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Buying a vacation home and rent it: Does it produce ROI?

We have plenty of statistics showing us if a vacation home still is a good investment. I.e. let’s take a look at the Tourist tax received by Lee County over the last 12 months:

This is a look by the end of September and therefore right before the season kicks in again: We had the highest income taxes paid since 2012 in the month of September. Take a deeper look at more statistics and numbers at https://www.leeclerk.org/records/statistics That looks promising.  Even all the months before, we had higher income taxes than in previous years. Although, the numbers only went up slightly to a little over 42 Million because there is another issue: Not everyone is honest and reports their rental income. Therefore the numbers aren’t’ 100% correct. But take a look:

But as usual, here comes the “it depends”

In this case, it depends on what kind of home you offer for rent. As always “Demand” and “Supply” regulate the market. And what I’ve ALWAYS said to all my buyers was confirmed again: The bigger the home, the more often you can rent it. In this particular case “Size” matters…… But the size is about the number of bedrooms.  ( What did you think…:-) ? Look at the numbers:

At the beginning of November there were:

  • 744 homes for rent with 3 bedrooms
  • From them 408 offered a pool
  • 351 are offered as vacation homes
  • Only 254 homes are offered for rent with 4 bedrooms or more
  • From them, only 149 offer a pool and only
  • 125 are offered as vacation rentals
Room for rent by Alex Block

This means we got about 65% fewer homes with 4 bedrooms or more for rent.  I rest my case: Demand and supply always work. Although I have to agree by far not all vacation homes are listed in the local MLS. But I did the same check on the usual websites where customers look for vacation homes. The numbers are pretty much the same. 

But there are other factors that decide if you get more bookings. Here is my conclusion about renting vacation homes for the last 15 years:

  • 3 bedroom homes get fewer bookings as homes with 4 or more bedrooms
  • 3 bedroom homes on any kind of waterfront get more bookings than 3 br off water homes
  • Homes with a bigger pool area get more bookings than homes with a small and boring pool area
  • Homeowners allowing kids and bigger groups to rent get more bookings
  • Homeowners who allow pets get a LOT more bookings as owners who deny pets
  • And the most bookings by far get homes offering a big pool area, at least 4 bedrooms, located on any kind of waterfront and who allow bigger groups and pets. Period!
Dogg with style (instagram.com/toshi.dog/) by Charles 🇵🇭

Do I hear a few complaints? Like pets are dirty and require a higher cleaning fee and the more people the more damages occur? All wrong. I rent homes since 2004 and until now I only had damages when renting to kids, but NEVER when renting to tenants traveling with pets. The opposite is true: Travelers with pets take great care of the homes. We had guests where we could not find anything to clean after they had rented a home for 4 weeks with 4 HUUUGE dogs. It was spotless. This happens often.

Pet owners don’t have the same amount of homes to choose from. Most owners are still concerned about the rumor of damages and hairs from the pets they might find. Crap. These tenants are happy to find a home and they have no problem to pay a higher cleaning fee and deposit – just in case. And they usually come back year after year. I have one home that’s already booked for March 2022!! They own 2 dogs.

I still hear some nagging: Yes, bigger homes are usually a little more expensive. I agree. But what sense does it make to save a few 10K and then sit on all these expenses cause nobody wants to rent the home? Tenants are supposed to pay your mortgage and expenses – right? I have one particular home that is ONLY rented during the season and sits empty for the rest of the year. And no: It’s not ugly – the opposite is true: It’s a lovely 3 bedroom off-water home in a good location. And this home has a lot of competition all facing the same problem: They badly need more tenants to cover for all the expenses such a home usually requires. The only solution they all come up with is to lower the rent. My suggestion: Don’t do it. It’s a bad idea. You often get what you pay for. In this case, you are attracting the wrong crowd. Teenagers traveling in big groups aren’t used to treat your investment with the necessary love and care. We’ve seen it. There are better ways to deal with this. I.e:

  • Look for a home without a pool
  • Bild the pool yourself and build it a little bigger and less boring
  • Waterfront attracts people: But even waterfront homes without access to the open ocean rent pretty well

Tenants spending time in Florida come for the outdoor adventure.  That’s why a bigger pool area is what they are looking for. In addition: Don’t forget that when you offer your home for rent, customers decide if they klick your tiny little photo. If this photo shows a sexy pool area, then your chances have just increased by a huge percentage you might get a booking.  If your property isn’t going to be clicked then no booking is guaranteed. Your home must have something that’s different from other comparable homes.

by big.tiny.belly

And why do people mostly place the pool alongside the house? It’s the same price to put it straight away from the house facing the canal/waterfront. And adding an invisible edge is the kicker for no extra charge.

A nice kitchen and bathrooms also attract customers, but it’s usually tougher to get them to klick your home if you show a nice picture of your bathroom. But of course, once they are on your side, it sure helps.

How many days per year are homes usually rented?

In order to cover your expenses ( taxes, insurance, pool, lawn, property management, and repairs ) the rule of thumb is, you need to rent a home about 100 days per year to break even.  If you aren’t planning to use your home during the season ( January – April ) then renting 100 days is no problem at all. Snowbirds using their home during this time must try a little harder to reach this goal. I’m always desperately looking for more homes to rent, cause overall each home we manage rents about 150 days/year. The 4 bedroom homes rent up to 300 days per year.

This takes care of the WHAT – now let’s talk about the WHERE:

If you consider the above tips, you are already in good shape to attract vacation guests. If you intend to look for properties on the East coast of Florida, then there is no big difference all along the costs starting in Miami all the way up to Jacksonville. Homes rent easy. One important rule: If you plan or need to rent your home to cover your expenses, avoid gated communities at all costs. I’ve personally seen owners with a nice home being denied to rent their home from one day to the other because the HOA said so. Not much you can do about it.  And it can happen in any HOA. So just don’t go there.

If you are looking to spend your money on the Eastcoast,  I can’t help you with my free MLS access.  It does not cover this area. You have to find a local Realtor, or you can take a peek at Zillow, Realtor.org or Redfin. But only to get an idea. I’ve covered these websites with all their pros and cons in another Blog. They should only be used to get an overall idea.

If your supply of money isn’t endless, you will soon find out how much more you can buy for your buck on the Westcoast.  Cape Coral has the least HOA’s and the most request for vacation homes, while Lehigh has even less HOA’s but a  lot less demand. It’s hard to cover your 100 days in Lehigh although you get by far the most for your money. Upscaled homes still much cheaper than on the East coast, can be found in Fort Myers Beach, Estero and all the way south to Naples.   

What’s holding you back?

Why don’t you take a look at what kind of homes with these criteria are available right now? The easiest way to do this with no obligation and nobody bothering you or tracking your internet search is to go on my website. Click Homebuyers and choose for either option.

Call or email me for any help you might need. I hope this has given you and idea if vacation homes are an investment. For most of my owners, the investment is only a secondary issue.   It’s nice if all expenses are paid by renting the home. Even nicer if there is a decent surplus at the end of each year, but most important for all my owners is the fun factor for themselves.  If tenants love your home, then so will you. And if the rental income covers for all your expenses PLUS your own trips to tr home, then we got a winner.  Don’t worry about earning money with the home:  That’s what the market is for. Keep the home a few years – enjoy it and then sell it for a profit. What else can you ask for? Investment with a fun factor built-in. Great.

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