All Forum Posts by: Account Closed

@Paul Brockland - please to meet you, I have a vacation rental in Portland that has done well from an appreciation stand point and I thought I was doing really well until I pulled financials and found I was doing "ok". So here are my lessons learned:

1) Ensure to compare your rents for the vacation rental at the occupancy rates suggested by @Evan R. or less. The nightly amount may be excellent, but you will only get it some of the time.

2) Check your zoning! Although VRBO's are not allowed in residential zoned areas in Portland, since their were VRBO's all around my Portland place I took a chance and was busted within the first six months. It was just an inquiry threatening to report me to zoning, but I did not need the hassle or the fine, so I converted it to a 30 day rental.

3) Make sure to factor in the cost to furnish the place - We thought we could get by with 10K and spent almost twice as much to furnish our 3 bed, 2.5 bath. We also did not go high end, and was able to get a lot from Craiglists, but the costs add up, so you have to ensure you can get those costs back as well.

This is all I can think of right now, good luck!

@Sundeep Amin

Maybe I am too conservative, but the idea of renting and then subletting as a vacation rental seems full of issues, the first of which is profitability.

If you try to do a long term rental on a furnished place, then you have to turn around and do short term rentals to make enough additional margin to make it worth while and typically, the zoning will not allow you to do that, as most residential areas (or condo HOA by laws) do not allow rentals of less than 30 days.

If you decide to rent unfurnished, it can easily cost 10K to 20K to furnish the house, and while you can move the furniture and dishes from house to house, the furnished versus unfurnished premium is usually 500 to 1000 a month, so it could take a year just to break even on furnishing.

If I were thinking about this, I would do what the others have mentioned which is to rent a larger house than you need and do the Airbnb thing for rooms, and take on the clean-up and risk of random roomates. It might be a great way to save a down payment to get into a duplex where your tenant can pay your mortgage for you.

@Sundeep Amin - don't forget the:

1) Credit card processing fees as this is the easiest way to collect the funds and the majority of my guests use this payment method. Also be careful with AMEX, I agreed to take this for one guets and it added $100/ month to my expenses. This will of course vary by the company you use but should be factored as it will reduce your income by 2.5% to 3.5% depending on your processor and what they charge.

2) Also factor in a welcome gift if you plan to go that route (most VRBO's do)

Thanks!

@Jason Fraser - Hey Jason,

The great Google is your friend - for zoning in Salt Lake City, Googles tells me that I can look up any address here http://maps.slcgov.com/mws/zoning.htm this site will tell you the zoning code for the address you enter and another table on this page tells you what the restrictions or uses are per zone.

As to rental costs, yes, but not much. I just looked on Craigslist and some unfurnisheds in my area are going for $2300 and $2500 unfurnished, so I think I should raise my rates again, but then just found a bigger 4 bedroom going for $3000, so it is really hard to say. Since the audience is totally different, I do not really depend on or use unfurnished rentals for pricing, rather I use VRBO.com and other furnished rental sites for pricing.

Good luck!

@Kevin Dickson Essentially the same as a VRBO. it is a furnished rental and I advertise on vrbo.com and just state a 30 day minimum stay. At this point I am no different than any other SFR in the area with the exception that the house is fully furnished, and I comply with all local zoning laws. I also do all rental agreements on a month to month basis.

What I have been learning in my market is that demand for even a 30 day furnished rental is VERY high and I am still referring leads away to others. I am also beginning to think that perhaps I do not need to spend the $350 plus per year to advertise on vrbo.com as in February, I just listed the house on Craigslist and a bunch of free sites (Trulia, Zillow, etc.) and in three weeks had the house rented from the September 1 vacancy date until Dec 1 and possibly through the winter.

I am going to be interested in how hard it is to rent in the winter months and am a little nervous about taking the three month rental (Sept through Nov), when I did have a 6 month renter who just need a few more weeks to figure out the specifics of her relocation, so we will see.

Here are some other random thoughts:

1) I did not like airbnb at all because they control the money until after the guest checks in and they can cancel the day off with little financial impact, whereas my ability to re-rent on the day of checkin is nil. If you are renting something for $50 or $75 a day, maybe not a big deal, but for $2800 a month, it is a big deal.

2) Pricing is key (of course). I started renting my house at $2200 a month which was $100 a month profit. This was dumb I know, but I was not an investor then, just trying to get a retirement home to pay for itself. I am now doing very well at $2800 a month and I am still $400 less than any advertised place on vrbo.com and get calls from people wanting to rent it who think it is unfurnished!!

