All Forum Posts by: Gerard Lester

Jeanne, 

Congrats on getting into the STR game in Maine. My company manages rentals along the coast. Many of the people we end up working with us after they have worked their rentals for awhile and are looking to allocate their efforts in other directions, especially since we are able to offer them an income guarantee based on their previous 12 months rentals. It's a great cash flow business to be sure. We're more than happy to share information if you have any questions.

When my company started marketing and managing STR's on Cape Cod, we needed to demonstrate our ability to outperform LTR's--this is the case in just about any new market where we operate. It takes us a year to learn the market and develop a successful rate structure, then to integrate that into algorithms that we use to adjust pricing on the fly. So instant success is not what you get in the STR world, but done correctly, it can yield great results. If you do get serious about any homes on the Cape, I can have my analyst team give you a projection for how that home would perform as an STR. This heroin scourge has been a really difficult issue for property management companies--tough to find the right hires.

As John D indicates, a guarantee or "fixed rent" on a vacation rental will offer a lower return, but it also removes the risks associated with marketing and managing a vacation rental. I work with a lot of owners who have built up their vacation rental units and then turn them over to my company for a fixed rent agreement. This trade-off works well for investors who are either busy seeking out new properties or who have other business interests that require their attention.

Speaking strictly from the STR perspective, it's a very different animal than LTR. The vacation rental business is high touch with both owners and guests and the marketing side of the business is and will be constantly in flux. There are many small vacation rental management companies who try to do it all, but any individual can only be great at so many facets of the business. I work with a lot of investors who turn their focus on doing what they do best--finding, negotiating and closing a deal, turning the home over to a management company and then making the next deal happen.

Anthony's concerns about local ordinances that restrict vacation rentals is significant. There are a lot of nimbys (not in my backyard) and enough companies who manage vacation rentals poorly that many communities question whether they want to permit short term rentals. Be certain of the local situation before assuming you can run a vacation rental.

If you want an accurate projection of how any particular home will perform as a vacation rental, that is something I can help with. I work with a team of analysts who can crank out projections, so contact me offline if you are interested. There's no fee for a projection, as it does help my company gather additional data about any area where we market and manage rentals.

Many resorts will allow owners to either rent on their own or use a management company of their choice. However, they can also make it very difficult for owners to do this by restricting access to guest services or even access through locked gates. Resorts will typically charge a far higher commission to market and manage a rental unit. The management company I work with has largely been able to work through these issues with resorts, who do need to have confidence that there will be good guest management on their properties. I can go into more detail with you if you want to connect offline.

Hi Pandu, I can get in conversation with you offline about where to look for properties that will drive strong revenue as short term rentals. There are good buying opportunities in Palm Springs, but there are growing restrictions on short term rentals there. My company compiles data in the many markets where we manage vacation rentals, so can help you hone in on those markets where you can afford to buy and also see strong rental income.

To Andrey's point--focus on your net income. If a property management company can give you the same net that you can make, but do all the marketing, booking, guest service, property managment and housekeeping so that you can focus on investing in locating and investing in more property, you both win. 

Hi Kiki. Sounds a lot like the company I work for. To answer your question about bank financing, they will usually credit 75% of the rental income when considering a loan. However, they will only consider if you have a "fixed rent" agreement. My company will usually be able to offer a fixed rent amount on an annual contract, which will make the bank happy. Let me know offline if you want more information.

California can be a difficult market for buying a vacation rental. Prices in desirable destinations can be too high to see a good cap rate. The company I work for filters through a lot of data to locate good markets for buying vacation rentals. Hit me up offline if you're want to get more info about good timing and locations for vacation rentals in the west.