Vacation rentals: Expected vacancy rate and management fees?

[Daniel Hart]

I've accumulated quite a few rentals in the city I live in, and the focus has always been cash flow, but I'm considering purchasing my first "vacation rental". 

While I have set formulas for my lower/middle income inner city rentals, I haven't the slightest idea what to expect from a vacation rental.  

I'm considering purchasing in the Asheville, NC area, and would purchase something that not only satisfies me for my visits, but also is universally attractive for vacation tenants, meaning an attractive setting, reasonably close to downtown, and modern amenities.  The price range I'm looking at is $100k-$150k.  The only assumption I am making is that something like that would rent for around $99 a night. 

My typical rental property at my home has a cost basis of $40k and rents for $800 a month, and those numbers always work, but I understand that with a vacation rental I may not see much income.  I know that I won't be able to manage it, and I'll have to have a property manager who will charge higher fees then a standard long term rental manager.  

So, in order to really understand what a vacation rental like this might earn (and I don't need income to buy it, but I do want it to break even), I need to get an idea, even just a ballpark, of what type of vacancy rates and management fees I'd be looking at.  

Even if you aren't in that specific rental market, I'd appreciate your estimates.  Thanks!

[Patrick Diamond]

Hi Dan -

In the line of resources, for a more simple way to get some info on occ rates and going rates, you'll also want to check out something like www.airdna.co , which can give you a bit more comprehensive information on short term rental analytics... there's a free report which will probably be all that you'll need.

I would add that when you're looking toward other listings to drill down a bit more, keep in mind that it can be difficult to get apples to apples comparisons, as the success of one listing over another depends often times more on the way it is managed than the amenities.  One mistake I find people making quite often is thinking that their location isn't ideal for Airbnb or other short term rental sites, because it's not near any tourist spots... Many people shoot themselves in the foot on this and leave a lot of cash on the table.  Often times, the areas which aren't "touristy" can be a gold mine for someone who really does their homework on short term rental.  A great supply of guests, usually 1-3 month long stays, comes in the form of just about any hospital or medical research center... I've hosted countless doctors and nurses over the years, all willing to pay a premium for a furnished and convenient pad without a long term commitment needed.  I know people who have forged relationships with the HR departments of nearby large campuses (academic and corporate) to get to the point where their income is generated on autopilot (some no longer even need to list via airbnb, homeaway, etc.).

Along the lines of management, you can turn to a company like Pillow, which likely operates in your area.  I can also provide you with some other recommendations along the lines of management if you get to that point.

The bottom line is that, though it takes more work to set up properly in the beginning, you can make 40-50% more through short term rental (notice I didn't say vacation rentals :) )

There are other regulatory caveats, etc., and I feel like the extra work in setting it up cause some people to just say "it's not worth it"... I have taken apartments that were renting on the regular rental market for 1,400 dollars in L.A. and had them making over $6,500 verifiable income in the busy months, netting around 3K after management expenses, etc... It's definitely worth a second look!