Short Term and Vacation Rental Success

[Hannah Hammond]

Hey BP! 

I am a Realtor and work, live, and invest in real estate here in the Scottsdale/ Phoenix/ Mesa/ Tempe areas and have experience in doing 1 year rentals with condos and single family homes. I have been running the numbers in excel and short term/ vacation rentals seem to offer a much higher return on investment than long term. If any one has experience in this niche, I would love any advice and if would highly appreciate if you could respond to the following questions: 

1) What type of property offers a higher return, condo's or single family homes ?

2) Properties with how many bedrooms have the highest occupancy and highest return ? 

3) What percent higher can you expect during peak season?

4) What is your average yearly occupancy rate? 

5) Do more remodeled properties or less remodeled properties have higher occupancy and/ or ROI?

Any experience, advice, or opinions would be great, thank you so much! 

[Keith Courtney]

Hannah -

I am in Orlando, home of Disney World and a very large vacation rental market.  I am going to attempt to answer your questions based on what I witness here.

1) As a general statement, single family homes yield better than condos due to they offer more amenities and can garner a higher nightly rate.

2) This is a tough one to answer because there are so many variables.  Regarding the number of bedrooms that have the highest occupancy rate, I don't think that can be answered.  The homes that offer the best amenities in the best locations achieve the highest occupancy rates regardless of the number of bedrooms.  Regarding the highest returns, generally speaking the larger homes with a greater number of bedrooms yield the best returns because they bring higher rental rates and their costs are not significantly higher than smaller homes with less bedrooms.

3) Peak seasons here are the holidays - Thanksgiving, Christmas, and Easter - and the summer months of June, July and August.  Occupancy rates during those times are 80-90% and even higher.

4) There are thousands of vacation rentals here, and I have not seen an average occupancy for all of them.  I know there are a number of homes that don't do better than 50%.  There are also homes that do 67% up to 90%.  As stated above, location and the homes themselves are the two most important factors that will determine the occupancy rate.

5) This is the easiest question to answer. Definitely remodeled vacation rentals have higher occupancy rates, higher nightly rates and thus greater ROI. Most vacationers go to HomeAway/VRBO, FlipKey and the other rental listing websites to find vacation homes to rent. They base a lot of their decisions on the photos they see of each home. I have seen over and over people will pay more per night for a vacation home that is new or newly remodeled than they will for an outdated vacation home. When I guide an investor in purchasing a resale vacation rental here, I make sure that the investor has enough cash to pay for all needed renovations.

I hope this helps you.  Feel free to contact me directly if I you have any other questions.  

Good luck,

Keith