Renting your second home can provide significant income, and the opportunity to earn rental income plays a part in most decisions to purchase a vacation home. Average vacation home rentals earn nearly $30,000 annually, which is a lot, but renting out your vacation home isn’t always easy. Here are a few tips for making the process as smooth (and lucrative) as possible.
- Know the costs. Know the rental rates, and compare that to your monthly mortgage. Include estimated costs for marketing, cleaning, repairs, and maintenance. Make sure it will be a profitable venture, as that’s the point!
- Know how much time you’re willing to spend. Be prepared to spend a lot of time managing the property if you don’t want to use a full service management company. Management companies charge a premium (often 20%), but it saves you a lot of time and headaches. Understand that if you do it yourself you have marketing, inquiries, booking, and housekeeping to manage.
- Pay for marketing. It’s a chunk of money (often upwards of $1000) but it pays in returns. Especially in areas where many vacation homes may be available think about how your home will stand out. Your rental home won’t earn you any income if nobody knows its available!
- Know your tenants, and be specific about your guidelines. You may want to set some ground rules, like a minimum age requirement, maximum number of people allowed, and rules regarding pets. Having this clearly laid out will head off concerns here before they arise. Its also often worth doing a credit and criminal check on your renters.
- Be prepared to deal with accidents. Even with the most responsible tenants its best to assume some damage will occur. Requiring security deposits is one way to mitigate this risk. You may also want an insurance policy that covers damage caused by renters. If your current policy doesn’t cover renter damages, you may want to switch.
- Create a guest-host dynamic. Its much more productive then landlord-tenant, and your renters will like you more, give a better review, and treat your home better.
If you’re interested in renting your home for some additional income, you may want to reach out to an attorney to make sure you’re maximizing your return and minimizing your risk!
Photo courtesy of Wikimedia user Mark Crawley under a Creative Commons Attribution 2.0 Generic License.