Have you ever been on vacation and thought, it sure would be nice to own some property down here? Well, that’s the subject of today’s podcast, as we speak with vacation rental property owner Scott Sutherland about how he’s built a profitable business owning and managing his vacation rental properties.
You’ll learn the step by step process for finding potential properties and analyzing them for profitability, as well as financing ideas and tips on managing the short-term renters. Whether you’re already in this real estate niche or you want to get your foot in the door, we’re confident you’ll get some new insight here. Don’t miss this exciting episode!
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nted to give a shout out to our podcast sponsor on today’s show: RealtyShares. RealtyShares is a crowdfunding platform that allows you to invest in professionally managed properties without leaving your living room!
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In This Episode We Cover:
- How Scott got started in real estate investing
- His story of taking time off
- Thoughts on choosing between stocks and real estate
- The concept of control in real estate
- How to get into the niche of vacation rentals
- Strategies for properties that don’t typically cash flow
- What exactly a vacation rental entails
- The ins and outs of vacation rentals, including pros and cons
- How to market your rental property
- What you should know about tenant screening on vacation rentals
- And SO much more!
Links from the Show:
- Trivia Email
- Brandon’s Forum Post on Vacation Rentals
- BiggerPockets Forums
- Evicting Renter from a Vacation Rental Property
- BiggerPocket’s The Book on Investing in Real Estate with No (and Low) Money Down
- HomeAway
- VRBO
- AirBNB
- alexa.com
- 99Designs
Books Mentioned in this Show
- Rich Dad Poor Dad by Robert T. Kiyosaki
- The 4-Hour Workweek by Timothy Ferriss
Connect with Scott
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18 Comments
Great show! I listened intently since I have a vacation rental. You may want to reconsider Orlando as your vacation rental location, though. It is FLOODED with listings (I know…I have one near Disney). You can always do some research by searching the available listings on vacationrentals.com, vrbo.com or homeaway.com. Choose your destination, and see how many listings come up. You can of course filter those listings down, but this gives you a good idea of what is available in a particular city. You can put in dates of peak seasons to determine how swamped the market is. If not much is available or it looks they are always booked, then you may have a good chance of doing well in that market. Of course, it would be good to have homes in areas that you want to go often. The IRS says that you can stay in a vacation rental property 10 days or 10% (whichever is greater) for personal use, without having to eat some of the expenses.
Thank you for the IRS tip:)
We have a second home on a lake an hour away from my permanent home. I use that second home when I do temp work in that town. Been thinking about making this a vacation rental but was worried about IRS problems doing both. Sounds like it would be more beneficial to use it for both?
Josh, Brandon,
Two words, couples therapy!
Scott,
Great vacation rental info! I ran the numbers in my area (Santa Ynez, CA), spoke to other vac owners, did a test AirBnB add, and it seams that it would take about 1 year before I bring in more than permanent rent. After that, I would get maybe 2x to 3x more than permanent rent at about 50+% occupancy. Is the method: make the customers happy any post testimonials? Or, Is there some kind of marketing or other that would speed up the bookings? I’ll have to wait until my renters move out to try…
Scott. This is great info! I also get started on airbnb renting out rooms in my personal resident and got really excited. We are coming into Austin for the MotoGP event April 10-12. Not sure if you are in town, Lunch is on me!
Thad,
I’d recommend hosting some friends at the rental and having them write some reviews to kick things off. Then run some pricing specials and offer a small gift (Starbucks card, etc) for additional reviews.
Make sure you buy the platinum package if you use homeaway. It will move you up the rankings and pays for itself very quickly.
Good tips!
I’m so glad you covered this topic on a podcast, and Scott thanks for sharing your experience. My end goal has always been to have a network of really unique and fun vacation rentals but I’ve struggled to figure out how to write a business plan around it. This was helpful in refining the metrics to look at.
