I’m lucky enough to live in Arizona year-round. It does get warm in the summer, but we have beautiful weather for the bulk of the year. It’s one of the reasons that people from colder climates come to visit us. There’s hiking, biking, golf, and beautiful opportunities, especially January through April. It also creates a unique opportunity for us to offer vacation rentals. A common question I often get from first time investors and even experienced investors is – should I rent out my property as a vacation rental or a long term rental? There are different things to consider, and I always start the conversation by asking them to consider if they plan to use the property themselves. If you are going to use the property to get away from time to time, that will drive your strategy. If not, there are a lot of other things to consider.
Costs of a Vacation Rental
The costs of caring for a vacation rental will be higher than they are for long term rentals. When someone comes to visit from out of state, they want their rental property to feel like home. Utilities, internet, and television are all services you’ll need to include in the rent. When your property isn’t rented, you cannot turn these services on and off just to save money. So inevitably, there will be costs you have to assume that aren’t offset by rental income.
Your insurance costs will be higher with a vacation rental than with a long term investment. You’ll need to insure your personal items in the house. With a long term rental, you’re just insuring the structure and protecting yourself from liability.
Logistics vs. Strategy
One common pitfall for owners is they decide to rent out a property that is already furnished. So, they think that they don’t want to move it all out or store it or sell it. Rather than dealing with the furniture, they think it’s a better idea to just use the home as a vacation rental. Don’t let the furniture drive your strategy. Go back to the most important question – is it a long term investment or will you use it? You don’t want to make this decision based just on logistics.
Managing Your Resources
If you have one vacation rental and you want to manage yourself, there are lots of online tools you can use to get the place rented. You can try VRBO and HomeAway, which have good online tools and will help you market and book the home. But, keep in mind that you will need a lot of resources for the property when the place is not rented and even when it is. You need a cleaning crew to prepare for transitions between guests. You’ll need access to plumbers, electricians, a handyman, and a restoration company that you can call if there’s an emergency. Serious issues may occur, and you need to be prepared. So, have a good list of resources before you begin listing your property as a vacation rental. It’s not as easy as just getting it rented out. It has to be well-maintained. Consider working with a Scottsdale property management company, whether you decide to rent it out as a vacation rental or a long term rental.
We have a great online tool that can give you a 10-year cash flow analysis. This may help you decide if your best strategy is for a long term rental or a vacation rental. Do a cost comparison of what investment strategy will be best, and generate the best cash flow for you in the long run.
We are always happy to talk through the different scenarios. We can do a free rental analysis as well. Contact us at Keyrenter Premier Property Management if you need help with property management in Scottsdale.