4 Unit Vacation Property - What do I need to know?

Question

I've found a 4-unit vacation property for sale one town over from me in a touristy spot. I want to pick up some short-term rental properties and this one fits my criteria pretty well.

What do I need to know from the owner to ensure this is a good deal?

Here's what I'm currently asking for:

• P&L sheet
• Rental rates
• Vacancy rates
• Expenses (especially insurance as this property is blocks from Galveston Bay)
• Current marketing efforts
• Current property management
• Known repairs needed
• Furnishings included if any
• Any special local taxes

What am I missing?

Thanks in advance.

Belinda Lopez · Answer

Short-term rentals are a very different animal than traditional rentals.  Expect a 50% occupancy and you can pay anywhere from 15 - 20% in property management fees.  Short-term rentals are more like running a hotel.  The hardest thing to find is a good cleaning crew who can do short turnarounds (hours) and are reliable.  Depending on where the property is located insurance can be a real issue; is flood and windstorm required?  has the property flooded before?

If your property is in Galveston then be prepared to deal with a ton of more maintenance due to the salt water and air that rust out everything.  Maintenance is higher and needed more often; believe I was just out cleaning my deck and patio this morning and noticed a lot of small things that need to be addressed soon.  There is also different insurance for short-term rentals.  You will need to furnish the properties and provide linens and be prepared for anything.

How are you going to differentiate your property from the thousands of others on AirBNB or VRBO? How far are you from the properties?  Will you have a good neighbor (like me!) who can call you when they notice a garage door open or sprinklers running all night or when 'strangers' suddenly appear at the house?  95% of the houses around me are 2nd homes or vacation rentals and fortunately, the local police know which homes are vacant and need extra watching.

Will you have a good alarm system or cameras installed?  Remote capability to set the thermostat or locksets is also good.  Get an inspection on everything.

Good luck!

Account Closed · Answer

@Belinda Lopez it's good to hear from you and thanks for the feedback and advice.

The property is on the bay side in Kemah, so I'm going to go ahead and assume Ike filled it with water. Definitely requires windstorm.

I like this property is because it is less than 10 miles from me and uniquely nestled in the center of Kemah's little village of shopping and dining. Very cottage-y too.

I worry about keeping it occupied consistently. The expenses will not be insignificant. My main concern is analyzing the financials on this.

Al Williamson · Answer

@Belinda Lopez gave some excellent advice. If you can differentiate yourself and or build some repeat client relationships, then your vacation rental will be an order of magnitude easier to manage.