Should you invest in a short-term rental or vacation property? There are a few important things you need to know before making that purchase.
If you go to any local city council meetings, you’ll notice that Airbnb and vacation rental ownership are hot topics right now.
If you are thinking about investing in a short-term or vacation rental, there are a few things you should know.
First of all, is it legal? Certain municipalities are pushing for restrictions on vacation rentals. You may see signs in certain areas that say, “Neighborhoods are for neighbors.” You want to make sure that the agent you’re working with understands which areas allow short-term rentals, which areas do not allow them, and which areas may restrict them in the future.
It’s also important to consider the type of property that you’re looking at. If you are thinking of investing in a condo, the homeowners association may have restrictions on the length of a short-term rental. For instance, there may be a seven-day minimum, a 30-day minimum, a six-month minimum, or a one-year minimum. That rental minimum is very important to your investment strategy. If the HOA has a one-year minimum, you will be better off investing in that condo as a long-term rental.
I recommend hiring a bookkeeper to track your income and expenses from the rental property.
What will the rent be for your vacation rental? How do you find a good, competitive rate? You can go on VRBO and compare and contrast the property with other rentals in the area. There are a number of tips and tricks to help you price your vacation rentals. I always recommend that you work with someone who has a lot of experience managing these types of properties. There are a lot of pitfalls with this kind of investment due to the high turnover. You need a good cleaning crew in order to make the property respectable for each visitor.
You can add some bells and whistles to the property in order to improve your return on investment. I’ve worked with clients who have added dining tours to different restaurants in San Diego. Some even have personal chefs or a dedicated staff come in and stock the refrigerator.
Make sure you take those kinds of services into account when developing your investment strategy. If you are buying your first home and you need some help with the mortgage payment, you can rent out a room as a short-term rental. Just be careful and make sure you have a plan in place before you sink all of your money into the home that you buy.
Finally, it is incredibly important to diligently track the income and expenses from that property. I recommend getting a bookkeeper to help you with that. When tax season arrives, you don’t want to be caught with a question mark on your face; you want to know exactly what your return on investment is and how to write off everything you can write off.
If you have any other questions about investing in vacation rentals, just give me a call or send me an email. I would be happy to help you.