How To Start A vacation rental business?
Investor · Jacksonville, FL · Member since 2015 · 76 posts · 22 votes
Hi, I am interested in learning how to start a vacation rental management business. I would love anyones advice on how to get started. Even the basics. Do I need a lic (I have one)? Does my company need to be in the same city to manage the property, legally speaking. I have people on the ground when needed. Things like that! Thanks BP community!
Are you talking about property management license? You won't attract many owners without a property management license, if the owners have half a brain.
Tailor a rental agreement towards vacation rentals. DO NOT use the same one you use for reg rentals. Get a lawyer who specializes in these contracts to look it over.
You need vacation rental insurance somehow... I would ask the owner to insure their property properly. If you have insurance for your business, it may cover these operations, but any claim you will make will make an already expensive insurance much more expensive. Try to convince the owners to purchase the policy. If they have a regular mortgage, there will be an exclusion prohibiting vacation rental activity most likely. Make sure they keep their escrow policy on their house in these situations, or they will be technically default on their loan and the bank can call it out (worst case scenario).
You do not need to be in the same city in my state. BUT, you might find it much easier to be in the city you are managing in. Look at the logistics. Do you know any cleaners who are reliable? Cleaners and house painters seem to be very flaky and can show up on time, or not at all in my experience. That cleaning cost will eat up a lot of your income, but I'm sure you thought of that.
You will need to check the zoning of the property. Normally, R1 and R2 do not qualify, and your city can put the kibosh on your rental just as quick as you set it up. Currently, in my town, there is a HUGE debate about this, and the city may shut down vacation rentals which aren't licensed. That equals about 290 rentals! Out of around 300... So make sure you pick a property that won't give you trouble down the road. If you file for exceptions, that costs around $5k in my little middle-American town.
If you've never done it before, but are used to property management, you may be pleasantly surprised. My guests love our place, while our previous tenants were all college kids who destroyed my property. This is why I converted it. I saw no point in watching my property get trashed, and my guests clean my place before they leave (work that into your rental agreement, get it up on a website, and offer virtual signatures). All depends on what demographic you are targeting. I target families on road trips, and families with students visiting the local University. But I do get a diverse cross-section of humanity. 95% of the time, I never even make contact except through emails, and about 1% of my guests must be ninjas, who show up, sleep in a bed, and vanish. 15 minute cleanups are the best!
Hope that helps. Lots of hidden costs to vacation rentals. Good luck! I spent around $36k (not including the price of my building), and made about $10k back this season (in 3 months). Not bad! I have another unit which will be ready next summer. Should turn a profit after 2 summers. Great industry if you can manage from afar, good luck.
Are you talking about property management license? You won't attract many owners without a property management license, if the owners have half a brain.
Tailor a rental agreement towards vacation rentals. DO NOT use the same one you use for reg rentals. Get a lawyer who specializes in these contracts to look it over.
You need vacation rental insurance somehow... I would ask the owner to insure their property properly. If you have insurance for your business, it may cover these operations, but any claim you will make will make an already expensive insurance much more expensive. Try to convince the owners to purchase the policy. If they have a regular mortgage, there will be an exclusion prohibiting vacation rental activity most likely. Make sure they keep their escrow policy on their house in these situations, or they will be technically default on their loan and the bank can call it out (worst case scenario).
You do not need to be in the same city in my state. BUT, you might find it much easier to be in the city you are managing in. Look at the logistics. Do you know any cleaners who are reliable? Cleaners and house painters seem to be very flaky and can show up on time, or not at all in my experience. That cleaning cost will eat up a lot of your income, but I'm sure you thought of that.
You will need to check the zoning of the property. Normally, R1 and R2 do not qualify, and your city can put the kibosh on your rental just as quick as you set it up. Currently, in my town, there is a HUGE debate about this, and the city may shut down vacation rentals which aren't licensed. That equals about 290 rentals! Out of around 300... So make sure you pick a property that won't give you trouble down the road. If you file for exceptions, that costs around $5k in my little middle-American town.
