If your second house/condo is in a an ideal location desirable enough to be a vacation rental, it's a great way to supplement your yearly income with not a lot of time commitment if done correctly.
So you picked out the furniture, all the appliances and properly working and you have had new landscaping put in. All set and ready for the cash to roll in? Think again. In order to make sure you are going to be making a profit and not just breaking even or worse losing money, you need to come up with a modestly estimated number of weeks you expect to your home to be rented and divide that by the total cost it takes to cover your monthly bills.
According to a survey conducted by HomeAway, owners who rent their second homes make, on average, more than $33,000 a year in rental revenue. Renting your second home just a few weeks each year could help offset some costs, such as your homeowner's insurance, power bills, or HOA dues.
However one on the downsides can be not having enough rental income to cover the cost of your mortgage and monthly maintenance costs. A great way to manage this is making realistic goals. Are you in this for the long haul? Could this be a mortage free retirement home for the future? Would it make sense to partner with someone to cover monthly costs?
One of the best ways to avoid not being able to cover the monthly costs is choosing a vacation rental property that can be easily rented. Here are a few things to think about:
- Does it have a HOA. Do they allow it to be rented? Will the rules change?
- Foreclosed house? How much will it cost to finish or remodel the property?
- Location, choose something highly desirable such as near a beach, sporting venue or university.
- Number of bedrooms. One bedroom one bath is easier to maintain and can be easily rented, but 4 bedroom 2 bath, can generate more income and be more desirable to families.
Choosing a location that is easy to market will save a lot of time when trying to book qualified renters. The second step to making a profitable return on your vacation rental investment.