The vacation rental market is growing. More people are traveling nationally and internationally with each passing year. Hotels have this monotonous sort-of uninteresting feeling about them. Vacation rentals on the other hand have a personal touch to them and offer visitors more freedom than a hotel does. And, they are often cheaper. This could be a great business to get in. A recent report suggested that renting out vacation homes can be almost 90% more profitable than a regular home rental. However, it’s always about risk-reward, right? There are things you need to know to run your vacation home business right to avoid getting burned. The responses to the six questions listed below will provide some answers for those new to vacation home renting.
1. Rule Number 1 – Get the right insurance
Homeowner’s insurance for your vacation rental property is essential. There is no questioning that. But just like vehicle insurance or renter’s insurance, there really are quite a few options out there. Choosing the right one can save you a lot of headache in the long run. And money too. The balance between premium and benefit in insurance is always a hard one to find. Determining your insurance needs is best done by consulting a number of insurance agencies, but make sure to prepare a checklist of questions beforehand. Insuring a vacation home is much more involved than a regular home. You have a new vacationer every week. You must be prepared to handle lawsuits from irate vacationers. You really can’t make everyone happy however hard you try. Strong liability coverage will help you sleep well. Don’t just sign the insurance paper as if it’s a necessary evil. Understand what you are getting into. If disaster strikes, you should know what you can get away with and what you can’t.
2. Marketing: Do this right. You don’t really have a choice.
Any business, but especially a vacation home rental must advertise to be successful and remain competitive. Online advertising has proven to be a key way of reaching prospective renters. In other businesses, people still use yellow books and word of mouth heavily. In vacation homes, most people are not from the same area so they don’t usually have the yellow pages and also may not know anyone from that area to get a recommendation. So where do they go? Google, Yahoo, MSN or AOL. That’s who they search to find a nice vacation rental. That can be a good or a bad thing. To turn that into a favorable thing, market online. Consult with a good search engine marketing company. Get a website for your vacation rental if possible. Get your home listed on multiple sites. Use other techniques like radio/print/TV ads as well, but to a lesser extent perhaps. If done right, internet advertising can get you ten times better results than other techniques for a fraction of the price. You really need a good online marketing company though. There are too many out there that don’t know what they are doing. It will help if you know some basics about advertising on search engines or have a friend or family member who does that can negotiate with your online marketing company.
3. Rental Restrictions: Be smart about this and avoid headaches.
You can stipulate certain requirements that renters must meet to rent your property. However, be careful not to make these discriminatory restrictions based on race or other such factors. That can get you into a lawsuit faster than anything else and you are almost assured of a loss. You can however set age limits, animal/pet, or smoking restrictions, depending on the jurisdiction that your rental is at. However, to avoid running a foul of the law, check regulations governing certain types of rentals. You can also change these restrictions periodically. Research the norm in your area. Often times, copying what other renters do in the area can be a good start.
4. Security deposit: Handle them carefully.
For vacation rentals, it is often a good idea to get a portion of the pay upfront as a deposit. Non-refundable or non-refundable is a question that you are going to have to answer. I personally like to keep smaller non-refundable deposits that I can deduct from the total pay. Often people pay checks that bounce. With a visitor every week you don’t really have the time to go after people if there are problems. To avoid making a loss, always cask the security deposit check. That’s a good way to know whether your renter is likely to pay the full amount.
5. Be clear and upfront about refundable security deposits
Many people also keep a refundable security deposit. If you do, remember that are only allowed to keep back the cost of the damaged item plus any fees associated with replacing the item. You can’t just withhold the whole security deposit if damages don’t equal the deposit. Be clear and upfront about this and keep all bills and receipts to prove why a specific amount was withheld.
6. Keep it clean
If done right, you can actually make a profit from this. Offer multiple options to your renters. No cleaning, full cleaning, partial cleaning. Also let them pick the frequency. Then based on that, charge them a markup over what you pay to your cleaners. There you go, now you have a cleaning service that you offer for your vacation rental and make money from it.
For many of the questions you’ll have, it is a good idea to talk to a lawyer who will assist you in drawing up a standard contract and provide guidance on local issues surrounding rental of vacation properties. Don’t hesitate in doing this. Just go in prepared for your meetings with lawyers and do as much work as possible yourself to keep the lawyer bills under control. These questions just touch the tip of the iceberg when it comes to starting a vacation rental company, but hopefully these will get you started!