If you've never done it before, but are used to property management, you may be pleasantly surprised. My guests love our place, while our previous tenants were all college kids who destroyed my property. This is why I converted it. I saw no point in watching my property get trashed, and my guests clean my place before they leave (work that into your rental agreement, get it up on a website, and offer virtual signatures). All depends on what demographic you are targeting. I target families on road trips, and families with students visiting the local University. But I do get a diverse cross-section of humanity. 95% of the time, I never even make contact except through emails, and about 1% of my guests must be ninjas, who show up, sleep in a bed, and vanish. 15 minute cleanups are the best!
Hope that helps. Lots of hidden costs to vacation rentals. Good luck! I spent around $36k (not including the price of my building), and made about $10k back this season (in 3 months). Not bad! I have another unit which will be ready next summer. Should turn a profit after 2 summers. Great industry if you can manage from afar, good luck.
Thank you for your thoughts! I am very experienced in long term rentals but am experimenting with a vacation rental of my own and starting to research how it should be managed. Legal and zoning I am fine, I am just not 100% sure on if and how I should manage my vacation rental.
There's actually a few options in an evolving industry like this.
First one is straightforward: DIY. I only decided to DIY when I was 100% sure I could quit my day job and not go broke. My wife and I do all the cleaning, I run a website, and use all the major internet sites to market the property, and we do all our own maintenance. Lots of money to be made...
Second option is to hire a property management company. You should ask them what's included in their fee. I've seen fees ranging from 50%-15%, with different options and styles of management. Things to ask about are insurance policies, taxes, local zoning.
Third option is totally hands off, and fees start around 50% from what I hear. These are management companies which roam the country looking for nice profitable properties to manage. They mostly operate hot real estate markets obviously, so they do not really target my town (although they should...).
Let me know if you have anymore questions! I love my new "job".
Hi Michael, Thanks for your thoughts! My uncle actually lives in Missoula Montana
and has a bunch of rentals there.
So how do you mean its very profitable to do 100% DIY? You mean just the savings from doing your own cleaning and maintenance? I am very hands on so thats appealing! I actually have a bunch of long term rentals in North Florida where I live this new vacation rental I finishing up is in south Florida so I am torn on how to manage it. I hate the idea of paying a manager to do it. I have my own property management company for the same reason...dont really like how management is done and didnt want others managing my personal rentals.
no license required for a vacation rental business even if you want to manage them for others. if you stray one bit into seasonal rentals without a license you will be in violation of Florida law
Hi Michael, Thanks for your thoughts! My uncle actually lives in Missoula Montana
and has a bunch of rentals there.
So how do you mean its very profitable to do 100% DIY? You mean just the savings from doing your own cleaning and maintenance? I am very hands on so thats appealing! I actually have a bunch of long term rentals in North Florida where I live this new vacation rental I finishing up is in south Florida so I am torn on how to manage it. I hate the idea of paying a manager to do it. I have my own property management company for the same reason...dont really like how management is done and didnt want others managing my personal rentals.
Not just maintenance and cleaning fees. More so the property management fees. I charge the cleaning fee to the guest, so that's not too big of a deal, as in if I don't want to clean it then I can pay a cleaner to come do it. Property management companies will charge around 30% for nicer properties. If you manage it completely on your own, it becomes a job, so keep that in mind. If you have two or more... wow that would be a lot of work for one person. In this case, I would probably use your property management company.
Some level of hands on is good in this business, but it can be a lifestyle choice, which it is now for us. I plan on keeping a side job for the winter time while I remodel our second unit. Once that is done, hopefully by spring 2017, my wife can quit her job, and we can both be home with the kids, and provide a nice income, while having next to zero stress really. I had 4 solid months, and looking at about 50% vacancy for the rest of the year. I'd imagine, that much of the US is similar. It's nice because you have a lot of free time to develop your business (remodel is also building sweat equity if you can DIY) If that's what you are looking for I would suggest 100% DIY. I only hire contractors for electrical work, and some mitigations, if they ever arise, as required by your state law.
With all of that said though, you've already got a property management company, so you can really cut your cost down. You might want to look at what this property requires in upkeep. Some high end properties will require you to hire at least one person to maintain the yard or clean the unit. It's a lot of work.
Go to the next Homeaway Summit which is in Seattle in November. This is for owners that have a rental or for people interested in it. Highly informative. https://www.homeaway.com/info/summit-2016
The event that Homeaway puts on for property managers is RezFest. Check it out here http://software.homeaway.com/rezfest.
