Author Topic: VRBO vs Full time rental  (Read 3776 times)

Lulu0204

  • 5 O'Clock Shadow
  • *
  • Posts: 9
VRBO vs Full time rental
« on: June 29, 2016, 01:13:43 PM »
We are thinking about keeping our first home to use as an income property as we move onto our second home.

Said home is in a great location in a walkable neighborhood close to downtown. Is there such thing as a home being "too nice" to use as an income property? It was built in the 1880s and has been renovated and kept in great condition. It is a freestanding home with yard and garage as opposed to many townhomes/apts/houses with no yards in the neighborhood. It would definitely be a unique property with a lot to offer but I am afraid that it will not be taken care of as a rental.

Does anyone know if VRBO would be a better option? Or would that be even riskier for those just coming to party on the weekends? Would it be a better idea to just sell the property for a small profit and move on?

Details: House has a mortgage payment (including insurance and taxes) of about $1250 a month. We could probably rent it for ~$1800 a month.


MakeSmarterDecisions

  • 5 O'Clock Shadow
  • *
  • Posts: 99
  • Location: Upstate NY
    • Make Smarter Decisions
Re: VRBO vs Full time rental
« Reply #1 on: June 29, 2016, 07:25:27 PM »
I just wrote about something similar to this but we based our answer on our goals.  Have you thought through what your ultimate goals are? Many people have VERY nice homes that are used as rentals - but it all depends on what your purpose is (goals).  Also - can you tell us what the house is worth approximately? 

Lulu0204

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: VRBO vs Full time rental
« Reply #2 on: June 30, 2016, 07:31:08 AM »
I just wrote about something similar to this but we based our answer on our goals.  Have you thought through what your ultimate goals are? Many people have VERY nice homes that are used as rentals - but it all depends on what your purpose is (goals).  Also - can you tell us what the house is worth approximately? 

Thank you - I will read through that thread! In case I can't find it, will you send me the link?

The house is worth approx 250k. We are located in the midwest. I guess our goal would be to have some else pay off the mortgage while keeping the house in decent shape :) You are right, we need to think about that more!

Lulu0204

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: VRBO vs Full time rental
« Reply #3 on: June 30, 2016, 07:32:35 AM »
You could do a monthly VRBO (and many locations don't allow shorter rents) as a middle ground. Less rent probably but more likely to have a tenant who is in the area longer term for work rather than for partying. You have the added bonus of booting them out after a month if there are problems. However, unlike with a longer term lease, you may have many days or months where your place is empty and not earning anything. Personally I'd do a regular year lease and high screen the applicants.

I hadn't thought about monthly VRBO. We do live close to a couple of larger corporations that have executives stay for months at a time.

jnc

  • 5 O'Clock Shadow
  • *
  • Posts: 93
Re: VRBO vs Full time rental
« Reply #4 on: June 30, 2016, 07:50:16 AM »
Yeah the viability of a short term rental options depends a lot on your location. Are there big companies around, lots of conventions / conferences, etc.... Also will you be around to manage it, including all the turnover that comes with that?

A full time rental "may" be less of a hassle. The most important part would be screening the tenants. If you have really good tenants and set the right house rules and conditions, it should not be an issue.

Good luck.

TheGrimSqueaker

  • Handlebar Stache
  • *****
  • Posts: 2201
  • Location: A desert wasteland, where none but the weird survive
  • www.theliveinlandlord.com
Re: VRBO vs Full time rental
« Reply #5 on: July 01, 2016, 11:07:06 AM »
The place has a yard, therefore you must not VRBO unless your rent includes outdoor maintenance services, even if you're in an area that has short-term corporate rentals in large numbers.

If you're relying on visiting executives, the absolute last thing they're going to want to do on the weekends is push a lawn mower around. They're more likely to be back in their home cities visiting their families, or else putting in obscene hours at the office. For the most part, companies prefer to rent or lease condominiums or apartments for this reason.

I've had success with one-year leases with properties worth >200k. They're actually quite desirable for families on short term assignment. Post-doctorate students, consultants or auditors on one-year assignments, and people on the management fast track in the hospitality industry are all part of your target market.

Do not neglect high-end military officers who require a fairly upscale place to entertain as part of their job duties. They do not live on base and are seldom in the same city for more than three years. They frequently have SAH spouses (past a certain rank it's an unofficial requirement) and kids, but there's a culture of immaculate housekeeping and the SAH spouses compete with each other to see whose house is the cleanest. Having access to a yard for the kids would be a factor that tips the decision in your favor.

Lulu0204

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: VRBO vs Full time rental
« Reply #6 on: July 01, 2016, 11:57:56 AM »
I did not even think about military! We have a base about 30 minutes away.

I also did not think about yard maintenance. The yard (grass area) is small, there is a large patio off of a deck and a few landscaped areas. I think it could easily be managed with about an hour of work a week.

How does choosing a tenant work? Can we just choose whoever we want or are there discrimination concerns?

TheGrimSqueaker

  • Handlebar Stache
  • *****
  • Posts: 2201
  • Location: A desert wasteland, where none but the weird survive
  • www.theliveinlandlord.com
Re: VRBO vs Full time rental
« Reply #7 on: July 01, 2016, 12:39:55 PM »
I did not even think about military! We have a base about 30 minutes away.

I also did not think about yard maintenance. The yard (grass area) is small, there is a large patio off of a deck and a few landscaped areas. I think it could easily be managed with about an hour of work a week.

