Deep down, I believe what people really want when they buy a vacation rental is a place that they can call home, and not just a property that they can rent for extra income. “Vacation” comes first, and then, “might as well earn some extra income on this baby!” That’s what my husband and I thought when we bought our first dream condo in Hawaii.
As reality dawned, we realized that we should not neglect the short-term rental income potential for our property. Once we got into this framework, we were able to maximize our returns with the help of the below advice:
1. Find a good property manager
First, find a great professional property manager who has a track record of success. They know the market for vacation rentals, how to attract the most buyers, and how to best price the rental for maximum yield. They make sure that the unit is cleaned in between guests and they take care of routine maintenance. This includes fixes that inevitably need to be made. It also includes replacing standard items that typically go missing, like coffee mugs, wine glasses, and cutlery. Who knew people steal cutlery?!
2. Set the right price
Our first manager didn’t keep an eye on rental rates. We happily relied on his advice to maximize occupancy, and were thrilled when it was above 50%. Turns out our manager was only charging an average of $80 per night for our 2-bedroom, 2- bath luxury condo. This was incredibly low, as the going rate for similar units in our complex was closer to $250 per night!
After consulting with some friends, we were able to find a new manager who was much more on their game. This particular company used a professional automated pricing tool to help optimize rates. These software solutions allow managers to maximize rental revenue and occupancy based on historical pricing patterns. They also allow managers easy access to historical market data to better understand when to lower or raise rates., I strongly recommend that you ask any prospective manager whether they use similar tools. Some of these platforms include BeyondPricing or Rented to help set optimal rates.
3. Don’t Skimp on Decorations
Make sure your decorating game is on point before you buy a vacation rental. It seems counter-intuitive to add designer pillows to the couch, but it’s amazing what that can do. Want to add a great touch to your vacation rental? Paint an accent wall and watch your reviews soar. Got your eye on a vintage surfboard at the local flea market? Buy it now! Those multi-colored oil and vinegar jars you see at Ross? Put them in your shopping cart!
4. Negotiate your Rate
Don’t be afraid to ask your property management to negotiate their management fee when you buy a vacation rental. We found that some managers charged 30%+ on gross rental income. Simply by asking, we were able to get them to agree to a significant deduction. When the economy turned, they even reduced our rate further.
When done right, you can have your dream vacation rental and make some money too. Here’s to getting the most out of your investment on both!