Vacation Rentals ARE a lot of work!

As a Realtor who once worked in the vacation rentals side of my local property management company, I often wondered why more people were not taking advantage of the income opportunity of this very profitable market. I would make reservations, and see the annual income summary of many different houses. I would take note of what that home was really worth, and with some quick math, determine that the return on investment was profoundly significant! Why were more people not doing this?! After a few years getting my feet wet as a property owner of several vacation rentals in Galveston, I quickly learned that the reality is, IT IS A LOT OF WORK! Even with a property manager/management company handling the reservations and cleanings. 

The first year was the initial set up. I thought that the work would be the most abundant at this time and slowly start to become more manageable over time, even thinking that it would require a minimal amount of my time. You know, choosing the right home in the right location, furniture shopping, paying for advertising on the right sites, marketing, marketing, marketing. Then upkeep would follow. Renters do tend to cause many properties "above average" wear and tear so my thinking was, stop in once every other month, size up any damages and that's that! No...as it turns out, advertising should be a constant job with at least 3-5 hours dedicated per week. Marketing should always be a priority! -Even with a management company! 

Of course, there is a positive side to each thing I have listed. Vacation rentals are normally purchased and rented with the idea that the rental income will at minimum, offset the cost of ownership, and at best, be a huge cash flow, money generating investment. Many things need to come together to make either of these possible.

First and foremost is choosing the right home in the right location! My market area is Galveston. I knew from my experience that the properties with the most income generated were beachfront, or in very very close proximity to the beach. Yet, one of the properties that now make up my portfolio is on the canal side. Its a beautiful home! It is probably more comfortable that all of the others. If I had to live in any of the rental homes full time, I would choose this one. At the end of the day, that DOES NOT matter! The home I am writing about does not even compete with the beach side/beach front home. It generates half the amount of reservations as the others and the demand for it is so low, that the rate is significantly less than the other homes too. The market is full of people who come to Galveston for the beach. So, location, location, location! Know your market and do not search based on your preference, unless you are planning on living there full time in the future.

Purchasing the right furniture is key in making it the home appealing for photos-which in turn means more rentals. Who wants to spend their hard earned money, and most importantly, their valuable family time in a place that is outdated? I personally would not want to rent a home that is less comfortable than my own home. For example, most people have flat screens in their home, why would they want to settle for a tube TV with poor picture quality? If your home is lacking appeal with the furnishings, it better be making up for it somewhere else! More than likely though, the next rental home in your area will capture that renter if it is more appealing. That's just the way it is. Furniture choices matter so much too when it comes to maximizing sleeping capacity-a HUGE difference maker in reservations. The more people the home sleeps, the more rentals it acquires, and at a significantly higher rate. Most people like to plan vacations together with other family members or friends. Its easier to split up the cost of one large rental than to reserve two homes. Its also more fun. So sleeping the maximum number of people, is something that most people overlook when purchasing furniture. Its just money left of the table.

Learning which sites offer the most "bang for your buck" really goes a long way in producing sizable rental income. The "platinum" package onVRBO/Home Away was a tough pill to swallow at first. Over $1,000 to advertise seemed like a lot of money! But for one years worth of advertising, and thousands of eyes on my listing in the first month, its really a no-brainer. If you are choosing to have a vacation rental management company handle your home, you should look for one with a very strong web presence. Do google searches for "vacation rentals in (your market city)" and see who stands out. You will quickly notice the trend of who has a stronger web presence after 20 minutes of google searches and 20-30 clicks around.

One thing that I cannot stress enough though, is doing extra marketing on your own! It is just so valuable. Never just sit back and expect a property management company to do it all. The truth is, your home or condo WILL get lost in the shuffle. I stopped marketing my homes and sat back thinking it was all good, we had a pretty good year last year and I am satisfied. From here on out these babies should opperate on auto-pilot. The wake up call was 3 consecutive months of less than half the income from the previous year. Ouch. That hurts right where it counts! 

My point is, that though the initial process is intensive with physical demands in the first year, in the second, third and consecutive years the work will accumulate in other ways. You will need to constantly monitor the reservations. How do they compare to past seasons? What things could have been done differently to change the amount of income? Were my guests happy? How can I keep them as repeat renters? How can we minimize costs/expenses? Electric bills in the summer were above $500 monthly, will remote access with WIFI thermostats really change this expense significantly? Time will only tell. One thing is for sure though, there is plenty of work to be done, and it is not going to happen by running on auto pilot!