Setting Up Destination Vacation Rental Properties

Since we’re all about vacation housing here, one of the things we thought about tackling was the topic of vacation rental properties in destination areas.

What does that mean?

Well, think about all the places people decide to go for vacations.

Beaches, mountains, downtowns, old cities, etc.

And you don’t have to look at already hugely popular destination areas. What about some that are up and coming?

Like Marche, Italy, for example. It was historically a poor community, but it’s vacation housing popularity is rising along with its tourism because of some of the history and beachfront properties.

Because of that, there may be some properties that are either up for sale or the owners aren’t accustomed to renting them out yet.

That means there’s an opportunity to either buy some property with the intentions of turning them into destination vacation rentals or approaching the master-lease option like we mentioned in the previous post.

Generally, with properties like these, people are going to be tourists coming in from other countries.

That means they’re likely to stay for weeks at a time, and with that comes higher cleaning and service fees to put towards the profit margin.

Additionally, it affords a higher brand-building experience.

The more things you add to make the visitors’ stay even better and higher quality, the more they’re likely to remember your stay, recommend it, and help build the notoriety of your brand for you.

Then you’re essentially building a “hotel” brand that can be used in many locations.

What do you think if people specifically look for your brand’s vacation housing before anywhere else? Then if you have multiple spots, they’re more likely to stay loyal to you before they branch off and find some other stranger’s property to stay in.

It’s also important to provide as much geographical information as you can about areas.

Like, what is the walking distance to stores, beaches, points of interests, and night life spots.

What is the cost of using uber-like services to get around, or any other benefits you can highlight for people that may have not even considered as potentially affecting their stay.

This requires a bit of research to learn the area really well and then some test data with people that stay there the first few times so you know what people are looking for, enjoy, and dislike, so you can frame that for them and highlight it when future guests are looking for a place.

So, the first thing to do is start coming up with a list of locations that might be worth checking out.

If you’re someone who travels a lot or you have an investment group that’s looking to invest in properties like this, then you may want to spend a week at a time checking out these different areas, looking at properties, and getting to know the lay of the land.

Be sure to also investigate the local laws to see what they may have in place regarding short-term rentals. You’ll also want to look at HOA or similar organizational bylaws that may have some restrictions.

The last thing you want is to invest in a property only to find out that your original plan will get completely blocked by a local government.

We’ll keep looking into more and more ideas about vacation housing and rental properties, so be sure to check back often, or get signed up on our newsletter for latest updates!

Short Term Rental Models May Have The Greatest Returns

Most people that are looking for long-term investments in real estate consider one form or another of having a long-term tenant.

This is generally something like a single family home, a duplex, or a multi-unit apartment complex.

This is common because for the last few decades this is how many people built their wealth.

But now we have airBnB, vrbo, homeaway, and other companies that are all about short-term rental models…

…which means we have alternatives to having long-term tenants.

Short-Term Rentals Are Like Time Shares

Consider this:

You own a condo in a location that you only visit every so often, but you don’t want to keep paying the mortgage while you only use it for only one week every two months.

This was exactly the situation I was in with my apartment back in my home town.

I wanted to use my condo every time I visited my family, but I didn’t want to keep paying a mortgage while it was empty, and I did not have a great time with my long-term tenants.

My condo also happened to be right outside the gates of the local college that was huge with football and tailgating.

This meant that, at least during football season, my condo would be in high demand two weekends per month.

It otherwise was close to downtown and right next to campus, so there were other events that people would want to be close to.

The result?

With a $562 mortgage and $288 HOA fee, along with electricity and other utilities / requirements, I was sitting at around $1100 per month in expenses for this condo.

With an average of $100 for a night’s rent, it would only need to rent out for 11 days out of the month to be completely free!

With game weekends and special events, the nightly rate would be around the $130 range, which is just an added bonus.

Now, I get almost 20 days per month to use for whatever I want while not having to pay for anything at all.

Now imagine taking this model…

…and multiplying it.

Own Multiple Vacation Homes For Free!

So if we take this model and multiply it, what do we get?

Imagine having a home in Hawaii and in San Francisco that rents out 1/3 of the month.

You can visit these cities and stay in these locations for free (literally), so you’re really just paying your flight and travel costs.

When I go on a trip, it’s often the lodging that is the most expensive thing about it.

Now, when I know I’m going to be visiting a place either for business or because I like it, I know that it’s a target for a short-term rental property that I can then book for myself when I want to visit.

Now, the key to getting these types of properties is finding the ones that are going to be hot spots.

You don’t want to get just any old house that’s in the middle of nowhere.

It needs to be near something that a particular audience would want.

This could be a property near a resort, beach, tourist point of interest, cabins, downtown, or business district.

Yes, business people will rent airBnB locations as well.

You can even get a place near a venue for shows or conferences.

There are many different styles of rental properties that you can go for, you just need to know what the audience will be and why they are there.

There are a few different websites out there that can help you see and determine what current airBnB listings are doing, what they offer, and what they go for.. along with their vacancy rate.

There Is More Than One Way To Have A Short-Term Rental Property

You don’t have to just get single-family homes.

I frequently visit California for business trips, and there are 3 different styles of these rental properties:

  1. Single family homes – just like the ones I’ve talked about above.
  2. Multi-unit homes – Big houses that have several bedrooms. It’s a shared rental space, meaning that each room has a different booking schedule.
  3. Shared Rental – Big houses that are rented to one group of people. This is especially common near beaches where a group of people will go for an after-party or for something like spring break.

Depending on the area, all of these models can work and can provide a property that turns into a cash cow.

Up above, I described a property where I can basically own it for free.

But when you have a multiple property short-term rental model, you can generate 3-5x your costs in profit.

You might be paying $1000 for the mortgage per month but generating about $3000-$4000 revenue, of course depending on vacancy rate and demand.

This model allows you to adjust your prices and schedule as needed – something you can’t do with long-term tenants.

Some of these properties can even be project homes.

Meaning, if you have the funds, you can get them at a discount by doing a short sale or buying at foreclosure.

Many people like to sell homes quickly and at a discount if they’re foreclosed, need to sell the house from a divorce, or they’ve even inherited it.

Specifically, divorces are a huge cause for selling houses quickly.

This means you can buy the property, put some work into it, and turn it into something that generates cash flow quickly without market-value costs!

It’s Not Necessarily New

This model isn’t exactly new, since airBnB has been around for a while.

But more and more people in the real estate world are starting to catch on, which means that there are many homes being converted into this.

New Orleans, for example, has a huge airBnB inventory.

But there are HOAs beginning to set up rules against it in order to block that.

For some gated communities, they don’t want to have strangers coming in and out, as that can be a security risk.

While that’s understandable, it can also be pretty paranoid.

The important thing is to keep track of what the rules and regulations are for each complex.

Make sure you check that out before you buy a unit in a shared community.

In most cases, it’s best to get a home that doesn’t share walls with another unit or building.

Check out this model, and drop a comment to let me know what you think.

Don’t forget to check back and see updates on some more about the rental model and general real estate tricks (!