How do vacation rentals work?
Renting your second home makes affordability much easier. Thousands of dollars each year can be earned to offset the mortgage or other vacation home expenses. Here’s some information about vacation rentals that will help you when thinking about buying a vacation home on the OBX.
When a property is a vacation rental the listing agent has a few additional fields they can complete showing rental income. Many of the national real estate web sites do not carry these minor data entry points that are unique to our market so looking at listings from a local Realtor’s web site can help you get good rental information quicker.
The income number found on local Realtor’s sites could be actual numbers or an estimate from a property management firm. The listing agent will receive a report from the property management firm that shows the last name of the tenant, their vacation period and what they paid. Usually this report shows when the owner reserved the house as well. Total income is listed at the bottom. Most Realtors upload these reports to the back end of the MLS system so other Realtors help you compare each cottage. Some Realtors also offer a vacation rental spreadsheet to their client to help them compare each cottage.
What are the fees like?
Vacation Rental management fees vary greatly depending upon the company and rent ability. Some charge as little as 10% of the rental income for a huge ocean front home that generates hundreds of thousands of dollars a year. If the cottage is a modest home away from the ocean then the property management fee might be as high as 25% of the rental income. For these fees the property management firm typically does the following:
-clean and inspect the house after each tenant
-advertise and book the cottage
-provide and collect keys for the tenant
-handle any maintenance issues with the property when the tenant is there
-handle all the money including security deposits, occupancy taxes and rents
There also is likely to be a few fees associated with renting the property that either the tenant or the owner pay. Providing linens is a good example of one of these fees.
When considering a purchase it is a good idea to talk with a property management firm about the property. They can give you a better idea of what the net income will be. Also they can make suggestions to increase rental income. Choosing a property management firm is not as simple as it seems. Scott Team Realty can help you compare companies to determine which company will be best for you and your vacation rental home.