Many of our clients anticipate purchasing a second home on the island here and having it pay for itself from vacation rental income. Nothing can top a real estate investment that pays for itself and offers you the luxury of a free vacation on the beach! Sounds too good to be true, and is it?
Maybe, maybe not. Like any investment, it is all about the numbers and all about the “sweat equity”. Personally we LOVE vacation rental properties as investments. Done right, they can provide outstanding appreciation as well as annual dividends and a great source of personal pleasure for our clients. Other than your primary home, no other type of real estate represents such a bounty!
Opportunities abound for great vacation rental properties in a market like North Florida. Potentially, the Saint Augustine market offers very lucrative returns. It offers a long beach season in the summer, good “snowbird” business in the fall and winter and the added bonus of “historical tourism” the rest of the months, offering a fully balanced calendar of events to even out potential seasonal downturns. But, it is an investment not without occasional pitfalls. Let’s look at some of those:
1. You have to have the mindset that your home is not your home.
If your “second home” is going to also function as a “vacation rental property” then it is business and with that comes challenges. Most holidays and high rental times such as three day weekends will be high income periods. You will have to resist the temptation to use your home yourself during those periods and instead, maintain some flexibility to use your rental last minute when it is not booked. Do you have that kind of schedule and discipline?
2. The best choice is not always the more luxurious or the home you love the best!
Although ocean front properties appeal to buyers, they are not always the best rentals! THE ROI on those homes may not be better than a lesser priced home that can appeal to more vacationers. Remember shopping for a proprietary second
home is not the same as shopping for a second home that can also function as a vacation rental and represent a great ROI. You have to determine at the outset what your goal really is: Is it a just a second home, or a second home that can be a great ROI?
3. Get professional help!
Many second home owners think that they can function themselves as the vacation rental manager. Many can. Most find, however, that the time, money and energy required to book just one property successfully is….hard. You get tons of inquiries for peak times and then struggle with the off periods. Some people think you can make the money with the peak times. Wrong. You will typically need to even out your bookings to really find a healthy ROI on your properties. Find a good property manager, one who lives locally and understands your property and is not encumbered with too many properties. We hear a lot of frustration from vacation property owners who feel their property is under-booked because their property manager has too many properties to book. Ask around, call around and find a professional who can give your listing the time and attention it deserves. We discuss this more in our blog “Why is my property not booked??!”
4. Make your property stand out of the crowd.
Too often buyers think that they can retain the same décor as when they purchased the unit. Updating is important but more important is a casual, clean and tropical décor. People want something they do not get at home. In lower end rentals(under 1,000 a week) you can get by with less luxury but you need a “fun factor”. Your property manager should be having professional photos made so ensure your rental is ready, free of personal items and offering something different. Remember, potential vacationers are looking through scores of properties for something that represents a departure from their everyday life. Again, your property manager should be able to assist with décor and even small renovations to enhance bookings.
5. Use your vacation time to reflect on the potential of your second home as a rental property and do something to improve that fun factor!
Spend a week at your property and shop for a new piece of artwork, update linens or dishware! A goal would be to leave it better than you found it. Put yourself into the shoes of your vacation dweller and find something you can do to make your home more exciting.
Owning a second home as a vacation rental is a continually evolving process and one that can bring enormous rewards. For more information about the process or the potential of a second home turned vacation rental, call BEACH STATE BROKERS at (904) 415-8489.