How does choosing a tenant work? Can we just choose whoever we want or are there discrimination concerns?

Study your state's Uniform Owner-Resident Relations Act. Everything you know is in there. In fact I recommend memorizing it not word for word but well enough to be able to answer the question "is X legal in my state" without having to look it up.

Since you're not sharing accommodations with this tenant, you may not discriminate based on age, gender, disability, religion, ethnicity, or anything else that would be forbidden if you were, say, interviewing people for a job. You may, however, discriminate based on income, criminal record, and rental history. With a military officer as a tenant, income and criminal record won't be a concern and your background check process may get a lot easier.

You can improve your odds of getting a military tenant by putting your advertising where they are likely to see it. Advertise in the base newspaper, and if you make use of an online classified ad, use military-friendly language. Including the words "military" and "family" would be wise. Emphasize the upscale ambience, the suitability for entertaining, and the presence of a small yard and patio area. Mention the number of rooms and the approximate location and square footage. Also mention your monthly rent and damage deposit.

Advertising a space for rent is like fishing (minus the negative experience for the fish). You bait your hook, you drop it in the water, and you wait for a nibble. When someone calls you to ask about the property, that's your nibble. It's the point at which you and the tenant start screening each other to make sure you want to continue in the business transaction.

Find out about your caller by chatting freely, and answer all his or her questions. Find out if they have pets, how long they plan to be in town, and when they expect to move into whatever space they want to rent. Get information about occupation and income (the officer's rank is the information you need; look up the relevant salary because it's public information). At some point, invite the prospective resident to come by, see the property, and talk about lease qualification which depends on sufficient income and a positive credit, criminal background, and rental history check. If you hear a "no thanks", then what you have is a misalignment of interests, and your property doesn't match that particular renter's needs. It's nothing personal.

When you meet, exchange ID and make sure the person you're talking to is who they say they are. If the tenants have provided you with references, you should have done your homework. Collect consent for a background check on all adults who will be living there if you haven't done it already. Have your lease on hand and be prepared to explain it clause by clause, but don't sign a lease until you get a thumbs up from the credit and background check and have called and verified each reference. Make sure you know the names and ages of everyone who will be living there. This is also how you establish yourself as someone who is proactive, savvy, and ethical enough to correctly hold up your end of whatever deal you make. Also, if you're trying to attract a military renter, the place should be immaculate.

clarkfan1979

  • Handlebar Stache
  • *****
  • Posts: 1921
  • Age: 40
  • Location: Pueblo, CO
Re: VRBO vs Full time rental
« Reply #8 on: July 12, 2016, 03:51:20 PM »
If your goal is to maximize profits at the expense of using your own time, VRBO. If you would like passive income that requires very little of your own time, then full-time rental. Year-lease at the very least.

earlycheckout

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: VRBO vs Full time rental
« Reply #9 on: July 20, 2016, 10:05:54 PM »
We rent out from a distance a very high end home worth about $650k (that we bought for $475 3 years ago). We gross about 75k a year on it. Have about 60 groups come through annually. Have only once had a problem (that was solved by keeping part of the deposit). It pays for itself and provides a great income.

We do 3 night min rentals and everyone has to be over 25 with ID. This solution has minimized people coming just to party (we learned from our very first booking which was a huge mistake).

Honestly we are shocked at how great everyone has been. We think a key that we keep it pristine (broken windows philosophy-- they know it would be noticed if damage done). And we go above and beyond and people seem to reciprocate. There is a big demand for nice houses that aren't of 'rental house' quality.

We hire a local individual who is a sole overseer of several houses. He provides a personal touch so our guests meet him and I think that goes a long ways too. We also find it way more cost effective to hire him (with a monthly retainer and payment per booking) than a 'management company'. He meets guests, and is there if anything goes wrong and calls in the repair people or his handiman, and he oversees the cleaners. We do our own bookings, communicating and selecting our guests which isn't much work for us at all.

We have a reliable gardener, and a pool person and a separate annual tree trimmer, and they just do their own thing and we pay them electronically. It is all very doable even though we aren't even in the same country!

Another thing we looked for was being within proximity to 8mil people (within a 2 hr driving distance) and being able to rent year round. Not always an option and may be entirely unnecessary for a less expensive house. But you can search the listings on VRBO and Airbnb to see what the going rates are, and what seems to have full calendars and when.

A few other tips if you go the short-term route:
1. Make sure short term rentals are allowed and get a sense of the political landscape around that issue.
2. Look at insurance. It has to be specifically for your kind of short term rental. Regular house insurance won't do. Look at the specific clauses. Proper is a great agency with a product from Lloyds of London that we really like (after shopping around).

Good luck!

« Last Edit: July 20, 2016, 10:17:22 PM by earlycheckout »

jwright

  • Bristles
  • ***
  • Posts: 267
Re: VRBO vs Full time rental
« Reply #10 on: July 21, 2016, 09:36:26 AM »
In our market, we have found short term rentals can generate much more gross revenues.  We pay a property manager 13% (well above a PM for long term rental), but they handle check in, check out, booking, housekeeping, and even act as a sort of concierge for income guests. 

Our area is saturated in 1 and 2 bedroom apartments for short term, but larger houses are in short supply.  We are also a tourist destination so have year round tenants.   

Do your research, but short term rentals are here to stay and can be a great investment.