Go to the events - ask questions of the vendors, owners, etc to see if this is something you want to pursue.
Go to the next Homeaway Summit which is in Seattle in November. This is for owners that have a rental or for people interested in it. Highly informative. https://www.homeaway.com/info/summit-2016
The event that Homeaway puts on for property managers is RezFest. Check it out here http://software.homeaway.com/rezfest.
Go to the events - ask questions of the vendors, owners, etc to see if this is something you want to pursue.
Thanks! I will check this out for sure!
I have no experience in this space, but another interesting business model I've come across to consider is that there are some that rather than being a vacation rental owner or PM will master lease a property with provisions to sublet it. They pay a long term rental rate, manage it as a short term/vacation rental, and pocket the difference. Of course, everything is fully disclosed and agreed upon by the owner.
@Account Closed
I am in the process of developing a business plan for a Vacation Resort and trying to nail down the Marketing. Can you share the site your are marketing your property? And any other information to help.
Thanks
Michael Swinton
@Account Closed There is a 4th option where you split the difference. I manage all the advertising/listing. bookings, calendar, rates, payments, general customer service, etc. Then I have one cleaner/housekeeper/manager who does changeovers and also does call outs, some repairs, supplies, etc. Lowers maintenance costs, puts control back in our hands. Works well for me.
@Account Closed
I am in the process of developing a business plan for a Vacation Resort and trying to nail down the Marketing. Can you share the site your are marketing your property? And any other information to help.
Thanks
Michael Swinton
Hey Michael,
I built my own site through Wordpress, which cost me $110 for the year, so less than $10/mth for hosting plus domain registration. If you build your own site you can save thousands of dollars, and it took me 2 hours to build, while watching a Youtube video tutorial. Your web guy would do the exact same thing, except it would take him 30 minutes.
I have my place listed through many sites, but I will list the big 3 and their performance during my busy months: AirBnB 22 bookings / 85 nights , VRBO (includes all the HomeAway family of sites) 17 bookings / 73 nights, Tripadvisor (includes Flipkey) 0 bookings / 0 nights.
So I can also tell you that the demographics which use each site are different. VRBO, in my experience is older folks, with more money, who seem to book off-season for weeks at a time (love these people, I can make $1500 a week with no effort). VRBO is WAY more expensive for the guests to book through than AirBnB, which changes up the demographic. If they book for longer periods of time (like weeks at a time) then it becomes affordable for them. While AirBnB seems to have younger families, and younger people in general, with lots staying 1-3 nights during the height of the season.
I also accept 1 night bookings, which really lets me stand out and compete against much nicer and more established vac. rentals who have been on the site for much longer. It is a lot of work, not gonna lie. But I did manage to be able to quit my job to do this, and my cleanings take about 2 hours, and my wife and I rotate. So if you can do it, 1 night stays are a huge boost in rank. Something to keep in mind is that accepting 1 night bookings can really drive away people who want to book large blocks in my calendar. The trick is to find a balance in your area. Like I limit my one night bookings to off-season. This is the most common technique as you'll see.
You want to get great reviews. That's the best possible way to market your property. I paid about $600 in Google Adwords, and only got traffic to my site (which is good to help with rankings), and yet AirBnB and VRBO have tens of millions of dollars in marketing behind them, so you want to focus on getting great reviews to help boost your position in their algorithms. I am pausing my Adwords ads because I managed to show up in the Google search. That's about all that Adwords is good for in my opinion. I link adwords to analytics so that I can see exactly where my traffic is coming from, and what they are reading on my page. Then I target those people with blogs about whatever they searched for. It works, but not as good as AirBnB and VRBO.
Here is a sample from my AirBnB page:
Great work! Your last 18 ratings were each 5 stars. Overall, you’ve received 5 stars 100% of the time. On average, hosts near you get 5 stars 86% of the time.
That 86% is crucial for me to get on the front page. I am consistently listed there. Most hosts have 5 star reviews, but the conversion from stay > review is what is important. If you get a 4 star, you will drop down in rank, and if you get a 1 star, you can most likely get AirBnB to remove it because I have yet to see a 1 star property which deserved it. I saw a review of a local place here, which was 1 star. It had like 42 other 5 star reviews. That 1 star was gone in a few days. VRBO is similar. Getting the reviews are crucial for marketing!
