Here I sit, looking out over the Atlantic Ocean… beautiful beach, great house, extraordinary day! While there are a number of topics I could write about, the one I’ve chosen for today: vacation property economics 101 (and don’t fret, I’ve got a few days here so there’s more to come). But seriously, on the trip in, I could not avoid noticing the “FOR SALE” and “FOR RENT” signs on every other house – how are these guys doing? Down market, not a great time to rent but maybe a good time to buy? So those of you considering making some money out of a vacation home remodel – let me share with you what I’ve learned:
- Vacation homes need to be rented 15 to 17 weeks a year in many areas to break even*. HOLY COW! That’s kind of a lot! This fact is based on the assumption that one month’s mortgage payment would equal one week’s rental income in the peak season. More expensive homes would need to be rented longer. Note to self: don’t buy an overpriced house in an overpriced ski or beach area where my rental prices are going to be… you got it… overpriced!
- Internet advertising is essential. You need to reach the widest possible audience of potential occupants to keep your place solidly rented. My personal favorite is a site called Vacation Rental by Owner (VRBO.com).
- Middlemen – be gone! Management companies take anywhere from 10% to 60% of rental income, making positive cash flow virtually impossible. Vacation Rentals can be managed remotely – its just a whoping big headache!
- Take Advantage of the write-offs from mortgage interest to property taxes thanks to our good buddies in the federal gov’t, middle class property owners do just fine on the tax end of these transactions… even if you can’t rent it out. When renting you typically can deduct a portion of your costs, such as utilities and maintenance.
- LOCATION!!! Get a place that you like – would you go there for a week every year with your family and pay the sort of rent you’re thinking of charging? If the answer is a resounding yes, then you have this Junky’s blessings.
There you have it… think twice, get advice and send me a picture… or better yet, an invite!
source: other than my own common sense and bag of tricks, I also referred to Christine Hrib Karpinski, “How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment.”
thanks, great article, funny i was just looking into information about vacation rentals
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How soon will you update your blog? I’m interested in reading some more information on this issue.