Real estate investing is great, but investing in vacation rental properties can be especially fun. It’s pretty nice to have a property in a vacation area for short-term rentals—because you can stay there with your family! But when you own a property so far from where you live, how can you manage it? Here are three ways to go about managing a vacation property:
1. Use a management company to rent and manage the property. This is the easiest way to go by far. You hand the keys over to a management company in the area and they take care of everything. They rent the property, market it, clean it, accept the check-ins of people coming and going. Then they just send you a check. Now ,this isn’t the method best for maximizing profits, because you’ll pay a management fee of 10%-50%. But for high income individuals or for people looking for some tax relief this can be great. It’s amazing to me how many people write the big checks to the IRS and never consider a vacation property to help them with their tax consequences!
2. Rent the property yourself but use a management company to manage the property. This is my favorite method. You don’t get the maximum profit possible, but it’s a good balance between profit and work. In order to rent the property yourself, you actually post your rental on various vacation-themed rental sites. This costs money, but you’ve got to spend money to actually advertise your property! And you get tremendous exposure. Nowadays, people use these sites to look for properties to rent because they’re trying to save money over what the local management companies or ski areas or beach communities are charging. I can tell you from personal experience that these sites are a powerful tool for reaching potential renters.
My favorite is vrbo.com, which stands for vacation rental by owner. Other options I’ve used include beachhouse.com, vacationrental.com, and homeaway.com. Just post your property on one of these sites and then contract with a management company in the area to handle the keys, cleaning, repairs and any emergencies. You’ll communicate with your renter up until the point where they pick up the keys.
I like this method because it allows me to directly control who rents the property and who doesn’t. It also allows me to control vacancies, because while my property might get overlooked in a low-demand market by a property management company, I can tell you that I won’t be overlooking it! And of course it’s also nice to control the use of the property for myself, my family and my friends.
So how does this work? Let’s take a cleaning fee. Say I rent a property for $400 a night but I have a minimum night stay of 5 nights. I charge the renter an additional rental deposit of about $250 so that I’m protected from damage. And then on top of that I charge an $80 cleaning fee. This allows me to contract with the management company to clean things up, but I don’t have to take it out of the rental fee. It’s the best of both worlds. You get to keep all of the rents (since some of those companies charge up to 50%!), but someone else does all the maintenance work.
3. Rent and manage the property yourself. The third way is to choose not to work with a management company at all. Then you rent the property and manage it yourself. I personally don’t like this method, but it can work if you live close to the property or are able to spend the time and energy to actually employ and work with (over the phone) the cleaning companies directly. You’ll also have to make sure that you have a couple of handymen available to fix stopped up toilets and whatnot.
Besides that, you do exactly the same thing as the second option: put the property up on vacation websites. In some cases, you may mail the keys or arrange for a pickup point or for someone in the community to deliver. Now this method does maximize your profits the most, but it takes a lot more time and effort on your part.
Another benefit of this method is that you are able to control the vacancies—and that’s really important for your cash flow! I had a situation on vacancies once. I was operating in option one. There was a season where I should have been receiving calls about what was going on with my property. I found out that my property had been put in a rotation like everyone else’s. Demand went down and I lost six weeks of good rentals I should have had. The problem is that the management company is thinking about other properties as well as yours. Because no one will care about my property as much as I do, the property lost rent. The rental demand was less during those six weeks. But I knew some people who were marketing their properties themselves and they did well on through the online marketing.
I learned from the school of hard knocks that it’s important for you to have some say so on your property’s rent! That’s why I like renting it myself and letting other folk do the management side. My personal experience aside, though each of these options are viable. It all depends on what you’re looking for from a vacation property!
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