Buying & Selling Real Estate
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 8 years ago, 05/25/2016
Colorado Mountain Condo & Rental
We are considering a mountain condo in the Fraser Valley of CO and something that we would use part time - mostly in the off season (Summer months). It will be very hard to cash flow from my estimates but curious what others have done in buying and managing such properties. Insights at all you can share?
I work in the Summit County market and most of my clients are second home owners who rent out their properties to cover some expenses. Generally speaking, short term rentals will cover HOA dues, taxes, insurance and maybe a small part of your mortgage. I have not seen a property with positive cash flow when the buyer has a loan. Property management companies take 25-50% in my market (not sure about Grand County/Fraser) of the gross rental income. The most successful owners who make the most rental income do it by renting it out on VRBO.
I own one in Fraser, and it cash flows very well. With a mortgage and property management I believe that the margins would be tighter, but still doable. Although like Amy mentioned, PMs for vacation rentals can be very proud of their work. I've not seen anything less that 35%, and that's if you do the marketing.
Luckily, doing your own PM really isn't that hard, with the right systems in place. VRBO, AirBNB and the like make it pretty simple. There are a few other parts and pieces you'll need to do yourself as well, but once you have some templates in place it's not difficult at all. I keep mine full almost all year round, and it's about 4 hours of work per month at the most.
Garry C. What kinds of systems did you set in place. I'm saving for a vacation rental now. Are you talking about maid service and housekeeping items. What about handyman service for unforeseeable cap ex stuff? Where should I start?
Housekeeping is the big one. Those are generally pass-through costs. They might charge you $25/hour for 3 hour turnover service, you pass that through as a fee to the renter. $89 sounds reasonable, and gives you $14 towards toiletries. Handyman service I do myself, as I did the rehab. I've had this one 3 years and my craigslist dishwasher finally bit the bullet, so I grabbed a new one for $100 and hauled it up there about two weeks ago. If you're not handy, or don't have easy access, then you'll want to hire this out too. I have one that I can call on if need be, recommended by my housekeeper, who was recommended by my realtor.
Other systems that I use are the smartphone apps for booking. Most of my business comes from VRBO, and I can respond and send quotes, accept reservations, etc. from anywhere at anytime. That's a big leg up over the competition, simply being responsive. It seems most folks that do this sort of thing are just trying to make some extra money on their mountain getaway. Even just doing a little research on the price of the competition once a year can put you far ahead of the pack. You don't necessarily want to be the cheapest on the block, but you need to know when the rates change seasonally. Then set yourself a reminder to update these once per quarter.
An automated lock that allows you to generate a code that only works between check in and check out is something I'll never go without again. One ruined vacation because they locked the keys in the condo and you've just lost a customer. Not to mention you might be paying out of pocket to have your housekeeper show up on her day off and let them in, if you're a nice guy. Or you could pass those costs through. Either way, they have a negative view of their stay at your rental. Buy the eRentalLock.
What else... cultivate those reviews! I ask for them when I send back security/damage deposits (as long as I didn't have reason to keep the deposit, which I hardly ever do). Add a little note that says "Great reviews help keep us booked, so your rental costs don't increase over time." Works very well, I have far more 5 star reviews than most of my competition, which keeps me booked.
Guide Book, online (web site/blog, vrbo app) and physical binder at the property. I keep check out instructions, how to start a fire in the wood stove, how to use the can opener, dial 911 for emergency, closest hospitals, pharmacies, restaurants and liquor stores, etc. I also have a bunch of my favorite crock-pot recipes in there. Besides being pet friendly, my niche is the fully stocked kitchen and catering to foodies like myself. Find your niche, and sell it to the masses. And then whenever one of them has a question that you've not already answered, immediately add it to your FAQ on the blog/site/app and your Guidebook document. Print that page and swap it in on your next visit, or mail it to your housekeeper and ask her to do it for you.
One of these days I'll write a book on it. There are a ton of ways to automate this process and make it easier than most people think it can be.
@Monika Haebich, I suppose without people like me that average would be 10 hours per week or more. Yes, I have many tips, please see my post previous to yours. Let me know if you have any specific questions, I'm glad to help.
@Garry C. It sounds like you do a great job with your vacation rentals. I'm in the early stages of investigating a vacation rental in Colorado. What percent of the year would you expect a rental to be occupied using VRBO or Airbnb?
I know for me personally, with just one vacation rental, and about 80%+ booked, I spend maybe 2 to 3 hours a week - it's pretty streamlined with vrbo's system...both from my laptop and phone with their app.
Aloha
Jeff Graves
Great job there. How do you manage booking, cleaning, repair remotely? I looked at the ski condos in CO before but couldn't figure out how to make it work without local presence. 80% is impressive. How long does it take you to get to this level? Thanks.
@Albert D. I do live on Maui...however I work remotely.
- Bookings are done via vrbo.
- Cleaning...as soon as I get a booking I would email my cleaner asap so they can get it booked into their schedule
- Repairs: I have a couple of people I can text, call or email and they are very responsive and reasonable
- 80% occupancy? For most of my clients putting their property on vrbo will get them to 60% to 70% occupancy - Maui's a pretty darn desirable vacation destination year round. To get that additional 10%+ occupancy requires "spreading the word" I do this via Facebook posts to a dedicated VR page, I have also runs some FB ads, posted on LinkedIn (occasionally) and I use twitter.
- During our low season we do adjust our rates...I kind of play around with them, do a new header in vrbo too every couple of weeks.
- There are a couple of things you can do to increase your ranking on vrbo - we just have the very basic subscription level.
I hope that gives you a few ideas.
Aloha,
Jeff
Very helpful. Thanks!
Thanks @Jeff Graves and @Garry C. for some great vacation rental tips, I use VRBO and Airbnb when I take vacations and try to keep notes one places that are awesome and they include a lot of the things you mention.
Seems like you can forgo the 25-35% PM fees if you can find a reliable housekeeper and handyman, so that potentially could make a VR work when it initially might not have.
@Sundeep Amin - you are correct. Many of the VR just don't quite cash flow when paying a management fee of 25% to 45%. When most potential investors consider buying a rental their concern is management, time and expense (among other things). I like the vrbo platform...most of my clients use it too...so once you dial in the housekeeping and have a handy-person to do repairs...it boils down to good communication.
Aloha