To Brandon’s question about getting started with VR’s for under $100k, absolutely! I did it in Denver, bought a condo last year for $90k and I cash flow about $1000/mo while still obeying all my HOA rules etc since I do 3-4 months stays. I wouldn’t have dreamed it was doable but i gave it a shot and it worked out wonderfully.
Being a vacation house renter myself, I’ve always been intrigued with the VR market. Of course anytime I thought about it, for the location where I like to vacation. Of course properties are very expensive there and it is far away for me (Southern Florida to my New York)
Your suggestion of renting near one’s home really opened my eyes. And got me thinking. I live in a very tourism-centric area, albeit seasonal, but I always took it for granted. Now I’m looking at all the properties around here with a different set of eyes.
Also, I’ve always wanted to get into buy-and-hold but I cannot stand the thought of being a landlord. Being a virtual innkeeper is much more my style.
I’m thinking of the different tourist centers near me and I have this question for you…
What’s the furthest away you would recommend a property be from my house? 30 mins? 60 Mins? Closer?
Thanks for great idea!
Distance from home is a personal decision. I’d say as close as possible. But you still need to be operating in areas where visitors like to stay (near the action). The more properties you operate, the more important proximity becomes. I have one property up North (30 minutes) and it consumes a bit more time and money than the others since I have to plan my trips around traffic and will often pay for services that I’d normally handle myself.
Hope that helps.
Very interesting podcast! I have been looking at vacation rentals in the Dallas/Fort Worth area on VRBO/AirBNB and it seems like almost nothing has more than 10 days a month booked. I would think that DFW would be able to support a fairly vibrant vacation rental market, so I’m a little at a loss. Any tips on further researching occupancy other than looking at calendars on the vacation rental sites?
I grew up in Dallas and I’m familiar with the culture there. I’m not sure if Dallas visitors are as VR progressive as in other towns, but don’t let that discourage you. If you’re in a good location, keep your rates competitive, take great photos, get good reviews and pay for a platinum membership with homeaway, you’ll stack the deck in your favor.
You might also find a VR property manager in Dallas and pick their brain on occupancy trends for their properties. Take it with a grain of salt given their motivations, but still good information.
I’d say take the leap and if the returns are not what you’d hoped after a few months, you can always switch it back to long term rental or make the rate really competitive for monthly rental and rent it furnished for $500-$1000 above market rate. We get 2-6 month rentals on occasion from visitors on temporary work assignment or new residents waiting for their new home to be built or close.
We typically spend about $3K-$5K on furnishings and outfitting a property. It takes us about a month to equip them, photo them, and get our first booking.
Great info Scott, thanks for sharing your story. Very helpful to hear.
This was a great podcast! Scott, thank you for your knowledge on this niche. It was enlightening. I’m looking at AirBNB differently now!!
Scott–a topic not touched on this show–what do you think about time shares? Is it really worth the $$ and a good investment long-term? We recently bought one (in VA Beach) but we may be having buyers remorse. We trade in our wks and can go anywhere around the world (via Interval) for 2 wks a yr, can delay it and not have to use it every yr. etc, but all these yearly maintenance fees, etc. and having to book way in advance may not be ideal for us. We’ll see once we’ve actually started using it…
Awesome podcast with Scott, A lot of guys here locally have been looking for vacation rentals, so heavily considering investing in some high class property, as it’s close to impossible getting short term rentals here.
From my Virtual Assistant business, we also have several clients where our VA help’s manage the holiday rentals, so doing conversations with customers, arranging dates, organizing cleaning, handyman when required, snow plows (some clients have ski resort property).
Just to point out that while it “takes more time” to manage this stuff there’s also companies that can help with this sort of stuff, similar to normal property management.
Hello Scott what do you recommend for newbies in the VR business? we don’t enough capital or credit to do a mortgage. Would you recommend sublease other local rentals? and how would you go about this? I know that’s a loaded questions but any info would be greatly appreciated thanks.
Scott,
Great Podcast and one of the few I have listened to twice. One questions…
What percent of VR’s leave you feedback (1 in 10, etc). Anything you do to increase this number?