5 Things No One Tells You About Owning Vacation Home Rentals

5 Things No One Tells You About Owning Vacation Home Rentals

3 min read
Trey Duling

Trey Duling is the President/CEO of OrlandoVacation.com, a large travel company specializing in Florida getaways. He has over 27 years of experience in the area, owning multiple companies that market to guests looking for an Orlando vacation. His main focus is marketing hotels and short-term vacation rentals near Disney World, with ample expertise as the largest authorized ticket seller for the large attractions in Orlando.

Experience
Raised by his father who previously owned multiple hotel properties, Trey gained a lot of knowledge growing up around the hospitality industry. He learned early on what general managers for hotels were looking for in a marketing company to help them sell more rooms per night and has been actively growing his hotel portfolio since 1993.

In 2006, Trey expanded into the vacation rental home market by offering his guests condos and townhomes to rent within a 15-minute drive to Disney World. With the increasing demand of this type of accommodations, he now markets over 380 condos, townhomes, and vacation homes in the area.

Packages are the most popular among guests, as they offer more savings when bundled with lodging, and OrlandoVacation.com is the largest ticket seller for the area’s attractions today.

Education
Trey graduated with a bachelor’s degree from the University of Mississippi and then received his master’s degree in Entrepreneurialism from Belmont University in Nashville, Tennessee.

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Owning a vacation home can be a great investment opportunity, but it is one that does have some risk associated with it. Before you ever purchase a vacation home, you should do your homework and plan accordingly. Here are 5 things that can go wrong when owning a vacation home.

5 Things No One Tells You About Owning Vacation Home Rentals

Annual Returns Can Go Negative

Oftentimes vacation homeowners are faced with a negative annual return especially if they had a down year for bookings or if they had a major repair. Before you ever purchase a vacation home, you should look at all the monthly bills associated with the property and be comfortable enough with the total amount that you could pay on these bills even if the vacation home did not bring in any money.

Just in a few recent years, we have had a terrorist attack on American soil and the second worst financial disaster in the history of our country. These two events had a major impact on people traveling and the amount of disposable income they have to spend on vacations.

The second thing you must research before you buy a vacation home is to figure out the average nightly rate guests are willing to pay for a similar property and how many nights a year the property should be occupied. Once you have these two figures, you can easily find out how much income the property will bring in on an annual basis. When you compare the income to the monthly expenses, you should have a positive cash flow. If not, I would think twice about purchasing the property.

Related: 5 Expert Tips for Managing Your Own Vacation Home Rental

You can find most of the information you are looking for by asking your realtor, property managers who manage properties in the area, and by calling homeowners who list their properties on VRBO (to learn more about how to rent your place and list for free on VRBO, click here).

You May Not Be Able to Visit as Often as You’d Like

Life has a funny way of jumping in and keeping us from doing things we really want to do. I can’t count on my hand how many times homeowners have told me that before they purchased a property in Orlando, they visited 3 or 4 times a year. Then after they purchased their vacation home, they never seem to be able to break away and visit. You oftentimes find this as kids get older and get into sports or other activities that seem to eat up your weekends.

Repairs Can Come Up

You will need to put money back into your property every year to keep it up and maintained. The National Realtors Association estimates that you should budget for 1.5% of the cost of your home to be spent on repairs and general upkeep every year.

So if you purchase a $200,000 vacation home, you should budget to put $3,000 back into the property every year. Now, if you are renting your vacation home out to short term renters, you might need to budget a little more. Guests may not treat a vacation home as nicely as they would their own house.

HOA Dues Always Go Up

If you purchase a vacation home in a community that has an HOA ,the dues will always go up. In all the years that I have been managing vacation homes, I have never seen an HOA reduce their monthly or quarterly dues.

Related: 8 Clever Ways to Save BIG on the Monthly Bills for Your Vacation Rental

Vacation Homes Do Not Always Increase in Value

Just as we talked about before, when we have a huge natural, manmade, or financial disaster, investors get scared and sell their investments. This is what happened in 2008 and 2009. Too many vacation homes flooded the market, and the price on the houses plummeted. Many people were not able to sell their vacation home for anywhere near the price that they purchased it, and this caused many houses to go into foreclosure and some houses to be sold as short sales. The longer you hold onto a vacation home, the better chance you have of making money on the property, but buying a vacation home is not a surefire money maker.

Owning a vacation home is a good investment if you do your homework and research. Many people rush to buy a vacation home for the simple pleasure of just saying they own one. Take your time; buying any good investment is a marathon, not a sprint. Don’t be afraid to walk away from the property if you are not totally comfortable.

If you own a vacation home, what have you learned over the years? What are some things that have gone wrong that you wish you’d been warned about?

Don’t forget to leave a comment below!