It will also help you with the acquisition of other owners. Walk the walk.
How Much Can Vacation Rental Properties Make
One of the first questions those considering getting into this business ask is Are vacation rentals profitable? or How much can a vacation rental make?
The vacation rental business is most certainly profitable, with the industry yielding over $80 million in revenue in 2019 alone. This places the average revenue per user at upwards of $100,000, which can, of course, fluctuate based on the quality of the property, the level of service provided and the efficiency and effectiveness of internal operations.
No matter what kind of property youre marketing, one of the key strategies for maximizing your profit is implementing a dynamic pricing model that reflects dips and rises in demand. This way, your prices will not discourage bookings during low seasons or periods and will invite the most revenue possible when people are most willing to pay.
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Start Your Vacation Rental Management Business
As a vacation rental owner, you have the know-how to start a property management company. The most important aspect is ensuring a positive guest experience. If you can do that, the guests and your clients will be happy. Following these steps will help with growing your business and setting it up for years of success.
Do Everything You Can To Get Reviews
Guy Novik is the Managing Director of Orlando Villa Holidays, a vacation rental company that specializes in high-quality luxury villas in the Orlando area. Guys company currently operates 250 villas. Heres one of his tips for owning a vacation rental:
Reviews are amongst the leading factors which holidaymakers consider before booking a holiday rental. Because of the high price of what theyre renting, potential guests wont trust somewhere, which has a low review count or several unfavorable one. On the other hand, highly positive reviews make your listing appear more reliable. Reviews help sway a potential guests decision in your favor. So, find a way to quickly gather feedback and generate reviews for your vacation rental when you first start renting it. And dont worry about a negative review once in a while. A vacation rental that only has 5-star reviews can look suspicious.
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Find And Buy A Property
If you dont already own a vacation rental property, your next step should be to start searching for one. Start by identifying a location and determining how much you are willing to pay. Not only is the location essential to your potential guests, but it will have a significant effect on the amount you pay in taxes and fees.
Next, youll want to conduct market analysis to gain a better understanding of how youll operate. As you conduct your research, keep the following questions in mind:
- How much does it cost to rent other similar properties?
- What are the busiest tourist times of the year for that area?
- Are there any notable attractions or destinations nearby?
- Will there be enough demand to make your investment worth it?
Once youve identified a property that fits your preferences, its time to negotiate a purchase. Remember that its important to find a property that will help you achieve your long-term goals of starting a vacation rental business.
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.
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Set Up An Email Marketing Strategy
While SEO, paid advertising, and social media are effective ways to draw in new guests, email marketing is a fantastic way to stay in direct communication with previous guests and maintain a loyal following.
Through email marketing, you could send out monthly newsletters and promotional discounts to keep your vacation rental company at the forefront of your guests minds. By keeping your loyal guests engaged with email marketing, you could encourage repeat bookings.
Stay Informed About The Industry Trends Of Vacation Rentals
The vacation rental industry is constantly evolving. New trends emerge as old ones die out. And technology continues to disrupt the industry.
Luckily, there are tools that help hosts and property managers stay informed with the latest market insights on the short-term rental industry, like Transparent and AirDNA. With this insight at your disposal, your business will be able to stay ahead of the competition in the long term the ultimate goal of any business.
About the AuthorCallan Riddles is the Content and Social Media Specialist at iGMS. Callan has a passion for finding new ways to help vacation rental businesses thrive. In her free time, she loves to travel, read, and experience all the new things that life has to offer.
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Calculate Your Expected Income And Expenses
You can proceed to dig a little deeper if your selected market shows an inherent demand and the numbers you crunched indicated a good promise of consistent positive cash flow.
While rental income will certainly be contingent on the area you buy in, most landlords should expect to set the weekly rental rate at 10 to 20 percent higher than your expected monthly mortgage payments. Its worth noting, however, that in todays market, landlords in high-demand areas could get away with asking for even more . Remember, you want to make money each month, but you dont want to scare away prospective tenants you have to find an agreeable middle-ground.
In addition to adjusting your income to cover more than your expected mortgage, make sure to factor in the inevitable down-times that your property is likely to face. After all, most vacation rentals are seasonal. While you can expect strong demand during high seasons, the demand needs to be lucrative enough to offset less busy months. I recommend factoring in at least a 25 percent vacancy rate to account for those times that the property is more than likely to sit empty. Whats more, you need to account for various other fees: condo fees, HOA fees, routine maintenance, etc.
At this point, you should have a good idea of how much you could expect the property to fetch in rental income and the expenses that will ensue. Provided the remaining balance works in your favor, you may have a deal on your hands.
Are You Allowed To Rent Your Vacation Home Out
Another question to answer before you make an offer is whether youre even allowed to rent the home out.
Many vacation destinations have restrictions on rentals. For example, I used to live in Key West, Florida. Rentals for less than a month at a time are prohibited by the city unless you get a very expensive transient license for the property.
