Are VRBOs a good investment? Thoughts?

Question

Are VRBOs a good investment?  Any watch outs?  Would you recommend doing it?  If there is already a forum on this subject, please direct me.  I'm sure this has been discussed many times :)

Debbie

John Underwood · Answer

@Debbie Zimmer That is a loaded question. The answer is it depends.

It depends on the location and what might attract people to your property, amenities, competition, your purchase price, how well you take pictures and furnish the property, how active you are in promoting the property, having a good support staff (mainly excellent cleaners/s). Are you going to have it in a place that you would go on vacation so that it is OK if it is just breaking even given that you can also go there and enjoy it.

@Lucas Carl says he is killing it in Pigeon Forge / Gatlinburg area.

I have a free lake house and make about 10k a year on it, much of which I enjoy reinvesting in my property making it better.

I make the bulk of my money off my long term cash flowing houses. This is my only investment property that I have a mortgage on and it is being paid for by other people and making some money along the way.

When I am there doing maintenance I have some free time to use my boat and jet skis :)

I think VRBO's can definitely be a good investment. I think many people are just breaking even on them and some are just fine with that.

Like any investment you need to run the numbers and see if a property and area makes sense for your goals.

Paige Kelsey · Answer

@Debbie Zimmer,I own six in Colorado Springs. Absolutely it is a great investment but this is NOT passive. As others have mentioned this is a business. As for things to think about:

+Cleaning- you need dependable cleaners and back ups - Folks will tell you they don't have a dog and bring a dog anyway. Now you have fur everywhere and a guest that is allergic to pet har checking in  2 hrs from now. This is a drop everything and go. To that end, you need cleaners that can adjust to this sort of problem or others like it. Ie- marajuana smells, washer breaking down etc etc.

+Maintenance- No one wants to have things that don't work perfectly on a vacation. Have a plumber, handyman etc that can go at drop of a hat no matter what. Don't worry, it will ALWAYS HAPPEN ON A HOLIDAY, OR A WEEKEND!! BE READY!! Also, there will be no haggling over price! Just get it done!

+Vacation Rentals- the day to day can be a killer so make sure you have systems in place for restocking  and maintain. Expect things to happen because they will. We just had a guest who thought they were checking out a day later go on a rafting trip and leave all their stuff everywhere. Meanwhile, we had another guest checking in.  Scheduling carpet cleaning, maintenance for even small things like changing bulbs,  to changing out beds becomes a calendar issue. Also, have a good way to pay for all of this. We use Zel and Venmo to pay for contractors on the spot for smaller things like snow removal.

+ Have a plan B- Will this property also work as a long term rental? Would you make money if you just sold it. Please make sure you have a plan.Just because vacation rentals were/ are allowed it does not mean they will always be allowed. For us, getting our vacation rentals licensed in the city of Manitou Springs was a SUPER lengthly process with zoning and mapping and it requires monthly rental income to be reported to the city, no this is not online. This goes WAY past checking out what things are renting for in the area, this is more about licensing the rental and knowing what you can and can not do with the property.

+ Vacation rental companies and what they will not do and so you have to! Did you know that folks LOVE to take the pics off of homeaway and airbnb and then post your property on Craigslist. Yup, I didnt know that either until.......... someone showed up to a property telling me that they are checking in for their 4 months stay!!    I actually started to then watch Craigslist for this reason to make sure this didnt happen again. A couple of times I have called other owners and got in touch with their property management companies and have gotten a total run around to.... "well owners can post on Craigslist if they like." Thing is, that is NOT an owner posting! That is a scammer. I wish the best for the owners and those companies but seriously, super dangerous!

+ There will be a time when you want to take a cruise or go camping without great internet service. Those will be the times when you need a back up. This however, does not mean your sister in law. You CAN NOT afford a bad review for when your sister in law forgot to pick up a phone, or guests smell gas on one of your properties.  I pay 15$ a day for when I travel for exactly those things and charge that locally here for owners wanting to take a break. Get someone in the business, you do not have to pay an arm and a leg just trust someone in the business to do it right.

Don't get me wrong, I love being a vacation rental owner  but it has not come without surprises or hard work.

Good Luck!

All the best!

Paige

Chris Baber · Answer

I live in a very popular tourist area (10M visitors last year I believe), and vacation rentals are very popular here.  I finally got mine listed in March and it's been very successful for me so far.

Lots of things to learn, and lots to invest to fully stock a complete house, with spares and extras and decorate and furnish.

I can't say it's a great long term strategy.  Who knows what the environment for STRs will be in 5 years, or 10?  Maybe oversaturated, maybe double the income, maybe the economy will no longer support so many travelers, maybe foreign investment will price the market to commercial rates and it'll be like finding MFR properties, who knows.

