Owning a Vacation Rental
Owning a vacation rental property is no walk in the park. There are many challenges to overcome and many distractions you will encounter.
My first house was a three family home. I lived upstairs and rented out the bottom two apartments. As my family grew we took over more apartments and finally moved away to a larger house. I was now a absentee landlord.
I initially tried to rent it out for the summer and then again for the winter. These seasonal rentals are very popular in Newport Rhode Island where I lived while I owned this home. What I discovered was that the higher income in the summer plus the lower income in the winter was only slightly more than the income from renting the property year round.
At the time I was running a retail sporting goods store and this was really a 7 day a week 12 hour a day proposition. When I would get calls for problems or when rent was late or any of a million things that go wrong it was extremely upsetting. I simply cringed whenever there was a call. I deeply resented having to deal with these distractions. “Why can’t these people get it together?” I would think. Long story short I got out of this property as soon as I could.
Many years later I sold my store and bought a large home on Martha’s Vineyard that was owned by my mother. It was not the sort of thing one would choose to do. It had sentimental value, I had inherited 1/2 of it and I wanted to keep it in the family. I borrowed against the house and bought out my siblings 1/2 creating the need for income to support the mortgage. In addition I did not want to sell it in 2008 as the markets started to tank in the recession. It was not a logical “I should do this” decision. It was more of a “I have to do this” decision.
The first job was to take care of the tremendous deferred maintenance on the property. These were major items like a roof, bathrooms, kitchens, heating plant etc. The next job was to simply keep up with the painting and repairs. The home is very large and takes an amazing amount of work. The cost of maintenance of a home is not really known until you own it. It is also much more when you are not around to do it yourself. Here is a list of the improvements.
I had to find a caretaker to check on the house. I needed a cleaner to turn the house over in five hours from 10:00am to 3:00pm. I turned out that I went through several of these finding the right crew as the demands placed upon them is really high. I currently have very good people that do a great job at managing the house. If I lost them I would probably not be able to run the house.
Getting good contractors on the island is difficult to say the least. I have had several and some were really bad. Unless you are already a contractor you will certainly move through several and have disappointments. One of the biggest challenges here on Martha’s Vineyard is the huge number of properties being fixed up. The very best contractors have year of work booked and tend to stay with customers that have huge properties with unlimited budgets. A contractor willing to work directly with a homeowner on maintenance projects is a rare bird. People I want to hire are often busy or they quote really high simply to find the homeowners who are desperate to get the work done. I can’t really blame them. They live on a island that has pretty poor weather for 1/2 the year. They need to cram almost all of the work into the spring and fall so that client can enjoy their properties in the summer. Clients whose houses are not ready or to their liking can be pretty harsh and not fun. Good contractors and workers are out there but it takes time to find them. Currently I feel that I finally have a good group. It only took me 6 years or so to find them.
I had to come up with a marketing plan. The internet and vacation rentals were just starting and so I used local realtors to start. The cost of the realtors is 15% to 20% and that comes out of my end. The vacation rental companies take an up front fee. Google search takes their share and pretty much every way of publicizing the property has gotten very competitive and expensive. There are so many properties now playing in this space that I predict that people will begin to exit the business. We are definitely approaching an over supply. The Orlando Florida area, perhaps the countries top VR location, is seeing this happen now.
Bookkeeping, drafting leases, deposits, getting payments in on time, damage reports and return of deposits if all very tedious and time consuming. Managing all of this is much more of a job than I thought it would be. There is very little chance of getting anyone to do it properly for you as the cost of doing that is really high. Also, it’s your home. If you sub contract something as important as sussing out your tenants you are bound to get some huge parties and at least one disaster a season. I have been lucky for the most part as my property is expensive enough that it tends to get people that appreciate it however I do sense that some people treat it more like a hotel and a family home. That’s disappointing but a very hard thing to ferret out.
At the end of the year you are usually already booking hard for the coming season. This means that stepping out of the house and turning it back into a residence is hard. If the numbers are not working out you need to plan ahead to exit. With people booking 15 months in advance you are committed. Just like selling the house the rental business tends to be pretty illiquid and slow moving. Keep that in mind as well.
My goal is to eventually take the home back over again bit by bit and use the seasonal rental to assist with the upkeep. I am proud that I am keeping the house in the family and also very happy to share it with people that come to the island to stay for a week. There have been some great people here and it has been fun meeting the ones I have.
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