Penny wise and Pound Foolish- Vacation Rentals Outer Banks

[Cal C.]

I spent the long Christmas weekend at the OB.  While there we looked at several properties.  It became very obvious that some owners were either unable or unwilling to spend on anything but basic type furniture and repairs.  To a large degree this affected how much they were getting in annual rents.   

Yes it is hard to put quality furniture in knowing that at some point in the next year or two, that furniture could be easily destroyed.  However, if you have a very nice place, the likelihood of repeat bookings (apparently there are a lot of families who return year after year to the same place) is much higher.  

Obviously, during the short (six weeks) peak season, just about anything will rent for a good price.  But I believe that the near peak weeks are the ones where a nicer place is going to shine through and attract more bookings and at a higher price.   

So instead of say $45K in yearly rents, spending $5K extra on upgrades and more comprehensive repairs, might get you $52K in rents, this year and also $55K in rents next year.   

Of course, there is a point of diminishing returns and you have to be cognizant of that. 

My hosts took over a property last year and substantially upgraded the property, they spend a lot more than $5K, but it was an initial rehab.  However, they increased the annual rents by nearly 50%.  They will continue to spend more on keeping their property in nicer conditions year in and year out.  I believe that they will continue to have higher income than similar properties.  

Bottomline- Being cheap doesn't always save you money and it can often cost you!