Rent Out Vacation Home
One thing to consider when you've built a cabin or vacation home is how can you offset the cost of ownership. It really is possible to make your vacation home pay for itself. Contrary to what you may have heard, creating a positive cash flow by renting out your vacation home is very doable, especially if you've built it yourself to reduce initial costs. There are many options available to you for renting out your vacation home. Here are some common ones:
1. Property Management Companies
Pros: Someone else handles the reservations and phone calls of your clients. If rental home is located a long ways from where you live, it is nice to have a management company close to the rental to handle emergencies that may arise or to handle cleaning of the rental. Well known rental management companies can provide immediate advertising exposure.
Cons: If you are looking to maximize profit, you are going to lose 20% to 60% of your rental income to these management companies to rent out your vacation home for you. This makes positive cash flow impossible.
2. Rental Websites (i.e. VRBO.com, Homeaway.com)
Pros: Website is already established, you just provide prices, pictures, location and they will list your rental.
Cons: Clients still contact you directly for reservations. These websites will charge on the order of $100 to $150 per property per year to list with them. You still have a middleman.
3. Private Website (Recommended)
Pros: You can customize every aspect of your rental listing and the best part is you keep 100% of the rental income. You've cut out the middleman. This makes positive cash flow on your rental property a reality. Your custom website will soon show up in Google searches and you can direct local folks to you website via online classifieds like Craigslist or in Utah we have KSL.com.
Cons: Clients contact you directly for reservations. This can be minimized by adding sufficient details on your website including an up-to-date reservation calendar. You can avoid most of the tedious phone inquires by having a good website. Most of the phone calls you get will be folks ready to book.
I've created a website at www.bearlakegetaways.com for renting out our vacation home. Please take a look at see what you think. I've added frequently asked questions that people have, things to do in the area, and rules for the cabin stay. I've also added the ability to make rental payments via paypal, and added a reservation calendar. In just the first year, we had way more calls for renting than what we could accommodate at our cabin. Please contact me at BearlakeGetaways@gmail.com if you are interested in getting my website template or in having a website like this setup for your vacation home. With most of the work already done, I could help set you up something similar fairly cheap.
Cabin and Vacation Home Rental Agreements
A rental agreement and security deposit are both important for renting out your property. Here is the rental agreement I use. I'll typically send my clients a .pdf version of this which is filled out with the clients names, reservation dates, and payments due. Clients will then sign and either scan/email it back or mail it back to you.
Cabin Cleaning Services
Cleaning up after renters is something to factor into your decision to rent out your vacation home. If you live close enough and have the time, you may choose to clean up your property yourself after you've had renters. We have done this from time to time to make sure the property is ready for the next group of people. One thing that we've found works nice is to have a detailed cleaning checklist that each group staying at the cabin must complete before they leave the cabin. This is nice if you have multiple owners like we do to make sure the cabin is cleaned the same way each and every time. I have found that clients dislike being charged a cleaning fee because they usually feel like they are capable of cleaning up after themselves and would rather not pay $75 for a cleaning fee. When we rent, part of the agreement is that the client will complete the cleaning checklist and sign off on it. We often have family that stays at the cabin after our renters and in that case it is easy to make agreements that if the cleaning has not been properly done you can pay the family to cover it and then pass on the charge to your client for not cleaning (ie deduct it from there security deposit). If you rent to clients back to back, using a regular cleaning service usually makes more sense. The cleaning system is something you'll have to address on a case-by-case basis for your rental. Attached below is a cleaning checklist that we use.
Setting your Prices for Rentals
Determining the right price renting out your vacation home will come with experience and time. You should start by looking at rates for other units for rent in the area. Weekends, holidays, and special events in your area should demand higher rates than regular days. We started a little low on price the first year just to see how things went and found that we had more demand that we could handle, particularly during the summer season. Knowing that, we'll probably move rates up a bit in the future.
Business Setup and Short-term Rental License with City
I setup a LLC called Bearlake Getaways to handle the rental business that I have. This was partially for liability reasons but mostly because we had to have an LLC in order to get a license with the city to do short-term rentals. You should check with your city to see what rules and regulations are required to do rentals in your location. Many community HOAs prohibit short-term rentals, ours luckily did not. Garden City required us to pay a $200 application fee to register and they look for things like your Tax ID number, LLC registration, cabin location to check HOA restrictions, etc. We are required to pay an annual $50 fee due for renewing this city license. The city sent an inspector out to look at and approve the property for renting. They took measurements of each of the bedrooms to determine max occupancy and also checked for working smoke detectors and fire extinguishers. Overall, it was pretty painless to get approved.
Liability Associated with Renting a Cabin or Vacation Home
Something to look at before renting your property is the potential liability you have if one of your clients were to have an accident during their stay. There are multiple ways to protect yourself and you should do both of these unless you are a real risk taker.
1. Make sure you have a homeowners insurance policy that covers the property (and includes short-term rentals). If you don't have this and somebody burns the place down, you will have a fight on your hands trying to get the insurance company to cover your loss.
2. Put the rental property ownership into an LLC or a trust. This will isolate that property and associated liability from your primary residence and other assets you have.
Doing both of these things will make you sleep better at night.