Turnkey Vacation Rentals – Dos, Don’ts, and Things to Consider

Those looking for an exciting cash flowing, turnkey, property look no further than vacation rentals. With the right property in the right market, vacation rentals can not only provide great cash flow, they can also provide a place for you and your family to get away to for free!

Vacation rentals are an awesome semi-passive income stream. By "semi-passive" I mean that you actually have the ability to control the revenue of vacation rentals more so than you can with SFRs. Every furniture or electronic upgrade, every $ you pay to get a better photographer, every marketing move you make, and every amenity you add to the property will add money to your revenue. Even though you might pay a manager 30-50% of the revenue, you’ll have the chance to treat this property more as a business, making decisions that will greatly affect the revenue as well as the costs, much more so than SFRs.

Vacation rentals are the definition of turnkey. They often are already on a rental program. They usually already have a promise of revenue beyond the closing date. And, most already have property management (PM) and cleaning and maintenance team associated with it. If you’re looking at cash flowing properties out of state, what else can you ask for?

First I’ll cover the Don’ts:

-Don’t only look in your favorite town/city/neighborhood, pick the type of place you want to invest in an open your horizons to some low key places where home prices are down and vacation rentals are high.

-Don’t fall in love with just any property. There will be that perfect property, in that perfect place, that you and your family are already planning two weeks in the summer at. You’ll pay too much and not do your due diligence. Remember, this is an investment that you might be able to enjoy

-Don’t trust the numbers the sellers give you. See how they compare to the numbers of surrounding properties. If their revenue is too high or costs are way too low then there’s probably something missing.

Now the Dos:

-Do your research on the location. How many people visit per year? How many rentals are there in the market? What can I get for an xBR/xBA per night? I good way to start once you find a good market is to purchase an AirDNA.co report for about $50. This report will help you determine everything from vacancy rates to how many 1 BR properties provide cable TV.

-Do get a realtor that is not only familiar with the area, but also one that is familiar with vacation rentals in particular

-Do get one that comes fully furnished. I assume you’re an out-of-towner that doesn’t want to furnish an entire home from cash. Make sure your loan officer doesn’t get that sheet in the agreement that shows you are going to pay $1 for all the furniture ;)

-Do get all the revenue information for the property you’re interested in as well as similar properties so you can compare the numbers.

-Do talk to a lot of property managers. Take recommendations from your realtor, the local loan officer, local insurance brokers, and random people in coffee shops. Then, do your due diligence. The PM will make or break your investment in vacation rentals even more so than with SFRs. Even if there is an existing PM that can cash flow you from day 1, it doesn’t mean that this is the best PM to ensure max PROFIT for you in the long run.

-Do enjoy your property every once and a while. One of the joys of vacation rentals is that you don’t have a renter in the place 24/7. Go enjoy the place, even if it is during the low season. Use the time for some minor touchups, but most importantly reveal in the fact that you're vacationing in a place for free!

All the other dos and don’ts are the same as investing in any other turnkey, cash flow property (i.e. financing, appraiser, inspector, etc.). Never take anyone’s word for it. Do your own research and enjoy the benefits of a semi-passive, cash flowing turnkey property that you and your family can enjoy