Monday, February 8, 2016

How to Make Your Vacation Home Pay for Itself?

Now that the real estate market crash is behind us, many people are thinking of taking the plunge and purchasing a rental / vacation home and start building up that real estate portfolio again.


I was watching a TV show the other day called “Vacation House for Free” with host Matt Blashaw and it inspired me to write this article to provide local Phoenicians with a few tips so they might want to “get back into the game.”


First off you want to buy in a popular location which is attractive to would-be vacationers and renters. Choose a couple different and desirable locations and find a good real estate agent to watch for deals as they appear on the MLS.


You could even go so far as to put up a few bandit signs and see if you can’t find a local who is needing to sell fast and offer you a better deal than if the home is listed with an agent and especially if it needs repairs.


Second choose an area with easy access. The easier the access and closer to modern amenities, the larger the potential rental audience will be. Homes that are close to lakes, rivers, beaches, hiking, forests, and other wonders of nature are best.


Third, check the high rental / busy seasons and plan accordingly. If you are going to use your vacation home, it makes sense to use it in the off season and rent it out when the busy vacation season hits. This also allows you to rent at a higher price especially if the area is under high demand.


Forth, make the home very attractive and a fun place to live in. Decorate the home to really enhance the area. If it is a beach home, have wave and surfing pictures on the wall. If it is a fishing area, have fishing action pictures and other items to enhance the experience for the renters


Fifth, make sure you do your math. Mark Fields wrote an article back in 2009 where he listed out an easy to follow plan for calculating your approx. yearly costs.


Add up those costs

Your fixed costs (those that will not vary because of rentals) include your mortgage, real estate taxes – say $2,000, home owner association dues – say $2,600, homeowner insurance – say $200, liability insurance – say $100, annual repair and maintenance – say $500, and minimum utility costs – say $3,000. Remember, utilities include telephone, heating and air conditioning, electric, water, cable TV, telephone, etc. All of these costs will vary according to your location, the unique vacation home, and the number of services.

Your variable costs (those that vary with rental/occupancy) include increased utility costs (say $10 per day rented) and rental operation costs (say 30% commission). The utility costs that vary include heating and air conditioning, electric, and water. These costs will vary by location and the weather.

The fixed costs (without mortgage) add up to $8,400. Your variable costs add up to the daily rental rate times the 30% commission plus $10.

Rental equation

If the average daily rental income, for both peak season and off season, is $160 per night, then you will net about $102 per night rented. That result is calculated by subtracting the rental commission (if you hire a rental agent, rates vary) and the increased utility costs.

To offset your fixed costs of $8,400 per year, your rental agent will need to rent your property 82 nights. Read the rest…


And lastly, make sure you have an easy and inexpensive way to list the home for easy rental.

A website called AirBNB makes this process very easy. All you will need is a person to clean up the home after the tenant leaves and get it ready for the next new family to use.

If you make your vacation home an easy and enjoyable place for people to visit, it will encourage repeat renters and people talking about your place in social media forums which could make your vacation home go viral.

Good luck and contact us if you need help looking for a good rental home in Phoenix, Arizona.

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