Weighing Options: To Operate a Vacation Rental or Traditional Rental Property?

CabinVRBO, or “vacation rental by owner” has become a very attractive and lucrative alternative for landlords. But beware there can be a little bit of hair on the candy.  One thing to remember is that there is never easy money and the added rewards come with additional risk. A major consideration is your level of involvement and your comfort level with risk.

Most VRBO’s work the best when the property is in an ideal location where it’s an attractive alternative to hotels.  Great VRBO locations are near college campuses, ski areas or other attractions such as the beach, or national park. The boom in VRBO’s has led to animosity from hotels and local municipalities who are losing revenue.  The City of Boulder just issued 20 cease and desist notices to owners offering their homes as VRBO’s (and AirBnB which is similar). Boulder city officials have not figured out how to regulate VRBO’s but this is on their agenda for 2015. They are considering level the playing field with hotels by regulating VRBO’s and imposing regulations, fees and taxes. Many municipalities across the country are feeling pressure from hotels and concerned citizens to pass legislation to address VRBO’s and I think you will be seeing more about VRBO’s in the news.

A few key items for VRBO owners to be successful are excellent organizational skills, quickly responding to serve tenants needs, dependable on call vendors, and continuous advertising budget to keep vacancy low. The VRBO’s that I see succeeding are ones where the owner lives very close and is actively involved in the management to avoid common pitfalls that can suck up those additional profits.   A few items to prepare for are waste of utilities, theft, damages, off hours emergency calls, lost keys, unauthorized tenants and pets, security, and complaints. If you treat this as a business such as a hotel then you will be prepared and ready 24 hours a day to provide your guests with the added benefit they expect. Usually trouble starts when an absentee landlord is not able to attend to their guests needs.

If you do not have the time or constitution for overseeing a VRBO properly then a traditional rental is probably your best choice. In our comparison over a 12-24 month period, the VRBO’s vacancy, utility costs, cleaning, stocking supplies, and owner’s time a VRBO is frequently financially equal to traditional rentals. I believe with new inspection regulations fees and taxes that many municipalities will soon adopt VRBO’s will become less attractive than a traditional rental.

Of course there are pitfalls with traditional rentals too but most problems can be solved with a good lease and a competent professional property manager. A professional property manager is on the cutting edge of dealing with new problems such as marijuana growing, service animals, and most recently VRBO business’ being run out of lazy landlords property’s without their knowledge. Good management can spot these and other problems before they cost landlords thousands of dollars.

In the end owning real estate is a fantastic investment but one that can’t be docile. In order to obtain the returns that make real estate so attractive someone has to be involved.  If the landlord is not willing to be that person then they definitely need qualified management to protect their investment. If you have any questions about what we do or how we can help you maximize your investment while freeing up your time please don’t hesitate to give us a call. We are here to help.

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