3) CHBO.com (corporate homes by owner) is a great site which costs much less to advertise on than vrbo.com and syndicates to a number of other sites and provides A LOT of leads. These leads however are always within 3 to 6 weeks of when they need the place, so this is a great resource as well, and I will pull the trigger on reactivating my ad there if I cannot fill the December vacancy by October. In contrast, VRBO.com provides those people who look 6 months out.

4) I do not always play by the 30 day rule and neither does anyone else. While the Portland OR zoning department will not come after you, the neighbors will and the only proof they have is your advertising. I have people from VRBO all the time inquire if I will allow a less than 30 day stay and have done this once or twice if the numbers are right. So for example, if I cannot fill the December time slot, I will allow a 2 week rental over Christmas at $1100 a week and at least make a little profit. There are some folks in Portland now who advertise 30 days minimums but are always doing less based on their occupancy calendars. If questioned, I am sure they say "these are my friends" which of course there are no restrictions on.

5) Finally, I believe this is a HUGE untapped market as other than VRBO and Craiglist, I have not even begun to market. I am sure a nice 3 page brochure and on-going email blasts handed out to all the real estate agents in the area (think temp housing and relocation experts) as well as the construction companies (think home renovations) would provide even more leads I would have to turn away.

So this is what I know, let me know if you have any other questions!

@Michele Fischer : I actually LOVE vacation rentals (VRs) and got started that way. I bought a home in Portland, OR and within 2 months of having it on the market had it rented out for 2 years! Now this house stays rented out 8 to 10 months in the future. In Feb I realized I did not have renters past Sept 1, so I got to work and it is now booked through November!

I bought the place in Feb 2012 and broke even through the end of 2012, but then lost money in 2013 because I under estimated expenses (newbie mistake) and was locked into a 12 month rental agreement under market rates (another newbie mistake). I really did not care though because of the monster appreciation. This year I will do very well indeed and actually have an accepted offer on our second property, which is a loft in the Pearl District.

Based on the cost in the Northeast I think the only way to cash flow is to do a VRBO because of the income you can bring in.

Make sure to connect with Matt Landau, he is the VRBO guru and can teach you what you want to know.

My rule of thumb (which worked for all 1 of my properties so far :)) is to use VRBO.com to determine the number of rentals available and how far out they are booked. For example, the majority of rentals in Portland in the Studio/Loft space were booked out for Feb and March and there were very few that would allow a 7 day stay, most required a month or more. As a result, I know there is unmet need especially since my 700 square foot loft which will sleep 4 comfortably and is decked out to the 9's with a roof deck will be AT LEAST $50 to $75 less per night than a Hotel w/ no Kitchen, etc.

On a final note, be really careful about zoning. In Portland, VR's are only allowed in commercially zoned places, which usually puts a premium on the property cost. I think I looked at 50 different condo's in Portland and found 2 that were zoned commercial AND had HOA that allowed less than a 30 day stay.

If you do decide to go this route, also be aware it is ALL about response time and the local knowledge of the owner to provide an experience to renter and not just another place to stay. The folks looking at vacation rentals can send out 10 to 20 inquiries in 10 minutes so the first one to respond and follow-up with meaningful information is the one who usually will get the booking.

Thanks and let us know if you have more ?'s, we are all here to help!

@Karin DiMauro en Margrave I just added my second vacation rental in Portland, OR and to the best of my knowledge @Dana R. and @Karin DiMauro method's are the only ways I know of right now and actually I think are the best.

Although tedious and you can never tell what is an actual booking from blocked nights for the owners, you get a GREAT feel for the competition and the vacancy rates. While making the decision for my second property, I was super concerned that as a loft in downtown I would be limited by the 7 day minimum required by my HOA, and doing this allowed me to see the vacancy rates for the entire 2014 year are so low in my price point that I should have no trouble. In addition, by using the Map feature (just like Craigslist) you can quickly tell how location impacts cost. So while it takes time, I think you get a lot more information and better feel for the market.

Embrace the spreadsheet!

@Kimberly T. : As I think some on BP know, I actually got started "by accident". We live in the SF Bay area and have family in Portland, Or. We were talking with my in-laws (Brother and Sister) who live there about purchasing a duplex to live in at retirement to allow us to take equity from our primary homes to help fund retirement and travel like crazy. After two years of not finding anything we could afford I started looking at SFR's and found one! So we bought it on our own with the hope of being able to make it pay for itself by renting it out as a vacation rental when we were not using it.

Within two months of making the house available, it was booked for 14 months in advance, and is seems to stay booked out about 10 months, so we never get to stay there! Since I just wanted to break even, I underpriced the home for the first 18 months of the rental, and actually lost money on a cash flow basis, but I have up about 120% net in two years based monster appreciation in Portland, and that was just dumb luck. Now that the house is cashing flowing well, I am hooked and just heard the sellers accepted my offer on a Loft Condo in the Pearl District in Portland, for another vacation rental, so I am on property 2!

