Do you dream of stepping out your front door and being right on the beach? Or maybe spending your day lounging at the poolside bar? Love the idea of owning a second home and making money from it?
When it comes to vacation homes, sometimes you can have your cake and eat it too.
Investing in a vacation property lets you enjoy it when you’re there, and lease it out when you’re not. But to turn your property into a money-maker, good management is essential. To help you make the most of your investment, here’s our ultimate guide to managing vacation home rentals profitably.
Option 1: Self-Management
If you own a second home, you can choose to manage it yourself. It will take more time and effort than hiring a property manager, but you’ll get to keep more of your money. Here’s what to keep in mind if you decide to manage your vacation home rental.
It can be a big commitment. Renting out a vacation property is far more time consuming than leasing out units for residential purposes. Obviously you have much more tenant turnover, as guests may stay anywhere from a few days to a few months at a time. To successfully manage your unit by yourself, you should live nearby and have the time to handle bookings, collect payments, hand out keys (or change the key codes), respond to maintenance issues and clean.
It lowers your expenses.Hiring a property manager can get expensive. Taking over the day-to-day tasks can lower your overall costs, letting you keep more of your own money. If you decide to manage your rentals yourself, it’s important to pay yourself an hourly rate for your time spent managing the property, to keep a clear eye on your actual profits from the property and to constantly reinforce the idea that spent time is spent money. It’s also critical that you make sure you’re not sacrificing quality. A well-appointed, clean unit can rent for more than one that isn’t as well maintained. Also, skimping on marketing can mean higher vacancy rates, and less money inbound.
You can use online tools to do some of the work for you. With the help of websites like Airbnb and VRBO (formerly HomeAway), it’s getting easier to manage your vacation home rentals on your own. Using these online marketplaces can get you great exposure and easy access to hundreds, even thousands of guests looking to rent vacation homes. They also simplify your deposit and payment process. These sites charge fees, but they are usually much less than those of professional property managers.
You can hire some outside help. If you decide to manage your own vacation home rentals, you don’t have to do it all. You might decide to hire a weekly cleaning service for example, or use a property management company simply for emergency services. You need to decide what you can handle, what you want to take care of, and what should be outsourced.
What do I need to do? The first step to self-management is learning the ropes. Find out what tools are available to help you successfully set up your marketing, accounting and payment processing. Remember to stay focused on minimizing vacancies, because they are what kill the profitability of vacation rental properties. Once you have a strategy in place, you can evaluate what is working well and what needs improvement.
Option 2: Professional Property Management
Although the monthly cost can seem expensive at first glance, don’t dismiss the option of professional property management too quickly. There are many advantages to hiring a property manager that specializes in vacation rentals.
Ease of use with on-site management. Many condominium complexes offer on-site management services to their owners. If you own a unit, you simply let them know which weeks your condo is available and they do the rest. If you don’t live nearby, some kind of local management is essential.
What services are included? Since many vacation home rentals are owned by long-distance landlords, property managers offer a wide range of services. They may include marketing your unit, screening tenants, managing your bookings, collecting payments and providing accounting summaries. They can issue keys or keycards, as well as handle check-ins and check-outs. Many include housekeeping services, and a full cleaning between guests. A good property management company will do a walk through between visitors and check for damage, missing items and maintenance issues.
How much does it cost? Costs vary widely depending on the location and services offered. Some companies charge a flat monthly fee; others work on a percentage of money collected. Rates can be as high as 15 to 50 percent of rent, so make sure you understand the costs before signing a property management agreement.
How to find a property manager? You can use the on-site management company if there is one, or you may bring in your own. Start by finding property managers in your area. A quick online search will let you know where to start. Before making a decision, approach a few neighboring property owners and find out who they use for management. Landlords won’t hesitate to tell you if they are happy with their property managers.
What do I need to do? If you’re thinking a property manager is the way to go, book an appointment with your top two or three choices. Ask them which services they offer and get a breakdown of their costs. Find out if they require exclusivity, or if you may take care of certain aspects, like maintenance or private bookings. If they manage a specific condo complex, also request a listing of the going rates for weekly and monthly rentals (high and low seasons), so you can make an informed decision.
Don’t Decide on Fees Alone
Don’t base your property management decisions solely on costs. Location, amenities, potential rent and total expenses all need to factor into your decision. So does your ability and availability to take care of your vacation property. It takes serious number crunching to decide on the profitability of any rental, even more so for vacation homes. Once again, stay focused on minimizing vacancies, these are the big bad profit killers.
Whether you self-manage, hire a property manager or go with a hybrid of the two, what matters is that you maximize your returns, and keep your vacancies as low as possible. That could mean managing it yourself, if you have the skill to do so. It could also mean hiring someone to do it for you, to allow you to focus on growing your real estate portfolio.