1. Numbers: Run conservative numbers before purchasing to make sure they work
2. Renovations: Determine what renovations are needed, who will be doing them and how long they “should” take
3. Buy Right: Leave the emotions at home, and buy based on the numbers
4. Finishes: Make your place look great for guests
5. Furniture: Purchase furniture that guests will love
6. Taxes: Register with your local sales tax agency and get permitted
7. Software: Use the best software to make your life more simple
8. Automation: Automation is the key to an easier life
9. Listing: Write an effective listing that accurately depicts your property
10. Extras: Which little extras make a big difference for guests
Each of these topics deserves it’s own forthcoming blog post, but let’s take a cursory look at each of these:
Through trial and error on five vacation rental units our co-founder Jake owns, we have honed this process in and want to help others get started on the right foot. These steps are designed to save you time, money and stress figuring things out on your own so use this as a base platform and create from there.
Make Sure the Numbers Work
Once you decide on purchasing a vacation rental, it’s time start familiarizing yourself with what properties are out there. Some real estate agents are very knowledgable about this topic (more so in vacation destinations), while others not so much. We aim to be a resource for those investors looking to pursue this avenue, so please reach out with any specific questions you may have (EMAIL US). Get a feel for what your competition looks like and what the earning potential is – some resources we like to use for a quick look are Eliot and Me and Airbnb’s Income Estimator.
The major marketing platforms used for vacation rentals are Airbnb, VRBO/Homeaway, Trip Advisor/Flipkey, and Booking.com. While there are tons of smaller websites out there including some geographic specific ones, we like to focus our energy on Airbnb and VRBO/Homeaway.
Are you familiar with running the numbers on an investment property to see what your potential returns are?> Vacation rentals are slightly different since you are required to furnish the property before renting, pay for all utilities and have some additional costs in stocking the unit, marketing and managing it. Be sure to account for these additional expenses before purchasing a property and check out our in depth post.
Determine How Much Renovation you are Comfortable With
Does the property you are buying need any renovations before it is rental rental ready? If you are okay paying a premium to avoid any work to the property, that’s great! You will be rental ready sooner than your competition. We like buying with some value add on the renovation front and are comfortable handling a lot of the work ourselves, and hiring out what we don’t have the time or expertise for. Understand what you are taking on and speak with several contractors prior to closing to understand the scope, timeline and expense of your proposed project. Walking the property with contractors is important because it ensures you are both on the same page and have actually put eyes on the project – photos can leave out a lot of detail.
If the idea of managing a construction project sounds awful, it’s even more important to find the right contractor who can effectively manage the project for you, and communicate effectively about its progress.
This really entails a logical and analytical approach to deciding which property to buy. Instead of your primary residence where the deciding factor might be because you love the entertaining space in the living room, the main factors should be based on perceived demand from renters. Are you in a location where people vacation, or travel frequently and need a place to stay? How does your property compare to others available for rent nearby? Do you offer easy access to local attractions and amenities? These are all important factors to consider, so please try not to get emotionally invested in a specific property that may hurt your wallet down the road.
Choosing the Right Finishes:
Value in your appliances, flooring, fixtures, etc takes a lot of research as well as trial and error to get dialed in. It’s a constant balance between quality, durability, ease of installation and price, and we want to help save you some of the headache. We will provide our thoughts on which products check all of the boxes for being effective options for vacation rentals and how to get these items for the lowest price.
Choosing the Right Furniture:
Several retailers offering good value on the furniture front are American Furniture Warehouse, Amazon, Home Depot and Lowes. Having a consistent aesthetic is way more appealing to travelers than a collection of your old furniture, Goodwill and garage sale finds. The investment in this aspect is important to show off your property and ensure the guest’s experience is positive. Measuring the space before ordering and accounting for narrow stairwells, door frame widths, etc are important to make sure the items can actually make it inside (we had to get a couch in through a second story window after removing the panes – not ideal).
Register with your local sales tax agency and permitting
This part isn’t very fun or sexy, but it’s a crucial component to ensuring your vacation rental doesn’t die after a six month run. There are a few levels of regulations to be aware of, including HOA (if you have a homeowner’s association), city and county regulations. It’s best to understand these items BEFORE you buy a property, because we have talked to investors who found out after they purchased that the HOA has a 30 night minimum stay on all rentals, which isn’t great for a weekend ski getaway…
The best resource for permitting is your city and county offices/website – although don’t be surprised if you get different answers based on who you talk to. We have found there is a lot of misinformation even among local government employees regarding this, so ensure you get links to actual rules and forms to get filled out. You will most likely be required to collect an occupancy tax (what hotels charge guests), and Airbnb has pretty good information HERE (*not to be construed as a tax advice – talk to your CPA). This tax is something the guest will pay for, but ensuring you collect and remit the appropriate amounts saves huge headaches down the road.
Use the best software to make your life easy
There are a ton of options out there for property management software, pricing programs, marketing platforms, etc, so let us help guide you on which are a necessity vs. nice to have. The biggest is ensuring your marketing strategy includes the major platforms such as Airbnb or VRBO/Homeaway, because these websites impart a level of trust and travelers are comfortable using them. If you only have one unit things can probably be kept to a marketing channel and pricing program, but as you start getting more units things can become more involved.
Automation is the Key to an Easier Life
Do you like answering the same questions every few days? Or trying to remember to ask each guest for a review? Of course not – no one enjoys that aspect of owning a vacation rental. These are things that can be automated in an effective way to provide prompt responses and information to guests, while saving you the headache of trying to remember each little item or having you calendar crammed full of reminders. We will cover the main items that illustrate why automation will help you sleep easier at night.
Write an Accurate and Effective Listing
Guests do not like surprises. Having the property look one way in your listing and completely different (even if it’s been updated) in person does not lead to a positive guest experience. Give them the feeling of walking through your property with your listing description, letting them know all the great things you have waiting for them while also keeping the fluffy verbiage to a minimum.
A big differentiator as more people list vacation rentals up for rent is how professional does your listing look? Is this something that catches your eye with well lit, appealing photos or did you take them with an iPhone 5? If you think photos don’t matter much, think about anything you buy online – if you can’t tell what you are buying why even bother? There are literally hundreds of other choices the consumer can feel more confident in booking.
Little Extras Make a Big Difference
What would you be excited to see at a vacation rental after you just traveled for 10+ hours? Perhaps a bottle of wine, coffee or some locally made snacks? Your guests will love these kind of things! This sets the tone for the rest of their stay, and can be a good insurance policy if something doesn’t go right later in their stay. These items can cost less than $10/reservation, be set out by your cleaners and are a valuable investment in your long term success.