A home is a huge asset, but a second home in which you don’t reside in can be an income producing asset. If you know how to rent out your house as a vacation rental, you can generate a steady source of passive income. However, how much you earn also depends on the condition in which you keep your vacation rental. There are several other factors that we will discuss in detail below.
Let’s find out more about renting out your house as a vacation rental.
Understand Your Target Guest Clientele
You have to decide whether you want to have high-paying guests, or guests on a budget. Often times the property and location itself will determine the type of guest you recieve, so sometimes it is beyond your control.
If you have a modest apartment in San Diego, it may never be successful in drawing in people looking for a luxurious vacation rental. On the other hand, if the size and locale of your house has elements of luxury, you can soon turn it into a premium vacation rental generating you top dollar income.
It’s important to know that if you decide in favor of a luxury vacation rental, the initial cost would be much higher. There are several things you need to do to make your rental house more attractive and luxurious. When you are done with the upgrades, you can start earning from it. The great thing about luxurious residences, from the homeowner’s perspective, is that they can earn you anywhere from 2x to 10x more than a budget rental.
On the other hand, a budget rental does not require a significant upfront capital expenditure. You’d still have to spend some money to make it adequate for a guests stay, but the out of pocket expense should be nowhere close to that of a luxurious vacation rental. At the same time, your budget rental will earn significantly less profit than a premium vacation rental. So you have to decide is the investment worth the return on investment.
Budget Rental VS Luxury Rental
The first thing you need to do is figure out whether your property can qualify as a luxury rental. If it fulfills the location requirement, you are already one step ahead. The next thing to consider is size. A luxury home has to have multiple bedrooms and living rooms, if not more than one floor. A small studio apartment can rarely pass off as a luxury vacation rental.
On the other hand, a budget rental is much more flexible. Almost any residential locale is adequate for a budget rental and size is not that big of a factor. However, there’s a big advantage of budget rentals – attracting high-paying guests.
Those who opt for luxury rentals demand a lot more from their rental properties. Finding such high-quality guests in itself is a big deal. When you do find your target guests you need to make sure you maintain a level of luxury and comfort guests are used to.
For budget properties, the hassles are much less. Finding guests is easier, and you may spend more time rejecting guests when compared to screening high-paying guests. Maintenance and repair are much easy, and you can address any issues without spending a lot of money.
Pricing your vacation rental property correctly
Pricing is everything when it comes to budget rentals, but it’s also important for luxury rental properties. There are various things that you need to keep in mind while setting a price for your property. When it comes to luxurious properties, you can be much more flexible with your pricing.
For budget rentals, there’s a lot less freedom. It’s often a competition of pricing with other budget rental properties, and the lowest price wins. But if you sacrifice quality to pinch pennies, over time you’ll accrue negative reviews and a bad reputation.
Pricing according to locale
Where your rental property is situated is one of the biggest factors in determining its price. If your property is at the heart of the town or in a scenic location, prices go high. If it’s disconnected from the city center and does not offer a scenic view, the prices will go down. When the location is neither bad nor good, so is the amount you can charge for it.
There are many ways of looking at pricing. You can offer a low price for basic accommodation. Such an arrangement works fine for digital nomads and those who travel around the country without staying in one place for a long time. Often they just want a nice place to work from home with high-speed internet and a desk.
On the other hand, you can brand your property as a premium vacation rental. In that case, you’ll have to add fixtures and features that elevate the worth of your house. That means nice lighting, wall mounted tvs, best-in-class decor and colors, landscaping, and a lot more.
If you have a house at a premium location, it’ll be easy to brand it as exclusive and charge accordingly. In the long run, the initial investments will pay off handsomely.
Seasonal pricing
Most vacation rental markets experience seasonality, even 70 degrees and sunny markets such as San Diego. If you see a lot of demand at a particular time, do not be hesitant to hike the price of your property. In San Diego that is typically in July.
Similarly, off-season leads to lower rates. It’s a fundamental rule of all vacation rental properties across the world.
