The travel website TripAdvisor reports that almost 60 percent of Americans plan to stay in a vacation rental in 2016. That is up from the 52 percent who planned to stay in one last year. If you ask people about their most enjoyable vacation, most of them will describe a time they stayed in a home or condo for their trip.
Vacation rental properties on sites such as AirBnB.com and VRBO.com have many benefits for the renters. They get more space, more privacy and a better opportunity to relax. For those few days, it is really their home away from home, and they can often save money by choosing a vacation home over a hotel.
If you are an investor hoping to capitalize on the vacation rental boom, keep these points in mind.
Largely unregulated industry
Most municipalities only require landlords to comply with standard building, health, and housing codes. This means renters may have a very different experience from one vacation rental to the next. Most people plan their vacations on the computer without having ever been to the destination. They can be misled by the online photos and description. When they arrive at a property that has not been cleaned and is infested with pests, they have little recourse and a difficult case to make for any financial compensation.
While you are going to be a good landlord who maintains your properties and provides an excellent experience for guests, you could also be a nice target. There is indeed a vacation rental property boom going on currently. Many people are making big money in this largely unregulated area. Legislatures, the courts, and local municipalities are looking to make an example out of opportunistic landlords and management companies. With some uncertainty about coming regulations for vacation rentals, you can’t accurately predict your operating expenses.
There may be high fees and other required expenses that cut into or eliminate your profits on vacation properties.
Know your operating costs and competition
Along with the high numbers of potential renters comes competition from practically anyone who has a home they are willing to rent for a few days. Your operating costs as an investor for things like property taxes, insurance, security, housekeeping and maintenance are higher than homeowners looking to make some cash by renting their primary residence. You’re still competing with the hotel industry at the same time.
Despite all the negatives, vacation rentals can still work if you approach them cautiously and with thorough research and patience. Managing vacation rentals is not a simple as it appears on the surface, and it might get more complicated and costly with new regulations.
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