Some condominiums or homeowners associations also have restrictions on rentals. One condo I looked at prohibits rentals until youve owned the property for at least a year. This discourages people from buying units purely for investment purposes. Others dont allow short-term rentals at all. And “short-term rental” has a variety of potential definitions.
If youre planning to rent your vacation home out, or relying on being able to rent it so you can afford it, make sure that youre allowed to. In many places, the fines for illegally renting a property are quite severe and enforcement efforts are widespread. Dont think you can just rent it anyway. A local real estate agent should be able to help you figure out if a particular property is rentable and what restrictions exist.
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Invest In Smart Home Technology For Your Properties
Havent jumped on the smart-home train yet? Well, its about time that you do so! Smart-home technology devices are a MUST for every vacation rental owner in 2021. Not only are they adding more value to your property , but they serve as a protection for your property, to make managing a vacation rental business so much easier.
Smart locks are a simple way to make your guests life a breeze. They are revolutionizing how property managers and homeowners keep their guests happy. No one has to worry about losing a key again. With smart locks, all our guests have to do is look at their phones and type in the provided key. Its that effortless!
Ever considered using noise monitoring at your property? NoiseAwares noise monitoring sensors allow you to have an insight into the well-being of your property without interfering with your guests privacy. If your guests end up being too loud, NoiseAware allows you to step in from wherever you are, and ensure the safety of your property as well as your community. Learn more about smart-home technology here.
First Impressions Matter Even In Vacation Rentals
Matt Woodley has been a vacation rental host for the past 12 years, with properties in New Zealand and Brazil. Matts taken advantage of the major platforms like Airbnb and VRBO to market his vacation rentals. Having been in the industry for so long, Matt focuses on the guest experience. Heres one tip in owning a vacation rental he offers to new hosts:
Before your guests even set foot in your vacation rental, set yourself up for a 5-star review by making a great first impression. Take time to update your landscaping and ensure the path to the front door is swept clean and free from obstacles. In cold weather, he walkways always have to be shoveled and de-iced. In warm climates, water plants frequently and remove dead greenery immediately. Every few months, wash your windows and check the exterior of the home for any maintenance that might be necessary. And keep in mind that your guests may be arriving after dark check that theres ample lighting from their parking spot to the entryway.
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Are Vacation Rentals A Good Investment
Short answer? Yes.
Long answer? Keep reading.
When you invest in a vacation rental property, you can build a financial safety net, take more risks, develop advanced business skills, and have more time to do what youre passionate about.
Here are some reasons why investing in vacation rental real estate is a smart move:
Things You Need To Know Before Becoming A Vacation Rental Business Owner
Before you become a vacation rental business owner, you have to ask yourself some of the key questions that come up from time to time to find out if this is the right job path for you to take. Here are some of the essentials to keep in mind before you move forward with this type of business.
Understand and Evaluate the Risks
As with anything, it is important that you understand and evaluate the risks involved with becoming a potential business owner and investor. You need to know what it takes to successfully manage your own rental business, as well as the profit and losses that might come with it. You need to have your concerns listed out along with the preventions that align next to them. Take the time to research all avenues and find out if this is something you want to do.
Invest in Security
Ensuring that the safety of all customers is critical. You want to make sure that you know the importance of security at all times, which includes those rentals. The rental that you have isnât your home so you shouldnât treat it as such, it is your business. You should always consider investing in a business security system to protect your profits. This also reduces the chances of working with dishonest guests, as well.
Think of the Consumerâs Needs
Consider Hiring a Third-Party Cleaning Service
Listen to What Consumers are Saying
Keep up on the Trends in the Market
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How To Start A Vacation Rental Company In Florida
In this article, we will share seven recommendations for starting a vacation rental company in Florida. Read on for these tips:
Florida is one of the hottest vacation rental markets in the U.S. Its no surprise, because the Sunshine State has always attracted tourists and vacationers. With the recent vacation rental industry boom, its only natural that it has become a desirable piece of land for vacation rental developers and investors.
The coast lines and Central Florida have traditionally been big draws, and they continue to rank among the top spots in the nations for vacation rental investment. Panama City and Kissimmee are ranked among the 10 hottest vacation rental property markets, according to Evolve Vacation Rentals. Panama City is listed as number one, and is a favorite among other industry watchers based on median home price, average monthly rent, occupancy rates and other factors.
When And Where You Should Invest In Property
When you should invest mostly has to do with your own personal and financial situation. However, as with any type of long-term investment, the sooner you start, the better. Thats because property values will always rise in the long run.
As far as where you should invest in property, its smart to look at tried-and-true places as well as up-and-coming locations . Here are a few things to consider:
- Warm weather locations usually do better than colder locations.
- Multiple high seasons mean more bookings.
- Some cities highly tax vacation rentals.
- Urban population centers have very expensive real estate and fierce competition.
- Smaller to medium-sized towns with high occupancy rates are a good bet.
If you are thinking about investing your money in a beach house, check this article.
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