Real Estate Investor · Jerseyville, IL · Member since 2015 · 37 posts · 2 votes
Morning bigger pockets. I have a question or two about vacation rentals. I have a contract on one but i'm looking for the best way to present it to my banker as a good investment. My question is what is the best route or what all should i put on paper explaining my plans for the place hoe much it will rent for how many times a year etc. Any help is greatly appreciated as im new to the vacation part of rentals. Thanks-Pat
To speak to your point about presenting to your banker as a good investment you can work with a property manager to get a projection or even a fixed rent offer to assist with financing of the property if you have a contract or letter of intent to rent. Fixed rent is a great way to get the property demonstrating you have guaranteed income then you can switch to commission down the road to get more upside on your investment.
Some rental graders are great but I would caution reliance on them as they are automated tools and cannot see everything. A vacation rental property management company can quickly look at the property build rates and model what the property can do for you. Many calculators screen scrape unsophisticated rates and just multiply across a band of occupancy estimates which can be pretty inaccurate. If your making a purchasing decision talk to an expert, does not take long and can save you from some big mistakes.
Shoot me a message if your interested I do analytics for a vacation PM with rate algorithms, guarantees and fixed payments. I can put you in touch with someone who specializes in working with investors and building their portfolios. We work internationally so can assist in US and yes Spain.
My company has a free vacation rental grader that you can use to see how much rental income you can expect to make. I'll inbox it to you (sorry, not allowed to post it in here).
We have quite a few vacation rentals in Arizona. We always run the numbers as a regular rental as our Plan B. Most banks will lend on it as a regular rental. If it doesn't make money as a regular rental, then be cautious. Vacation Rentals will typically make 2-4 times regular rental income but i will always calculate a properties both ways.
To speak to your point about presenting to your banker as a good investment you can work with a property manager to get a projection or even a fixed rent offer to assist with financing of the property if you have a contract or letter of intent to rent. Fixed rent is a great way to get the property demonstrating you have guaranteed income then you can switch to commission down the road to get more upside on your investment.
Some rental graders are great but I would caution reliance on them as they are automated tools and cannot see everything. A vacation rental property management company can quickly look at the property build rates and model what the property can do for you. Many calculators screen scrape unsophisticated rates and just multiply across a band of occupancy estimates which can be pretty inaccurate. If your making a purchasing decision talk to an expert, does not take long and can save you from some big mistakes.
Shoot me a message if your interested I do analytics for a vacation PM with rate algorithms, guarantees and fixed payments. I can put you in touch with someone who specializes in working with investors and building their portfolios. We work internationally so can assist in US and yes Spain.
Hello @Kristy Farmer, I would recommend you talk to your mortgage person. I have heard they do to an extent but not at 100% face value. Are you searching in Galveston or another specific market?
Ryan Rabideau : Yes; I also have a friend selling her vacation rental and my boyfriend's mom fixing up a house to rent. I'm in the market for a vacation rental on the island. A couple of houses I've been interested in but I feel our market is overpriced and heated right now. There's good profit bc it's warm all year and we have events on weekends most of the off season. Based on comps and friends that have been doing rentals here you can pull $30 k or so profit yearly.
Im an analyst for Vacasa we have a pretty large presence on the island. It might be a good idea to wait till the off season to pick up some properties when they are not so cash rich from summer reservations and you have time to get the home ready for the next booking window. Im evaluating early ski season markets right now or fall heavy places. If your interested in the island specifically shoot me a message I can put you in contact with our general manager down there who can work with you can help with projections for places your looking at.
@Ryan Rabideau: I sent a PM and collegue request although I don't think I denoted it with your name. I presume that is why folks aren't checking and accepting collegue requests. I searched for vacasa on the island. I was not aware that they had a presence on the island. It's pretty neat what you can learn from networking. I look forward to working with and learning from you.
AirDNA has all the rental info you need for finding the vacation rental data in areas. you can also check VRBO and Homeaway to see what the comparable homes are renting for and how booked they are. Also I have an excel spreadsheet that I use for myself and my VR investors, but again, I can't post it here.
The best way to present it to the bank would be if you have the past few years of income history as well as if those bookings belong to the owner or the management company. If they transfer to you than that's solid. If the deposits have already been places and are being held in escrow that will help your case. No deposits than it's hard to count it as income.
Be very careful where you pull your rental data from. The best place is to get it directly from Airbnb, Homeaway and VRBO because those are homes already performing. You don't want to supply pure speculation to the bank.
I would pull info directly from the property manager who was managing the home and present it that way. Be sure to factor in all expenses as there can be much more wear and tear on the systems (think guests leaving the doors open at your beach house in the dead of summer, extra insurance for liability and flood,and generally a bit more wear and tear). Also factor in your fees from Airbnb, VRBO, and property management folks that come in.
I am excited to learn banks are being more accepting of vacation rentals as a legitimate income stream - thanks for all the tips, y'all!
@Laurie Devegter, I agree completely. Also make sure you know exactly what their responsibilities are (as well as yours). Recently saw this graphic online. While some of those commission rates look sky high, it does a good job with outlining some of the many fees a property manager could try to charge you.
If anyone is looking for a vacation rental property manager and wants to see prices in a market on the same contract, please let me know & I may be able to help.
@Monika Haebich on that chart, the commission it's showing, is that for the booking the property manager put in place? The owner puts in place? or both? And on the line for management, is that their monthly expense?
@Erica Muller, I apologize that I don't know the answer! I don't work for any of the companies above, so I'm not entirely sure what is included in the commission & when it is charged. I think the main point of the graphic is just to show how deceiving commission rates can be when comparing property management pricing because each company includes different things and charges various added fees.
I am not a property manager (nor do I work for one), and my company helps owners compare prices by having managers bid for business using the same standard contract (meaning no additional fees).
@Monika Haebich Gotcha! Thanks for clearing that up. I know how deceiving management companies can be when representing their rates so I just wanted to find out if that was something that was being broken down in your chart. It's so important for investors to know which questions to ask management companies.
My company has a free vacation rental grader that you can use to see how much rental income you can expect to make. I'll inbox it to you (sorry, not allowed to post it in here).