let’s talk : VACATION RENTALS
Good morning!
This week I am writing to you from Kiawah Island, SC (I know eye roll, honestly so annoying of me). But, you guys I had to write about this – the homes here are AMAZING. I can only hope that one day I can own an amazing beach home for myself and my family…. BUT those days are FAR off so in the meantime a girl can dream AND until then I will just do my research on this market.
So, as we do, let’s talk real estate, let’s talk VACATION RENTAL HOMES…
OVERVIEW OF THE VACATION RENTAL MARKET
According to a recent online study, 1 in 3 U.S. travelers opted to stay in private accommodations vs the traditional hotels. The growth in the private accommodation sector, aka rental properties, is outpacing that of the entire travel industry and is expected to be worth ~$36.6B by YE 2018 (according to Phocuswright). The rental market has boomed astronomically over the past 2 years and is only expected to grow further into 2022.
BUT, WHY?
It all comes down to EXPERIENCE. Vacation renters, similar to residential renters and home buyers, are looking to fulfill an experience. They want the luxury of being able to have friends over, cook out, hang out, walk to night life, etc. all in the comfort of their “own” home WHILE on vacation.
SO, HOW DO INVESTORS ACCOMMODATE THIS NEW DEMAND?
TECHNOLOGY. Online property management and real estate analytics groups such as Vacasa, Evolve, and AirDNA, to name a few, have made it beyond easy for investors to pick the right market, home, housekeepers, contractors, property managers, etc. to run their businesses.
I’M SORRY, WHAT ARE THESE TECH PLATFORMS THAT CAN HELP TURN ME INTO A SUCCESSFUL BUSINESS (WO) MAN??
Just to name a few…
- VACASA ( & ALAN) : Vacasa is a technology based rental property management company, providing services for 8k+ rentals in the United States, Europe, Central and Latin America. Vacasa recently launched a new platform, Alan, used to help owners maximize revenue by continuously tracking and moving with market change. This algorithm allows owners to change their pricing depending on how the market is acting at any point in time. They claim that their average customer can expect to see a 34% increase in profits in their first year all because of their new management system.
- EVOVLE : Evovle is another online vacation rental property management group, claiming lower fees and more flexibility than their competitors. They are essentially a one stop shop for anything vacation rentals as they handle everything from maintaining the properties to booking the renters.
- AIRDNA : AirDNA is essentially a live online data shop that tracks rental performance of Airbnb properties. They look at occupancy, rentals rates and revenue statistics globally. By tracking this data, AirDNA is able to identify high yielding markets and opportunities for investors. That being said, this research tool is not free for us investors (makes sense really).In order to utilize the AirDNA database one must pay a fee, pricing depends on what type of data you are looking for.
Please note there are a million other sites out there that can help you grow your vacation rental business – the 3 groups above are just a few I have been reading up on that utilize data to help you make appropriate decisions for your portfolio. If you know of any other sites we should consider – please comment on the blog post and let us know!
SIGN ME UP, WHERE ARE THE TOP VACATION RENTAL MARKETS??
According to rented.com, the market is experiencing a major investor shift towards more urban area rentals as urban owners are currently seeing higher ROIs.
Many sources include the below cities in their top destination lists…
- Nashville, TN
- Destin, FL
- Corpus Christi, TX
- Denver, CO
- Clearwater Beach, FL
- Gatlinburg, TN
- Siesta Key, FL
- Las Vegas, NV
- Palm Springs, CA
The top destination list is compiled from analysis based on…
- Property prices
- Rental rates
- Operating expenses
- Tax rates and laws
- Destination popularity
- Average annual vacation rental ROI
- Short and long-term rental regulations as the rules and requirements can have a major impact on homes owners income potential.
SO, WHAT’S THE CATCH HERE?
- TAX CODES AND REGULATIONS: Everchanging tax codes and local regulations can make it hard for investors to pick an ever profitable vacation rental market.
- INSURANCE : (Potentially) high insurance costs, if you choose to invest near the beach / any body of water, where flood insurance alone can eat away all your profits.
- EMOTIONS : You own a vacation home but you really can’t vacation in it (well not more than ~2 weeks per year) if you want to see the tax benefits of an investment property. Some investors have stated that with their vacation rental homes it can be hard to remember it’s an investment, NOT your residence.
- SEASONALITY / VACANCY : If you are investing in a beach home, especially in somewhere like the northeast, there are only a select number of months renters can truly bask in the sun. Sure, you may see renters around the holidays, even though it is cold, but make sure you factor vacancy rates into your property analysis.
- MAINTENANCE : Often times if someone knows where they want to retire, they will purchase the home pre-retirement age, and use it as a rental property to make back a bit on their investment. BUT, they will most likely have to put $$$ back into it to fix it up before they move in- so how much are they really making back here? Running the numbers in these scenarios can be critical.
Do any of YOU own a vacation rental? What are YOUR thoughts on the vacation rental market?
Feel free to comment below and let us know what YOU think!
Happy Wednesday!
-Erin
P.S. today’s featured image is brought to you by my sister Grace O’Connell taken down here in South Carolina this week – thanks Gracie!
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Data Sources for today’s content:
https://evolvevacationrental.com
https://www.rented.com/125-best-places-to-buy-vacation-rental-property-2017/
https://www.statista.com/outlook/268/109/vacation-rentals/united-states
https://www.statista.com/outlook/268/109/vacation-rentals/united-states#market-driver