Pricing can also fluctuate depending on local events. If you have an upcoming event in San Diego that many people are going to attend, you can increase the price of your rental property. The economic principle of demand and supply should dictate the pricing of your rental property.
At Haustay Vacation Rentals we use dynamic pricing which tracks market conditions and adjusts prices accordingly.
Branding your rental property
With so many rental properties in and around San Diego, you have to be on top of your game to always have renters at your property. It begins with branding your property correctly and efficiently. A unique property web page, social media account, and a name – can help create a guest following. Without a brand, if your property is just “one block from the beach” your property does not have an identity and can be easily forgotten.
Decide on the vibe of your rental property
When we look at famous hotels around the country, not all of them follow the same branding principles. While some hotels cater to corporate tastes, others have a more laid-back, casual vibe. You have to first decide on what your vibe is for your vacation rental, and then plan accordingly.
If you want a premium, sophisticated vibe, you’d have to design the property accordingly. Make sure the paints and wallpapers are not faded or tampered with at any place. The next thing you need to take care of is the lighting and plumbing.
Lights alone can transform the interiors of a home. Understand the concept of primary, secondary, and ambient lights to give your vacation rental a sophisticated vibe. The same goes for bathroom fixtures. Premium bathroom fixtures look, feel, and work differently. It’s the same for kitchens, porches, and any other room of your house. If the fixtures are taken care of, your rental property will start to look and feel more luxurious.
Landscaping can significantly boost the value of your rental property, but it requires you to have the physical space. If you do have the space, landscape it by all means.
Give a virtual tour of your property
Almost all rental properties offer pictures of the property. But if you want to build a brand, you have to take it a step higher. Virtual tours allow you to make the most of technology to brand your rental property. It gives potential renters a complete idea of what the house looks like. On top of that, you can highlight the best features of your rental property while not focusing on the unattractive parts. Creating a virtual tour may require you to get some professional assistance at first, but it’s a one-time investment. It’s one of the best things you can do to promote your rental property.
Prepare your rental property before guests arrive
When guests arrive at your rental property, they should feel welcome. That’s the only organic way to build credibility over time. To do that effectively, you need to know what type of guests are coming to your property. You would have to prepare very differently for a family compared to people coming for a bachelor’s party. The first step is to know about the guests and ask about their preferences. Instead of making assumptions, it’s always better to ask upfront about your guests’ requirements and demands.
Another thing that you should keep in mind is emergency situations. Make sure that your house has smoke alarms, fire extinguishers, and everything else required to ensure safety. It’s also a good idea to list all emergency contacts at a designated place on your property. While you would never want emergencies to occur, they do not come with warnings. Being prepared is the only thing you can do to ensure safety at all times. When you are prepared for the worst, you can deal with most of the commonplace emergencies with ease.
Be clear on the legal side
From drafting an agreement to specifying inclusive and exclusive costs, renting out a property is not just about branding and marketing. There are tonnes of legal things to take care of when you are first renting your property as a vacation rental. There are different rules for residential rentals and vacation rentals, and your lease document should specify everything that the renter needs to know. If you do not keep the legal aspects clean, it will come back to you in the future. Unless you are a legal expert yourself, you would require professional assistance to manage the legal aspects of rental properties.
Communicate with your renter
If you want renters to know about a few specific things, tell them about it beforehand. Do not wait for guests to arrive at your property to tell them important things that they should know. The same rule goes for everything from pricing to rental terms and conditions. When you communicate everything in advance, renters do not have the chance of complaining or leaving negative reviews. It also builds a degree of trust and confidence between the homeowner and the renters. Communication is key when it comes to seamlessly managing your rental property and renters.This guide aims to help you lease out your house as a rental property. But we do understand that for a first-timer, doing everything on their own is not possible. In some cases, they do not have the expertise. In other cases, they simply do not have enough time. Getting in touch with a real estate management company is the simplest approach to renting out your property. It saves you a lot of time and hassle while keeping operations smooth. However, you must still know the ins and outs of your property to turn it into a successful rental property.
