Real estate investors in the market for a vacation home have a variety of ways to make the purchase profitable. Whether renting to longer-term tenants with a traditional lease or taking advantage of new short-term rental platforms like Airbnb, vacation homes offer competitive benefits in the rental market.
Below, we'll explore some of the ways you can get your vacation home producing income, and why a global investment may be the perfect choice for a cash-minded investor.
The classic way of turning your property into cash, leasing to long-term tenants (i.e. a month or longer) is a great choice if you anticipate extended periods without use of your property.
Unlike platforms intended for multiple guests with frequent turnovers, signing a lease means minimal expenses for cleaning, maintaining, and re-renting the property. Additionally, professional property management services are available worldwide, enabling owners to just sit back and wait for the monthly rent deposit for a small fee.
Do It Yourself vs. Hiring Out
Many investment property owners manage their rentals themselves. This is a great way to avoid the expense of hiring a rental manager, and for the investor comfortable with working remotely, possible even without living in the same place as the property. Free rental management services like Cozy, for example, allow you to list rentals, screen tenants, and accept rent payments from anywhere without cost.
The downside to self-managing your property is that it takes time you may find more valuable elsewhere. Additionally, you'll need to make sure you have some reliable services on speed-dial in case of an emergency or repair. A reputable plumber, electrician, handyman service, and cleaning service are a good idea for rentals located away from home.
An upside to professional management is that managers usually have access to in-house maintenance services or partner businesses at a much cheaper rate. If you are closing on a large property, multiple properties, or property located in a foreign country or far away, it may be worth it to pay the management fee and save the time expense of self-managing.
Airbnb is likely the most recognized, but there are a variety of options for the investor preferring more flexibility in accessing their vacation home.
While a long-term lease reduces the expense of repeated turnover, it also means less time for you to enjoy your rental. Using a vacation rental service like Airbnb lets you plan out well in advance what dates you'd like to have the property rented, and make it a snap to block out as many dates as desired for personal use. Additionally, the average per-day rents from a vacation rental platform are typically much higher than in a traditional lease. Many traditional landlords are now even using this platform for their local rentals, as far higher profits can be realized in a popular destination.
The downside to short-term renting, however, is the frequency of turnovers. Multiple turnovers mean multiple cleanings and maintenance tasks between tenants. Particularly for remotely located properties, owners interested in the higher flexibility and potential profit of vacation rental platforms may wish to hire out managing the residence.
Additional Income Streams
Besides rent, potential tenants will frequently pay for a wealth of additional services. On-site laundry, for example, is a cheap investment that produces some respectable income, and a popular amenity for travelers.
For extended leases, tenants are often willing to pay extra for cleaning services, landscaping, or additional services they'd otherwise be responsible for. Negotiating the cost of hiring out the service and charging an additional fee for convenience means extra cash in your pocket without an ounce of extra effort.
For residences in hot tourist destinations, consider partnering with private taxi, shuttle, or limousine services, or negotiate special rates for tenants with nearby businesses. VIP access to popular destinations or services make your rental that much more desirable, and revenue from rents and fees can be raised accordingly.
Ultimately, you may find that the best revenue is achieved not through a large portfolio, but by operating a smaller number of properties more intelligently. A vacation home means not only private access to some of the globe's most desirable locales, but can also serve as a formidable source of cash.
If you'd like to know more, contact us at Legacy Global Development.