Owning a vacation home can be a wonderful experience with many benefits. It can be your escape to the mountains, beach, or wherever you like to relax and unwind. Many property owners have also discovered that renting their property out when they’re not using it can be an excellent way to offset the cost of ownership, pay down the mortgage, or simply earn additional income. Whatever the case may be, here are a few things to keep in mind as you consider entering the world of vacation rental ownership.
- If you are renting your property to guests, it is considered a vacation home. This would include homes, lake houses, condos, mobile homes, house trailers, or yachts. And, if you rent out your home to guests, you likely must collect taxes on all rental payment transactions. Check with your local tax authorities to find out what their specific requirements and regulations are. Most of the time, rentals of 30 consecutive days or under are taxable, but this varies by jurisdiction.
- To evaluate a potential vacation rental home investment, look at comparable rental rates on sites like HomeAway and VRBO. In general, real estate will increase in value over time but certain markets will have a greater upside over time. Evaluate how the market has performed historically and identify areas of growth that can lead to greater returns. Additionally, ensure that the zoning laws and boundaries in the area allow you to rent out your home to guests.
- Manage your vacation rental like a business. Owning a vacation rental is a great way to earn extra income but it isn’t “hands off” – the most successful owners are diligent and meticulous in managing and maintaining their property. You must remember that your guests are relying on you to have a great vacation which means their experience should be as painless as possible. You will likely have to do general maintenance on your vacation home and provide things like extra linens and towels and amenities like basic condiments and coffee filters for guests to use. In popular areas, the vacation rental market can be fiercely competitive so it’s important to research how others are marketing their properties and highlight features of your property in your own marketing efforts that make it stand out -- like the ability to accommodate special occasions, perhaps. Of course, there’s the associated lodging tax rates and regulations. Don’t forget to collect the necessary tax revenue and file the proper rental taxes for your city, county, and state!