Vacation rental - the second best way to use a property?

[Ken Latchers]

I am of the opinion the trying to do vacation rentals is no longer the best way to monetize a property. I am running an experiment with two buildings.

Airbnb and it's growth has strongly cause of decline in the bed and breakfast industry. Is my belief that in most places, vacation rentals will turn on each other with incredible Market saturation making it difficult to do well.

people talk about getting 20% annual return on a property in the Smokey's and elsewhere. And how great that is.

but a vacation rental dollar is not the same as a long-term tenant dollar.

3% credit card charge, software, insurance that can be two or three times more expensive and may be hard to get, the industry trend for listing sites to charge a commission to the owner such as booking.com at 15%, the fact that vacation rentals require self-employment tax, Linens and cleaners and maintenance people who have to keep it perfect, every possible kitchen appliance and coffee setups add toilet paper and soap and everything else, up to 30% to a property manager.

so maybe if you're lucky a vacation rental dollar is 75% of a long-term tenant dollar. So now you're 20% return is more like 15%.

not counting the increased restrictions by many municipalities, Market saturation by everyone jumping into the short term rental pool,  angst about reviews, unhappy neighbors, etc etc.

what if there was a better way? The more vacation rentals pop up the more demand there is for what I'm trying to do in some areas. That is the experiment I am currently involved in. No I'm not trying to sell anything. More to come.

[Wendy Fate]

Where's the experiment?  What are you "trying to do"?

[Paul Sandhu]

You know my story Ken.  I just rent to people working temporary jobs at a refinery with a per diem.  Is there any industry or market for something like that where your properties are?  If not, maybe you could sell one and invest in a market where something like what I do exists.

[Luke Reninger]

This post reminds me of facebooks ads. Lots of problems in great detail. Promises of a fix with no details. 

I’m waiting on the click funnel or online guru course to appear.

I say that in jest but am curious if you found another method of short term rental. By me, there is a large demand for 3-9 month rentals for contractors to the space center. 

[Ken Latchers]

Paul and Luke have the right idea. But you dont need travel nurses or refineries or contractors.

For example the one building has two townhomes I bought. Each was $67,500 in reasonable shape. When I purchased it, the five bedroom was going for 775 a month to someone who had been there for five years.

I can rent up to 3 bedrooms out without triggering the dreaded "rooming house" designation. So for that one, I am on target to make about 1,500 a month.

so making about making about twice the amount in long-term dollars not vacation rental dollars. 

when you peel away the vacation rental dollar cost, I'm probably making about 2.5 times the original rent.

[Michael Baum]

So how are you marketing the property? I remember reading in another thread that you were doing this.

For my area. That wouldn’t work. There isn’t the issues of saturation or rules and regs here. Curious to know.

[Ken Latchers]

craigslist, zillow, etc

[Ken Latchers]

The kinds of people I get are older women with grandchildren who just need their own space, people who sold their house and need a place until the new house built, get a contract with an IT company for 3 to 6 months, but some of them plan to stay a long time. Some people just don't have the nice furniture and they appreciate a place that's already set up including dishes.

the thing though is, it is a tourist area but also towns where the vacation rentals are growing any available rentals are shrinking. This would not work in the Smokies.

[Lauren Kormylo]

So you are supplying a furnished house, and utilities, so your expenses will be more than a LTR.  Will you require them to sign leases?   Keep us updated on how it goes.

[Paul Sandhu]

@Lauren Kormylo The price of utilites is factored in to the rent. The general rule of thumb us STR people have is to take the monthly rate for a LTR and make that amount the weekly rate for a STR. My 3 bedroom houses rent for $600/week. 4 bedrooms are $800. They cost around $10,000 to purchase and another $2000 for furniture and appliances.

[Ken Latchers]

They pay heat and electric