How To Start A vacation rental business?

[Aaron Cooper]

Hi, I am interested in learning how to start a vacation rental management business.  I would love anyones advice on how to get started.  Even the basics.  Do I need a lic (I have one)? Does my company need to be in the same city to manage the property, legally speaking.  I have people on the ground when needed.  Things like that! Thanks BP community!

[Michael Rutkowski]

Are you talking about property management license? You won't attract many owners without a property management license, if the owners have half a brain.

Tailor a rental agreement towards vacation rentals. DO NOT use the same one you use for reg rentals. Get a lawyer who specializes in these contracts to look it over. 

You need vacation rental insurance somehow... I would ask the owner to insure their property properly. If you have insurance for your business, it may cover these operations, but any claim you will make will make an already expensive insurance much more expensive. Try to convince the owners to purchase the policy. If they have a regular mortgage, there will be an exclusion prohibiting vacation rental activity most likely. Make sure they keep their escrow policy on their house in these situations, or they will be technically default on their loan and the bank can call it out (worst case scenario).

You do not need to be in the same city in my state. BUT, you might find it much easier to be in the city you are managing in. Look at the logistics. Do you know any cleaners who are reliable? Cleaners and house painters seem to be very flaky and can show up on time, or not at all in my experience. That cleaning cost will eat up a lot of your income, but I'm sure you thought of that. 

You will need to check the zoning of the property. Normally, R1 and R2 do not qualify, and your city can put the kibosh on your rental just as quick as you set it up. Currently, in my town, there is a HUGE debate about this, and the city may shut down vacation rentals which aren't licensed. That equals about 290 rentals! Out of around 300... So make sure you pick a property that won't give you trouble down the road. If you file for exceptions, that costs around $5k in my little middle-American town.

If you've never done it before, but are used to property management, you may be pleasantly surprised. My guests love our place, while our previous tenants were all college kids who destroyed my property. This is why I converted it. I saw no point in watching my property get trashed, and my guests clean my place before they leave (work that into your rental agreement, get it up on a website, and offer virtual signatures). All depends on what demographic you are targeting. I target families on road trips, and families with students visiting the local University. But I do get a diverse cross-section of humanity. 95% of the time, I never even make contact except through emails, and about 1% of my guests must be ninjas, who show up, sleep in a bed, and vanish. 15 minute cleanups are the best!

Hope that helps. Lots of hidden costs to vacation rentals. Good luck! I spent around $36k (not including the price of my building), and made about $10k back this season (in 3 months). Not bad! I have another unit which will be ready next summer. Should turn a profit after 2 summers. Great industry if you can manage from afar, good luck.