AirBnB has a superhost status also. I just got mine after 4 months, which was the minimum amount of time I could have received it in. You need 16, 5 star reviews in a 3 month period or something... And be able to accept instant bookings. This will get you on the front page. The instant bookings is contentious. I do it because I live in the building my vac. ren. is at. I can be there, I can monitor the situation while keeping a low profile. If you're doing it property management style, that might be a hard pill to swallow. There are caveats to AirBnB and VRBO, but they are consistent moneymakers.
Hope this helps!
@Account Closed @Aaron Cooper There is a 4th option where you split the difference. I manage all the advertising/listing. bookings, calendar, rates, payments, general customer service, etc. Then I have one cleaner/housekeeper/manager who does changeovers and also does call outs, some repairs, supplies, etc. Lowers maintenance costs, puts control back in our hands. Works well for me.
Yea I agree, there is no fine line as to how to manage it really. I bet there is a 5th and 6th way also. I am looking for someone dependable to do cleanings and maintenance, as I am very tied to the property right now. I would love a more hands off approach, and after we get three of our units functioning at max profit, then we may be totally hands off, but right now we have 1 unit, and 2 traditional rentals.
The one thing I have noticed is that the bigger you get, the more hands off your rentals can be. If you're like me, and started small, and grew, then you would have most success being more hands on. Just my advice to people out there though, and each property is so different it is hard to say what will work for some and not others.
@Account Closed what are your peak seasons and what are your vacancy rates during peak and off peak? I have one long term rental here in Missoula and I have an acquaintance here who is building on a lot in a hot part of town (for university folk and visitors) and I am trying to convince him to consider vacation rentals for at least one of the units. His concern is vacancy rates during the winter. We won't have the traffic you would without Big Sky Resort maybe. Anyway just wanted your thoughts on the seasonal nature. Obviously it works because you are still doing it here in Montana.
Thanks for all the great info already!
Hey Jeremiah,
Peak season is around May15th- Sept 15th. Vacancy: 0% (minus a few days throughout the summer for maintenance and big changeovers like after a 2 week stay.)
Oct/Nov: vacancy so far at around 50%
winter :Dec-May is hard to say because I have never operated, but I've got some 1 week bookings in that date range already, so I am optimistic.
Tell your investor that you will switch to college rentals again during the low season. He shouldn't lose any money in this, it is a no-brainer. I considered it for this winter, as about 6 other vac. rent. owners I know have told me that it is pretty dead in Bozeman during the winter. October and November, yes for sure, but I've got bookings, and make more money than I would renting it out normally. Not much more, but any money extra is still extra money right? AND less work, so...
How's he building out? A single family home or a building or what? I'm finding that some properties rent way easier than others. I would check your local AirBnB and VRBO listings. Check the prices. How many people are targeting luxury travelers? (>$250/night) How many are mid range? ($180ish>$250/night), and how many are budget? (<$180). If the market is saturated with expensive rentals, you want to focus on budget travelers. I have had great luck with budget vacation rentals. Here is what I've seen: families traveling in the Northern Rockies, who are very grateful for finding a place at $180/night (my current price in summer) who want to book for 1 or 2 nights, and actually clean up your place. They also leave great reviews (reviews are your main source of marketing while managing vacation rentals, see my other posts). Think of the volume of reviews you will need to show up on the first or second pages of AirBnB and VRBO. For this reason, to build a credible source of reviews, I would not leave out single night bookings. Next summer, do what you want.
At least that is how tight the competition is here in Bozeman... Not sure how Missoula is. We have had some major issues with vacation rentals in this town. C.O.B. is talking about putting a stop to new vacation rental activity, so make sure you won't run into that problem in Missoula. It doesn't affect me though, I just stand to profit, as I am R4.
Good luck!
There are already a bunch of advice here.
I have a vacation rental and i have a person who is managing vacation rental for me. My PM, an investor himself, has a lot of long term rentals but no vacation rental. I wanted to find a PM for my rental but believe it or not, there were no PMs who were willing to take the undertaking.
So, from the point of view of an investor who has a vacation rental and was looking for a vacation rental PM, I would say that you need to go out there and advertize. You have to let everyone in ur local REIAs know, and have a website. Contact a few vrbo/airbnb owners.
