Thursday, February 2, 2012

How To Purchase The Perfect Vacation Rental Property

     When selecting a vacation rental property, as an investment or as the place you would like to retire someday, you need to do a little homework prior to making your purchase.  Too often I get a call from someone looking for a vacation rental manager and I have to politely tell them that I won't be able to manage their property.  There is usually a bit of silence and then I get the "why not?"  Usually they got a great deal on a property in a horrible location or they found the perfect property for them, but one that is not desirable to vacationing guests.  I have even received calls from buyers who purchased in an area that has restrictions against nightly vacation rentals.  Those people owned homes they couldn't even rent!  So to avoid buyers remorse here are some steps to take to ensure that doesn't happen to you.

     Here are four essential questions that need to be answered prior to making your purchase and above all ensure that you do your home work.  

A great view is a must!
1.  What is the best location for rentals?

2.  What type of property rents the best?

3.  What amenities come with the property?

4.  How do I select the right Real Estate Agent?

What is the best location for rentals?

     Finding the right location is essential.  Having a great home or condo in a terrible location will not bring you renters.  In fact having a terrible home or condo in a great location will bring you more renters than the great home in a bad location.  

     So how do you find just the right location?  Do some old fashioned footwork and investigate the area where you are thinking of buying.  Make a few phone calls to vacation rental companies and ask them which locations are the best for rental properties.  At the same time you can inquire about their services and they may even have some properties that are up for sale.  Visit some vacation rental websites and see where most of the rentals are located.  That is usually a good indication of the best areas for rentals.  Then look to see how close the attractions, restaurants, grocery stores, gas stations, etc. are to your chosen location.  You might also call the local Convention and Visitors Bureau or the Chamber of Commerce and ask them if they could suggest anyone in that area that could help you out.

Curb Appeal Lake Style
What type of property rents the best?                                              

     After selecting the proper location this is the next most important question to answer.  A lot of mistakes are made at this level of the selection process.  This can be the make or break decision.  You've found the perfect location and then you purchase a property that is not very desirable to renters.  Again you need to do your homework prior to making your purchase.  What size home or condo rents the best?  Does the layout matter?  Does it have a great view? Finding the answer to these questions can significantly increase your rentals.  I will use our area as an example.  Our community is situated on one of the largest man made lakes in the United States.  Most people who come here to vacation visit our area because of the lake.  Yet I get calls from owners wanting us to rent their homes and condos that are not located on the water.  There is a very limited market for that type of rental.  Most renters want a home with a private dock or a condo with a boat slip and a great view of the water.  Anything else just isn't going to rent very well.  

     So how big of a home or condo should I buy?  Obviously what you can purchase will be determined by how much money you have to invest.  Do not buy a property that you cannot pay for without counting on the rental income.  I must stress this, if you are counting on the rental income to make your payments, don't make the purchase.  Again I have seen owners have to sell there rental homes because the income wasn't enough to make their payments and they couldn't afford the home or condo otherwise.  In this day and age you cannot count on the economy and there are always ups and downs.  Be prepared for those times when there may not be enough rental income to make your payments.  Most properties will pay for their upkeep, maintenance, taxes or assessments, etc. but may not make a profit or show income until the property is paid off.  
A hot tub on the water

     At the Lake of the Ozarks, the bigger the better when it comes to vacation rentals.  The bigger the home the more rental nights you will receive and the more you can charge.  The average price in our market is approximately $100.00 per bedroom per night.  You would then add or subtract depending on amenities and how nice the property is, the location, how many it sleeps, etc.  Four and Five bedroom (and larger) homes rent the best in our market.  When it comes to condos it is a little different.  One and two bedroom condos usually rent for more nights than a three or four bedroom condo, but there are exceptions.  Here it seems that those that rent homes are a different crowd than those that rent condos.  The home renter wants more privacy and a private boat dock while the condo renter is about location and the pool.

     We have had homes on our program the bring in $30,000 to $50,000 in gross rental income in a year (and our main season is only Memorial Day through Labor Day) and condos that will gross anywhere from $9,000 for a one bedroom up to $17,000 for a four bedroom unit.  Those are the best renters, the ones who keep their properties updated and have great locations.  These numbers are based on properties that are seeing 50 to 100 rental nights per year.

     Determine what the vacationers visiting your area want and need in terms of size, view, sleeping accommodations and layout of the property.  Many times a group will want separate family and sleeping areas, two levels, extra bathrooms, etc. that make for a more comfortable vacation, especially when two or more families are involved or when every body's favorite relative is along.

A pool always helps
What amenities come with the property?                                    