What I can say is that it's very worth it for me, now, to pursue more of them.  I own a house up the street I was doing the same house hack with; live in while rehabbing.  With the success of this one, I've just taken out a hard money loan to pay to finish asap so I can get it on the market before leaf season.  I expect rates to increase by 30-50% in the fall here.

This house might rent for 1300-1500/mo to a LT tenant.  Internet is satellite (terrible and unreliable, and unfit for working from home), and it's not close to anything commercial.  They will not treat it as theirs, and I'd expect to have to spend some rehab and cleanup once they vacate.

With STR, I've had the following bookings (not yet completed or paid, only booked)

Mar-Apr         $3,405

Apr-May         $1079

May-Jun          $4260

Jun-Jul             $5583

This is NOT what I've been paid these months, but these are gross numbers that were easy to compile.

My expenses are all of the utilities, cleaning, and MY TIME for managing all this.

Utilities average $400/month

cleaning cost about $300/month

supplies cost about $50/month

insurance cost about $100/month

I spend several hours a month writing reviews, researching strategy, fixing stuff, etc

Other expenses are maybe another 10%

I'm still setting up the business formally, and am probably forgetting some things right now.

For me, this is a good return on my investment.  I'm looking to duplicate this strategically moving forward.

All future investments in the STR market for me will also have to be cash flow positive in a LT strategy as a backup plan, as will equity in them.

An often overlooked side benefit of STR is that you've got eyes on your property a couple times a week.  Nothing big or unexpected can happen to your place without you being able to file a claim against the occupants, and little things never have time to grow into big problems.

Make hay while the sun shines, but plan for rain.

Julie McCoy · Answer

@Debbie Zimmer this IS the forum on this subject.  :)  VRBOs are short-term or vacation rental properties.

@John Underwood gave a great response.  Second everything he said.

@Lucas Carl and myself are both doing very well in Pigeon Forge/Gatlinburg (TN).  We both self-manage remotely.  My properties cash flow at least $1k/mo.  It's definitely more work than a long-term rental, but for me that cash flow has turbo-charged my investing and wealth-building strategy.

Lots of good info on this forum, do some exploring and you'll learn a lot!

Chuck Kramer · Answer

@Debbie Zimmer, as @John Underwood says, you need to run the numbers just like any other rental to see if it makes sense. Also:

- research the area for trends in area visitor numbers

- look at AirBnB/VRBO to see how much competition there is in that market.

- Check availability calendars to get a sense of how other places are booking and for how much.

Krista Goodrich · Answer

Speaking to my heart there!  I love the design and decorating aspect of the Vacation Rentals because you can have fun with it and do things that you wouldn't do in a long term house.  My farm house for example, has tons of cow/chicken/barn decorations that make it sooo cute but when I lived there full time it was more family pics less decor...same with the beach houses-we do some wacky fun things that make people feel like they are living the beach life, even if its just for a week.  I really hope Daytona changes back to allowing Short Term Rentals because this truly is my passion and I LOVE meeting people from all around the world and showing them what my town is like.  Good luck to you!

Krista Goodrich · Answer

It's an awesome investment in the right area-I have several VRBOs in Florida that were killing it but now my city has decided to try to shut down short term rentals (Daytona) so I am looking at other cities to start investing in as the long term returns in Daytona are good but not near as good as I was doing on Short term.  I would say investigate the city you are in and make sure it is legal before purchasing.  That being said, I also have a farm house in Georgia that my husband and I use when we are in Georgia (my family and some of my businesses are there) and I like to bring my dogs...so I don't want to long term rent the house and was unsure how short term rental would go over in the middle of nowhere.  Surprisingly, I listed my house in May and it has booked up through October....so maybe location does not carry as much weight as I had thought!  I bring in about $1.6 a month on the house which is about $200 more than I would long term rent it-that means I still carry a couple hundred dollars a month in utilities but again, I have a place to stay in Georgia and at the end of the day it's still way cheaper than a hotel and I have my mortgage being paid down.

In Florida (or other vacation towns), I was making $6-$10k a month when I was doing short term on houses that would bring in $2k on long term rental.....so there is great money to be made if your town allows it.

Chai Xiong · Answer

i'm going in my 2nd month and made 2K last month compare to $400 from my longterm rental.   Not enough data for you but get back with me in 1 year

Debbie Zimmer · Answer

Thanks @John Underwood.  Yes, we would probably just want to break even and have renters pay for our vacation home.   We are big VRBO renters, and we've had great high-end places.  They weren't cheap, so we took very good care of them.  I think it's worth researching and maybe putting this on our 2-year plan!

Are VRBOs a good investment? Thoughts?

Most Popular Reply