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August 24, 2020

Eight reasons to own vacation rental properties

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

While we earn most of our money from our mortgage brokerage business, I started helping investors buy real estate some 5 years ago.  Working in San Diego, I have seen just how profitable vacation ownership has been for long-term investors.  If you follow me on any of my social sites, you will see that we just traveled to the Florida Panhandle to look at some of the best areas to own a vacation rental property.   Subsequently, we entered into a strategic partnership with Vacasa, the nation’s largest vacation rental property manager.

Here is an incomplete list of reasons why we think vacation rentals make sense for most investors:

1- Landlords get paid up-front.  When this COVID panic hit, politicians in every level of government instituted eviction stays, denying landlords the right to remove tenants who couldn’t afford the rent.  When you own a vacation rental, the typical stay is 7-30 days and you get paid by the renter before they occupy your property

2- The capitalization rates are better than long-term leases.  Properly managed, vacation rentals produce between 1.6 and 2.1 times the annual income which a long term lease would produce.  A vacation rental requires much more active marketing and management and, for that, vacation rental property managers take a healthy management fee but, after that is accounted for, the net operating income is still better than a long-term tenant.

3- Vacation rental properties are maintained better than those with long-term leases.  This seems counter-intuitive but, because of the active management, the properties are kept cleaner and repairs are addressed immediately.  The housekeeping service is usually passed on to the vacation renter and many of the repairs are covered by that renter if they break it.  Routine maintenance is addressed immediately because the vacation rental needs to be in top-condition to be rented again– tenants don’t “hide” small problems (which can become big problems)

4- Owners can take a vacation in their property.  While using the property can eat into profits, there are seasonal vacancies which can be expected and, if the property is within driving distance, the owner can use the property for leisure Read more

September 20, 2010

Real Estate Investment Tips

by

Realtor, Internet Marketing Expert

Author website

Finding a “bargain” property to purchase for rental purposes takes some analytical skills, market knowledge, and a real estate agent who is in sync with your investment goals.

Some investors would consider the ideal rental property to be a three- bedroom, two-bath house in good repair, or needing minor touch-ups at most, and would be willing to pay at or near market value price if neighborhood rental values would justify the investment.

This investor would be holding the property long-term, and would have a desirable property, available for immediate occupancy, and would attract renters willing to pay top dollar to live there.

Other investors would prefer to find a property that is structurally sound, but in need of extensive cosmetic rehabilitation. If this property could be purchased at a considerably below market value price, and if the cost of repair and possible rental income would justify the purchase price, then that would be this investor’s  idea of a “bargain.”

A knowledgeable real estate agent should point out to the new investor that disassociating ones self from a prospective property to rent is vitally important, meaning that the investor should not evaluate an investment property as a property he or she might want or not want to live in. Investment properties should be looked at with profit potential in mind.

Holding a rental property long-term, enables the investor to ride out market swings and generate continued cash-flow. However, consideration must also be given to the fact that the longer a property is held the more extensive the costs of future repairs are going to be, such as roof replacement, appliance replacements, etc.

Furthermore, if the investor is planning to purchase multiple rental properties over time, consideration should be given to hiring a property manager to oversee rent collections, maintenance, emergencies, etc.

Hiring a property manager is often more cost-effective than handling everything one’s self. Additionally, the property manager can be the investor’s knowledgeable guide in calculating the rent levels that would simultaneously attract renters and optimize revenues.

The new investor will have many important decisions to make before committing to a particular property:

  • Is this property suitable for my purposes?
  • How much Read more

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