Anyway to get to your questions:

1) Got started with the vacation homes, love this niche and will stay here.

2) Bought in the area because of family who are a second line of defense to my contractors.

3) Yep, we knew Portland pretty well, but only the highlights, there are still a number of emerging neighborhoods and markets here.

4) Learning about the area - I forced myself to do a Blog on my web site for the vacation rental which helped me learn more, I also subscribes to the local magazines and small community newspapers, they give me a wierd look when I tell them my adress, but hey, it is a GREAT source of info.

5) Relied on family who knew the area and my RE broker, he is fantastic.

6) The lessons learned - know ALL the expenses up front, that 10% for maintenance you do not think you need to budget, you do, I know. Probably not as important for non-vacation rental investors, but for me, it is all about zoning and knowing the HOA's. I looked at 30 condo's before I found two that are commercial zoning (city of Portland) AND allow rents of less than 30 days (HOA).

7) As mentioned, I have an HOA and a Condo/Loft.

Best of luck!

@Jeffrey Cervi Good morning from the left coast! I live in the Bay Area and have a vacation rental in Portland Oregon, and so while I have some competition, I believe Portland is minor league compared to Naples, that being said, here are my thoughts:

First, you have to make a decision what your goals are for your vacation rental and decide how much time and effort you are willing to put into the marketing and managing of the the home. Based on what I have heard from others, if your time is limited, you may simply want to find a broker who will take the rental and charge 20% to 25% of the rental to handle al of this for you.

Second, economics is a big part of the equation and without knowing how much revenue you generate it is hard to assess the best next step. For example, if you generate 50K per year in rentals, then 10K or more to an agent is a huge chunk and you could probably get to the same rental rent spending 2k to 3k per year in marketing. Likewise if you are generating 20K per year, then is the additional 1K to 2K of cash you will pay in higher management fees worth the effort?

Finally, you need to think through what else the broker provided for you and what that is worth? Did they do the booking, collect the payment, arrange for repairs and house cleaning, etc.? You need to figure out what else was included to help you put a dollar value on the cost.

As to your questions should you decided to take on marketing:

1) You can list it on the mls, see mlsmyhome.com, but I have no clue how effective this will be.

2) VRBO.com and Homeaway or not that expensive and should at least pay for themselves with a booking or two, so if you decide to go this route, you at least can break even. Remember to try the featured advertisements from time to time. In addition to the subscription level you purchase (which determines your search ranking), you can also pay extra to be featured as a top search result on a rotating basis for a certain period of time, so you may want to experiment with this as well.

3) Definitely get a web site - see myvr.com, super easy with lots of management tools included at a very low cost. Also be sure to register your business with Google, Bing and others, as well as putting yourself on yelp, I get a lot a traffic from these sites.

4) As to the rates charged, as mentioned above, this all comes down to how much your time is worth and the dollar amount in question. If the cost of a realtor is more than the time required to do what the realtor did, then you have your answer.

5) A PM is excellent, so then you will be limited to marketing only, so this may be viable

6) You have my thoughts, feel free to PM me if you have more questions.

@Amy Meza as many on the board know, I purchased a second home out of state in Portland, OR as possible retirement place and only hoped to break even, but now began making a profit, so I am looking to expand my portfolio.

I think the idea that comes to my mind from @Ali Boone @Bryan L. and @Rodney Getsy comments is we always have to remember we are not really buying a house, but in reality, we are starting, growing, or maintaining our business. With this in mind, typically, businesses begin, grow or maintain by following the pre-thought out business plan, and all good business plans have contingency planning.

Ali's plan says it is OK to lose a little each month on the specific property, while Rodney's does not and so he is selling the property to stay in line with his business plan.

So as you start your business it is critical to not only run the numbers for a property to ensure the numbers work, but also to do contingency planning to ensure you have enough working capital to survive vacancy, or a bad tenant that requires eviction (and probably repair the damage from that tenant) as well. For example, I am lucky enough to have a great amount of equity in my home and just got my HELOC approved, and I just found a duplex at a screaming good value in Portland. I am eager to purchase it because I think it will do fine either as a furnished vacation rental (what I like to do) or a regular rental. However, when I go back to my plan, I realize it only meets my criteria as a vacation rental and I need to see if I can change the zoning before I move forward. My gut says that it will be gone by the time I cross all my T's and dot my i's, but that is OK, because I am working' my plan. :)

Anyway, just my thoughts, I hope you find them helpful.