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Updated over 5 years ago on . Most recent reply

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Julie Dillon
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Vacation Rental Financing

Julie Dillon
Posted

Anyone have advice on how to calculate the 'numbers' on vacation rentals?

I believe it can have a good cash flow even with the added expenses as long as the property is in a area of high rental demand and the property itself is priced right to buy. Is there a more precise way of checking the ROI before making an offer?

Added expenses at the outset would be furnishings, decor, household items, linens, etc

Monthly expenses would include property management, housekeeping, landlord insurance, utilities, internet/cable, lawncare, etc.

Any help or advice is appreciated!

Julie

Most Popular Reply

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Michael Baum
#2 Short-Term & Vacation Rental Discussions Contributor
  • Olympia, WA
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Michael Baum
#2 Short-Term & Vacation Rental Discussions Contributor
  • Olympia, WA
Replied

Hi @Julie Dillon! Very good idea to run the numbers. When we bought our vacation home I went through each and every AirBNB and VRBO/HomeAway listing for the general area. Lakefront only. I pulled numbers from all listings, even those 8 bedroom log mansions with 2400 sqft of dock to the 1 bed 1920's lake cabin. Even though they are very dissimilar, I made sure I knew the numbers.

You need to find the sweet spot. Our's was a 3 bed 3 bath (or somewhere therein). Price was right and the rental numbers were very doable. Once you narrow down the field, you can look at everything else. 

Then I pulled the calendars for all homes that were even a little bit close in size and nightly rate to see how their bookings were. What did the pics look like? How many 5 star reviews did they have? Amenities? That is your more direct competition. You can then decide who you want to market to.

We market to families specifically and the house is setup that way. A separate kids bunkroom with TV and stuff. All the beds are Queen or King. A cool convertible game/card/bumper pool table. TONS of kitchen supplies. Everything from coffee makers to a single egg poacher. Depending on your area, do not skimp here. We get rave reviews for our kitchen and it's completeness. 

Decor is a matter of taste and location. You wouldn't want to decorate your mountain cabin in a Caribbean beach theme. There are a ton of resources out there on the Web to get ideas. 

I found most of our furniture on Craigslist or family who were changing out stuff. Always go for USA (or other quality) made furniture. We have almost all Thomasville, Drexel etc in the house with some exceptions (one bed was made locally by a craftsman around 1940). 

Memory foam mattresses with gel topper. Best combo for most people IMHO. You don't need to spend a ton. 

If you are a summer place I highly recommend Percale weave sheets and not Sateen. Percale is a crisper weave and they run cool. Ours are a 75/25 Cotton/Poly blend. Always white. 250TC. We are a more casual place so that's that. If you are doing something for 2500 a night, then buy accordingly. 

White bathtowels, hand towels and washcloths. We provide dark grey cheap washcloths to remove makeup. Hair dryers in every bathroom. We have dedicated beach towels. 

Our vacation home is about 360 miles from us and we self manage. No way I am giving up 40% to full service property managers. Our housekeepers are 225 for each flip, we pass through the cost of course. 

NO LANDLORD INSURANCE. Get insurance specific to short term vacation rentals. We use Proper (Lloyd's of London). It is more expensive but it covers damn near everything. Regular landlord insurance will leave you hanging.

We have no yard so other than trimming some Oregon Grape vines back, zero work. 

Utilities will greatly depend on the location. We have city water (even though we are very rural) and sewer. Propane for the furnace and electrical service. Your real estate agent should be able to get numbers on any property you are considering.

We have 12mb DSL internet (Frontier) and that is as fast as we can go. No satellite TV. People just use their Netfilx accounts. 

Communication is the key. I email the folks and call them before they go. Chat for a few minutes and text them when I see the house is unlocked to make sure everything is good, then text them the night before checkout with some instructions and asking how things were. Then I ask for that coveted 5 star review!

I hope this helps. There is a ton of stuff to cover, but it is fun. It took us a year to find the right place and about 9 months getting it in shape. Your first year will be light. People like reviews and a place with no reviews will take longer to book out. Of course if you have a very popular area and everyone gets booked fast, then you will just ride the wave. Your second year should be much better.

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