It’s no secret that the vacation rental industry is hot. Because of this, I’ve been having a lot of discussions with individuals wanting to dive headlong into income property ownership.
The first questions new investors have been asking me involve the money needed to obtain and maintain a second home and/or if it will turn a profit. This is an important piece of the equation for long-term viability, but should not be the primary factor of consideration.
As in many industries, opportunities for financial success exist. But many proprietors do fail because they lack the know-how, drive needed to startup or the ability to look at their business situation critically and realistically.
Definitely get excited about the potential! Ambition is what keeps the dream alive. Just be sure to find time to step back and ponder these three important questions before buying your vacation home to ensure it’s right for you:
1. Intentions: First and foremost, everyone should understand why they want to embark on an income property adventure. Ask yourself what you like about hospitality and why you want to host travelers.
If your primary intention is to quickly profit on a booming industry with little effort, vacation rental ownership is probably not for you. Managing your own vacation rental takes a lot of thought, care and hard work. If you are not interested in (or don’t have the time to) build a hospitality business over time, I recommend a different venture.
Sensible ambitions for starting your own vacation rental business include, but are not limited to; your love of meeting new people, the desire to help create memorable vacations in an area you love, gaining flexibility to travel personally (a lot of people rent their personal homes to pay for a vacation!) or even the desire to increase your income in the future.
Owning and managing my own properties is very satisfying. I absolutely love interacting with travelers and the flexibility my job brings. But, without consistent effort it would not a profitable career. Challenge yourself to fully understand why you want to do this!
2. The Art of Liking People: Successful owners love people and interacting with all types of personalities. If you would rather chew glass than deal with guests regularly, this might not be for you.
A lackluster attitude will not excite travelers enough to rent your home and certainly won’t make them feel welcome upon arrival. Profitable owners have a high rate of repeat guests because they have outstanding guests service and an infectious attitude. It’s easy to sense if someone is genuine (which then reflects on how we feel about an experience), so ensure you are really excited to work with people.
Equally important to note, you will encounter difficult situations with authorities, neighbors and problematic guests. In my experience, they don’t happen often (I screen guests before booking) but inevitably there will be time when you have to navigate diplomatically. It’s important to be honest with yourself from the start and understand if you are up for the constant engagement.
3. Business Sense: There are a lot of skills needed to be able to build a profitable vacation rental business. Of which, organization, being detail oriented, and the ability to manage a business are key factors to success. These skills aren’t difficult independently, and can certainly be learned, but I think they are important to be cognizant of before jumping in.
Managing the home itself is much like running your own home; you have a mortgage and utilities to pay monthly. That part is pretty simple. However, the many additional moving parts can be overwhelming at times so it’s important to have an organization system in place. Below are a few examples:
- Inquiries and bookings can come in quickly before peak season (and at inopportune times). It can be difficult to keep details straight (name, contact information, purpose of the trip, how excited they were and so on), so I always carry a moleskine notebook with me.
- You will need to ensure your cleaning and maintenance companies (if you choose to hire this out) logistics are tightly organized between bookings.
- Business licenses need to be kept up to date and sales taxes need to be paid (sometimes quarterly or monthly depending on how your business is setup).
- Maintaining clean books for your accountant.
Marketing, strategy and finance all come into play. It’s okay if you don’t have a deep understanding of these from the start but you should be interested in learning more of each and in strengthening your organizational approach as you develop your vacation rental business.
Honestly assessing your intentions, life situation, skills and knowledge will help you determine if you should consider this venture. If all signs are a go, rest assured knowing you can be profitable doing so.