Earning a profit is the goal of investment property, so it makes sense to use it in a manner that will bring in the most money possible. Most properties are easily determined to be preferable as either a short or long term rental. The decision making begins when investors choose homes that could be a family home or a vacation rental. Waterfront property is a great example of this type of dilemma. Many of these homes are equally desirable to vacationers and tenants. Determining the best option involves many factors.
Understanding the Neighborhood
Zoning laws and the rules of any homeowner's associations determine what options many people have, but there is also the concern of what others living nearby may prefer. Making neighbors unhappy could lead to years of legal disputes and other complications. If neighboring properties are also rentals as opposed to privately owned and occupied it is much less of a concern.
Considering Personal Use
Are the owners contemplating a future bed and breakfast? Do they want a vacation spot for themselves, their family and friends? If so, short-term rentals are preferable to bringing in long term tenants. The property would begin to develop a reputation as a vacation destination and the schedule would allow people to use the home for themselves when needed.
Factor the Expenses
It is impossible to check the backgrounds of a weekend and weekly renter the same way a management service would a long term renter. This could mean more damage to the property when unreliable people visit. It is not always possible to recover those expenses and the cost of legal fees and property insurance could be much higher. In addition, vacation rentals require the owner to handle all maintenance and cleaning that is not always necessary when tenants are living in the property. Hiring a cleaning service, handling all rubbish removal and performing the yard work year round is the full responsibility of the owner. Vacation rentals also include the expense of consistent advertising.
Calculate Potential Profit
Vacation properties charge much more than residential accommodations. The monthly rate is often double or more than a typical rent. The concern is how long the peak rental season lasts. Is the home a potential four-season rental? Even if it is possible to keep it fully occupied all year it is unlikely that the same rates will apply in the off-season as they do when the area is in its highest demand. It is important to calculate the annual income expectation for both a long term and short term rental to decide what option offers the most potential.
Making a Compromise
A long term rental can mean renting for periods as little as six months. Corporate rentals appeal to local medical facilities, universities and other businesses in the area that use professionals for short contracts. These temporary employees are often given accommodations by the company requiring their services, and the rents the companies pay usually exceed the average for the area. They do this to ensure that better properties are available to entice talent to work for them.
Vacation rentals prevent the owner from being bound by a contract. It is a good solution for investors that are uncertain if they want to keep the property as a rental or live in the home themselves. However, if the owner is selling a home and wants to rent while it is on the market they will still usually benefit from choosing a long term tenant. There is typically less management needed and the lease agreement will include the termination of the lease if a sale occurs. Contact an agent, such as at CENTURY 21 Ryan Realty, for more help.