Investors sometimes forget about other options for rental properties. Most people buy an investment property to rent out yearly. If an investor chooses a home or condominium wisely and manages it as a vacation rental, the return on their investment can far outweigh a typical yearly rental property. Here are some things to consider when pursuing a vacation rental.
Location – You must first decide on the location and if the city ordinances and condominium or housing associations allow vacation rentals. One of the most important decisions you will make is the location. The location should optimally be a resort or vacation destination where you rent the property out year round. Winter does not always mean you wouldn’t be able to rent it out. There are several ski resort destinations in the winter that are also golf destinations in the summer. You want your property to be busy all year, not just in a specific season. Although sometimes you might be able to make enough money during the season that you would be able to slide through the off-season. I would highly advise you to visit the location you decide in the winter and summer before making a purchase. Since the owner usually wants to reserve the home for their own use a few times a year, it’s important that the homeowner enjoy the area as well. If you’re concerned that you want a high return on your investment, you should look at vacation rental web sites and look at other owner’s property calendars and rates. Find out if they’re busy or not. You should do all the research up front before you decide if the location is right for a vacation rental and you.
Amenities – After you decide on the location, what should you look for in a vacation rental property? Think of what you would like if you rented out a property with your family on one of your own vacations. In the warmer regions, a swimming pool is a must and in the winter months a hot tub would be best especially for the smaller homes or condos where the property only sleeps 2-4 people. If you were vacationing and wanted to go snow skiing, think how nice it would be to come back to your rental and jump into a bubbling hot tub. Likewise, if you were vacationing in a warmer climate you would like a pool to cool off during the warmest months. It would be best if you had both! If you don’t have a swimming pool or hot tub, it doesn’t mean that the property won’t rent out, it just means it might not rent out as much, or at a comparable rent to other nearby properties, since these types of well equipped rental properties go first. For larger rentals that sleep 6 people and more, not only pools and hot tubs but game rooms with pool tables and video games are very nice. Sometimes during the winter the weather is not desirable to even go out in and if the property has some of these amenities, the guest wouldn’t mind spending the day at the rental. Upgrade the TVs to flat panels and put TVs in the bedrooms too or at least the master bedroom. Make sure the beds are large, king size beds are the best. Don’t think of this as a regular rental where you put the minimal amount into it. The guests are paying as much per night as a hotel or resort most of the time, so you have to make sure they want to come back and the amount they are paying reflects what they’re getting.
Advertising – There are several websites out there advertising vacation rentals, but as always, you get what you pay for. When anybody looks up anything on one of the search engines, the larger more popular websites come up on page 1. Those are the ones you want to advertise on or get your management company to advertise on. Type your city name followed by “Vacation Rental” into Google and see what websites come up on page 1 or 2. Your local management company nor your personal website will more than likely not come up on page 1 or 2. This is very important that you research where your management company (if you decide to use one) advertises since most will not spend much money to advertise. Someone in Europe will never see that your property is even up for rent if you don’t advertise on the major sites. They will never see your local management company that has their own local website with your property on there. It’s great to create your own website for the property to include your availability calendar, rates, additional pictures and more information, but it should only be as a link from the major vacation rental websites. I would suggest a website that covers the United States and Canada and one or two additional websites that cover European and Latin American countries including the UK, France, Germany, Spain, etc….Before you signup on any website, logon to their site and see what vacation rentals are being advertised in your city or state. If there are just a few, then the website is probably not worth advertising on. The most expensive ones are the ones that are worth it and you’re probably going to be spending anywhere from $600-$1,000 per year on the advertising costs depending on the number of countries you advertise in. You should cover at least some European countries and the United States and Canada.
Contracts and Charges – Contracts are very important. Each of the major websites have contract examples for you to review. Start with one of them and add your own information according to your location. If you have an attorney, it would be a good idea for them to review it. You can put almost anything in a contract including that they have to vacate the property if they disturb the neighbors within a number of hours, no parties (if that is your wish), pet policy, smoking policy, weather issues, cancelation policy, security deposit returns, vacation insurance suggestions. The contract has to cover more than just the amount of money and dates. Most vacation rental contracts are from 3-5 pages long. Security deposits are a must and the same amount should be charged for anybody whether they stay for 2 nights or a month. Don’t make it too expensive that would scare people away. Look at the other rentals in the area and see what the norm is in your area for the size of the home and its level of furnishings. Security deposits can be used for not only damages to the property, but policy violations including not picking up after their dog, smoking in the home, etc.
Management – You can manage the vacation rental yourself if you’re one that answers emails and voicemail quickly. Remember when someone searches for a vacation rental, they’re excited about going to the location and are sending out numerous requests for quotes for their stay at a number of properties. If you or your management company decide to answer their email days later, most likely they have already chosen another property. It’s very important that you answer email from the renter the same day, and it’s best within hours, with a quote of total costs including all security deposits and cleaning fees. No hidden fees. As part of vacation rental management, the owner or management company must make sure that the property is extremely clean and sanitized inside and out. Pay attention to detail, cleaning windows, baseboards and ceiling fans at least on a rotational basis. If there are hot tubs and/or pools, these must be clean as well with the water being changed in the hot tub often, most of the time after each guest. If you’re going to manage it yourself, check up on your cleaning person and also pay them more since you must insist on very detailed cleanings. The cleaning person must also restock all the paper products, soaps,.. etc.. and a number of loads of laundry so they’re doing more than a regular cleaning person does that might be cleaning your home weekly. Pay them well and they will want to do the extra detailed cleaning. Most all vacation rentals charge a cleaning fee on top of the rental fees so give that to them, don’t try and make money on the cleaning fees. Calendars should also be managed and kept up-to-date online so guests can see them. This probably means management of more than one calendar. Remember if you’re advertising on a few of the major vacation rental websites, they have calendars on their sites and if you build your own website, then link to one of theirs so you minimize the number of calendars you keep up to date.
Vacation rentals can be very profitable and a great alternative for real estate investors. This opens up a whole new market for realtors once they understand the level of investor they have and if they could buy and operate a successful vacation rental.
About the Author: Eric Miller is a broker associate /owner with Keller Williams Realty in Fort Lauderdale with over 10 years of experience. Eric Miller and Associates is an award winning team of Ft. Lauderdale realtors and can be found online at FortLauderdaleGroup.com, where you can view every Fort Lauderdale condominium listed for sale.
Keith Munsell 