     This is another area that you need to pay special attention to when purchasing your vacation rental property.  Just because you don't need an additional private bath, separate family area or a garage, your guests may want and need those amenities.  Recently I shared some statistics with a group of 30 condo owners at a complex that my company manages their vacation rentals.  The units that had king beds in the master bedroom averaged twice as many nights as the units that only had a queen bed in the master bedroom.  The average nights for the queen condos was 20 nights per year and the kings averaged 40 nights.  At an average of $150 per night that is a $3000 difference per year, over the size of the bed!  We also get requests to be close to the pool, a T.V. in every bedroom, a bathroom for every bedroom, wifi, large boat slip, great view, 2 car garage, etc. etc.  So it is a good idea to do your homework and find out what visitors to your area want and need.  

     Another example in our area is guests bringing boats.  They need a place to launch their boat, park their trailer (most condo complexes don't allow trailer parking and don't have a boat launch) and a spot to dock their boat.  If you buy a condo without a boat slip you ultimately miss out on the 25% of guests that bring or rent a boat while vacationing at the Lake.  Also if your complex allows trailer parking or has a boat launch the guest can use, then the guest is saving time and money, a plus for any rental situation.

Selecting a Real Estate Agent

     When working with a real estate agent you want to ensure that the agent you choose has experience with vacation rental properties.  They need to know (especially at the Lake of the Ozarks) which areas and condo complexes allow nightly rentals and which areas have restrictions against them.  They also need to know which areas are the most popular and have a good general idea of what a desirable vacation rental property looks like.  

     You don't want an agent just looking to make a sale, at your expense.  At least find an agent that works with vacation rental companies that can answer your questions.  We work with three or four agents in our area that have some knowledge of the industry and once they have an interested client they allow us to work with them to help them through the process.  Even if we don't end up managing their property we still want to help buyers through the process of selecting a property they will like and one that will provide for maximum vacation rental income.

If you need help

     Please feel free to give us a call if you are looking to invest in a vacation rental property at the Lake of the Ozarks.  We will be glad to assist you and there will be no obligation to let us manage your property.  In fact we often refer clients to other vacation rental companies if we feel they would be a better fit with that particular company.  If you are just starting we can help you determine the best type of property for your purchase and we can refer you to the top real estate agents in our market.  

     We currently manage more than $25,000,000 worth of vacation rental properties here at the beautiful Lake of the Ozarks and have served close to 120,000 guests in the last 26 years.  Our professional staff includes a licensed real estate broker, interior designer, rental sales staff as well as resources for maintenance and housekeeping.   We have logged over 50,000 rental nights since 1986 and are one of the leading and most respected vacation rental companies in Central Missouri.

     To view videos of some of our properties please click on the links below.  Until next time, have a great day and Happy Renting!

Key Largo Vacation Home

Ridgewood Court Vacation Home

Bridge Point Vacation Condo

Friday, January 13, 2012

Five things to look for when booking your next vacation rental property

There are five essential questions that you should ask and be able to answer before booking your next vacation rental.  After you have picked your destination the real work begins.  Here are the five essential questions that you need to answer;

Copper Ridge Condos
Lake of the Ozarks
What is the best location at my chosen destination?  
What amenities do I want?

What happens or who do I contact if I have problems?

What is the cancellation policy?

What if something gets damaged?

Location:  Just because you know where you want to go doesn't mean that you know the best location at that destination.  How many times have you ended up farther away from the attractions you wanted to visit?  In a bad neighborhood?  Stuck in a property with no view?  To avoid this and find the best location at your destination you need decide on what you will be doing while on vacation.  Are you just hanging out at the beach?  Are you going to visit the attractions?  Going boating, water skiing and enjoy lake or water activities?  Once you decide on what you will be doing, look at a map and find the best location that will give you the easiest access to the things that you want to do.  Here at the Lake of the Ozarks in Central Missouri we have a lake that stretches almost 100 miles.  Many vacationers don't realize just how big our lake is and invariably they end up booking a property away from most of the attractions and I hear something like, "It had a great view" or "The price was right".  The problem was that most of the activities, restaurants and water destinations on our lake are between the 1 and 22 mile markers.  Yet this person ended up renting something above the 30 mile marker, which also takes over an hour to drive to the area where all the attractions, shopping and restaurants are located.  So make sure you ask those types of questions; how far is it to the things you want to do, are there any restaurants close by?  Don't put a damper on your vacation by booking the wrong location at a great destination.