As far as the management goes, its not easy. You need to make sure that you have a proper staff to do the turns before and after each guests. Guests will nit pick on everything and their reviews will define how much business u actually get. Also, you will be on call during their stay. If they need anything, you will have to provide. For example, once we had the iron go bad for one of our guests who were there for the wedding. They really needed a new iron right away. Someone has to be ready to go buy a new iron and provide it to them.
A lot of great information. One more tip. I am more hands on so I operate two of my properties w/o a property management. On my third one, which is a condo, I have a property management company BUT I am able to do my bookings also so I operate through airbnb, vrbo, flipkey. If I book it, I get 100% of the rent and the agreement is that the PM company will clean it, with a fee. If the PM books it, they get 30%. I really did not want to mess with the condo so wanted to play hands off so I added 30% more to my rent. Believe it or not, I booked my condo 90% of the time this summer vs the PM company (they have 230 plus condos to fill). If I depended on the PM to book , I would at best break even. But If I leave town and there is a ckin, I can tell the owner to go to the PM company and they can pick up the key or I will leave a lock box. I get calls and the first question is "are you the owner" . People rather deal with the owners, not a PM company where they are a number. However, I got a call from a national pm company, and I was interested working with them but they want 100% of the bookings. I cant do that. I want some control. But what drives your bookings are the Reviews. Customer service is #1. I went a little farther and bought an homemade icecream maker, and if my guests have children, the last night I will fill it up with the mix, plug it in at the vacation rental, give them the ice and salt and they can have homemade icecream in the evening after they come in from the beach. I dont do it all the time, but believe me, it is cheap advertising. The bad part is if they put it in the review that I gave them an icecream maker, some of the future guests may be expecting it.
@Account Closed
Thanks for the great information. I need to do some better research on vacancies here in Missoula. Pricing seems all over the map, but I would shoot for a quality unit. Most of the stuff one seeing is a lot of thrift store shopping with very little care for quality and look, but I have not put in the real due diligence I need to convince investors.
Thanks again!
no license required for a vacation rental business even if you want to manage them for others. if you stray one bit into seasonal rentals without a license you will be in violation of Florida law
How is a season rental defined as? I am only familiar with short term and long term (6month and 1 day -12month).
Here you go sir:
Florida law defines a vacation rental as any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family, three-family or four-family house or dwelling within a single complex of buildings which is “transient accommodations” which means “rented to guests more than three times in a calendar year for periods of less than 30 days or 1 calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to guests.”
Keep in mind that tax rates may vary from each municipality.
p.s.--there is no specific definition of "seasonal rental". Those can be of any term but are most often a few months. However, in Florida, you may see some people advertise "seasonal rentals" that are for a term of six months. Any term of six months or less requires you charge the applicable sales tax and remit that to the state.
Here is some info from the state regarding charges of sales tax and exemptions:
http://dor.myflorida.com/Forms_library/current/gt800034.pdf
Aaron, have you decided to go into Vacation Rental Mgmt? In your area, I've seen a lack of them. I am actively looking for a team for mine in St. Augustine and have found one local and Evolve (based in Colorado but with "partners" who are local and Rented (not local either).
Aaron, have you decided to go into Vacation Rental Mgmt? In your area, I've seen a lack of them. I am actively looking for a team for mine in St. Augustine and have found one local and Evolve (based in Colorado but with "partners" who are local and Rented (not local either).
Hi Nancy, I have not yet. I have a traditional property management company here in Jacksonville that has done very well. I have just started renting out my own vacation rental down in the keys for the first time. I started this tread because the vacay rental management seems extremely expensive to me and most of the work is just responding to emails and marketing. St Augustine does have a have a lack of vacation management. I am just a bit to far 30-45min away to really properly manage homes down there and Jacksonville has very little to no vacation rental business here.
With all the out of state investors in Jax I can see why you're in that type of PM there. How are you managing your place in the Keys? Basically, I feel the need for a vacay pm for overseeing the cleanings. I can take on the marketing and scheduling, and would make periodic visits for maintenance checks. I would prefer that, actually. I want to make contact with several cleaners this month before deciding if I'm turning it over to another mgmt service.