Key Largo Home
5 bed/5 bath
Lake of the Ozarks
Amenities:  What are the most important things that you want while on vacation?  Maybe it is a King bed, maybe a separate bathroom for each bedroom, a dock or water access close by, walk-in unit, a garage, a pool table, satellite or cable TV, etc.  The list could go on and on, but narrow down the make or break amenities that you have to have and then look for properties that fit that description in the location that you have chosen.  You may have to give up a little location to get your amenities or some amenities to get the best location.  Either  way it is best to ask these questions, especially if it is not spelled out in the property description.  Also you may want to probe a little deeper.  For instance the description might say that the home features a two car garage, but the owner is using one of the garage spaces and it is unavailable.  Also some people cannot decide if they want a home or a condo.  Here are the basic differences, at least here at the Lake of the Ozarks.  With a home you will have a little more privacy, private boat dock, usually a little more room and usually more parking spaces.  With a condo you will usually have some extra amenities that most homes don't offer, a community pool, tennis courts, a playground for the kids and security.  Figure out what you want or what you need and then ensure you ask the right questions and get the amenities you desire.

Problems:  What happens when you don't have any water?  When the refrigerator quits working and your food is going to spoil?  The AC goes out on the hottest weekend of the summer?  Or the toilet is over flowing into the bathroom?  All of these things can and do happen.  So who ya gonna call?  Not the Ghost Busters, you need real help and real fast.  This is where choosing a reputable vacation rental company or going with a private owner can make a big difference.  Many private owners don't have the resources to respond quickly or adequately to potential problems.  Sometimes it's a neighbor who looks after the property for the owner who lives out of state.  What if the neighbor isn't home or really doesn't know what they are doing?  Usually with a professional rental company, while you will probably pay more for your rental, you will also have greater piece of mind.  Most rental companies have maintenance staff, housekeepers and access to professional repair personnel if needed.  My company retains three different AC/Heating companies that can be called 24 hours a day for repairs, three maintenance workers to take care of small problems and more than 10 housekeepers that can respond if you have a cleaning issue.  The old adage, "You get what you pay for" is also true in the vacation rental business.  There was a time when I held a flashlight at midnight for the AC repairman so that he could repair the wiring in an outside unit to provide guests some cool AC during a rather humid Lake of the Ozarks night and another time that me and my staff delivered water to many guests at a condo complex when a pipe broke and due to a boil order they were without drinking water for a day.

Cancellations:  Something comes up and you have to cancel your vacation.  Believe it or not this happens more often than you would think.  Over the years I have heard just about everything, some legitimate and some not so legitimate.  From a death in the family, to kids sporting events, to a broken leg and unscheduled surgery.  It can happen and you need to be protected just in case.  Again when you rent through a private individual, you may save some money, but you are usually at the whim of the property owner.  Most vacation rental companies now offer Vacation Rental Insurance.  You can purchase this insurance for a small percentage of your trip cost (usually 6.5% to 7%) and you are covered for most legitimate reasons.  If you just decide that you aren't showing up, well that isn't covered.  We use CSA based out of California and they offer insurance that is very similar to what cruise lines offer.  Most vacation rental companies have very specific cancellation policies and most are willing to work with you when something comes up.  At the end of  this blog is a link to the vacation rental insurance that we offer our guests.

Damage: Your tripped over the lamp cord and broke the lamp, now what do you do?  Or you dropped a glass on the glass topped end table and both shattered.  Most private individuals and vacation rental companies require some sort of damage deposit.  They will get the item fixed or replaced and deduct the amount from your deposit.  In some cases the deposit can be anywhere from $300.00 to $1,000.00 depending on the type of property rented.  We stopped taking damage deposits in 2005.  Basically we were losing good customers.  They had an accident, didn't mean to break something but were upset when we deducted the amount from their damage deposit and they didn't rent with us again.  We figured that whatever the cost of the lamp was, it wasn't worth losing an otherwise good guest over.  Also we were finding things glued back together, hidden under beds, in closets, or just plain missing.  And we were not sure who to charge or had already given the deposit back.  In 2005 we switched to charging a damage waiver fee or what we now call our damage protection plan.  A guest can pay a small one time, non-refundable fee and it covers them up to specified amount of damage protection.  In our case we charge $35.00 and our guests are covered up to $3,000.00 in accidental damage.  Last year we had a boy run into (literally) a sliding glass door when he was trying to get a toy he had left on the deck of the condo that his parents were renting.  The boy was fine, the sliding glass door was not, one of the panes cracked and it cost just over $300.00 to replace.  The dad called the office, apologizing and offering to pay for it and I told him, "Hey, you are covered by our damage protection plan, there is no more cost to you."  To say the least, he was very happy!
Now if a guest throws a TV off the deck into the lake, then we are charging the guest.  So be sure to find out what the damage policy is, who is responsible and if they require a damage deposit or have some sort of damage protection plan.

If you plan accordingly and cover these five areas you should have a much greater chance of actually enjoying your much deserved vacation.  Now if only the weather will cooperate!  Have a great day and enjoy your vacation wherever it may be......

Russell Burdette