Considering buying a house for a full-time short-term property? Think again. The market at the start of 2024 is not producing the income that many expected. If you are thinking of putting your existing vacation home on the short-term rental market, you may be rewarded. Vacation homes are always in demand somewhere. It’s time to consider how to improve your vacation rental income now. Take action while you can by reading our 9 things to do below.
Vacation rentals can work for you if you are prepared to cover the cost of the property and consider the extra income as just that, extra. There was a time not long ago with lower interest rates and lower housing costs when you could acquire a property and rent it for income alone.
Unless you pay cash for a property, don’t expect the short-term rental market to support your property at least in 2023. Yes, it’s true, there is high demand during the peak season but earning a good income for three or four months may not pay the bills. There are at least 9 things you can do to improve your vacation rental income now if you already own a vacation rental property.
Everyone is hoping the high season will help
Rental property managers are doing the best they can to rent owners’ properties but the demand has fallen off. Occupancy rates are much lower than they have been for the past few years. Everyone is hoping that the high season will deliver some great income and help offset miserable first-quarter income. The entire short-term rental industry is trying to determine what has happened to the guests. This is my take on the issue.
Many more properties have come to the market meaning more competition for the same or fewer guests. The number of guests has fallen off as well for two reasons. One is that the pent-up demand during COVID generated outsized income in 2020 and 2021. The second is that because everyone took their vacations and I do mean more than one for lots of people, they all vacationed out. Another key reason is of course the high inflation economy.
The ironic thing is that people who are desperate to make their mortgage payments have lowered their nightly rate to the point where they are in some cases going backward. This has caused a cascade effect on pricing in many markets where even the best properties with high ratings were forced to drop their prices.
The vacancy rate at the end of 2024 is high
The middle of 2024 and the vacancy rate has improved slightly as more vacation homes hit the for sale market. Revenue per night is roughly the same as 2023 but many people with little skills at property management have lowered their prices. A few may have more rentals but total income will probably not be higher than in 2023 without more bookings.
Rentals were brisk this past Spring and going into the summer there are some good indicators. Gone for now are the longer two-week stays at most properties during the summer. Weekend stays and last minute bookings are the norm in 2024.
There was a rush to buy second homes during the past few years and while many thought they could sustain the costs of a second home, the economy changed their financial position. At this writing, I do not see a large number of vacation properties hitting the market. There have been a few in the last several months but not a rush.
Guests will pay about the same as 2023
As mentioned above, guests are paying about the same in 2024 as in 2023. Not raising rates is in effect a discount since inflation has hit vacation property owners hard with higher insurance costs.
The good news for some investment properties is that they are well-located for long-term rentals. Renting to individuals for a longer term e.g. six months to one year can improve revenue streams and help cover costs.
Not all vacation properties are suitable for full-time rental and some are not in areas where people want to rent full-time. Speaking for the Mississippi Gulf Coast, there is a shortage of full-time rentals so converting some will help both the owners and renters.
Hosts are looking for visiting nurses
Our rental management company handles both long and short-term rentals. This means we can rent on a shorter-term basis for one month, six months, or longer. Many short-term rental hosts attempt to attract traveling nurses and other business travelers who stay longer. That’s a good idea however most short-term rental listings already cater to people who stay for multiple weeks and months.
These economic headwinds require significant research about how to attract other than vacationers. This is the right time to determine what you want to do with an existing property, rent on a long-term basis or sell it.
Why sell your vacation rental now? New hosts may believe they can do better. The summer travel demand may entice buyers to pay what you are asking for a fully furnished property. Higher interest rates have slowed down the acquisition process but rates have been coming back down slowly.
Home prices are softening which is making potential buyers look again. If you purchased your property a few years ago, you probably have sufficient equity to sell at the market and walk away with a nice income.
Long-term rental rates are still rising
For the rental business owner who wants to retain the property and rent it on a long-term basis, good news. Rental rates in many markets are still going up. They are on the Mississippi Gulf Coast. Rates are beginning to reflect higher operating costs and where once a three-bedroom house would rent for $1,200 per month in this market, they are now going for $2,000 and more per month.
Short-term rentals are in an oversupply situation now which will keep rental rates lower than they should be and reduce income earned by individuals.
To wrap up my discussion about the travel industry, it’s important to note that from what I have been reading, many Airbnb hosts are experiencing the same slowdown. The supply growth may be fueling higher income for Airbnb but it’s killing lots of mom-and-pop hosts. I believe that the supply growth will slow in 2024. Some vacation homes are already being offered for sale fully furnished. This trend should increase through 2024.
We thought that mortgage rates would fall under 6% in 2024, but that has not happened. This has helped keep the supply of short-term rentals from growing. With higher insurance rates plus higher financing rates and too much competition, many potential investors are looking elsewhere.
The housing inventory in 2024 is higher on the Mississippi Gulf Coast than it was in 2023. Part of that inventory are vacation homes being sold fully furnished.
9 things to improve your short-term rental income
Ok, it’s time to get more into what you can do now to improve your situation. I am offering these suggestions, some will apply to you and some will not. You may or may not be in a position to take advantage of one or more.
Property management
Find a property manager. If you have been managing a property from a long distance, it’s time to hire a manager. Why? several reasons but the most important when there are fewer guest bookings is to be sure your property is cared for. Particularly in remote locations, your property may be fair game for those who may want what you have. Someone should be responsible for driving by and periodically checking on the property.
When there is a steady flow of guests security may not be as important an issue. In cities such as San Francisco crime is on the rise and you need to be sure your property is secure.
Another reason to hire a property manager is that they do not charge by the hour, week, day, etc. They earn when you earn. They are still responsible for your property when there are no guests there. During the winter, pipes can break, and AC systems can go down during warmer periods. Stuff happens and having someone there to look at your property is essential. Not to mention that a good property manager has a website that adds some depth to marketing your property.
The Property Management website offers flexibility
Last year, our clients were able to benefit from our current offerings. Christies website does not get the traffic that the third-party sites get but we get direct bookings from past guests. Having our website gives us some flexibility with prices and guest offerings.
A good example is that during the winter we offer firewood for a fee to be used in the firepit. Without going into more detail on this topic, there are many more reasons to use a property manager when there are fewer listings and when there is market demand for your property as well.
Chrisies also markets to groups including nurses but those snowbirds are important, particularly in the winter.
Property managers understand the local market and the average daily rates that your property can get even in this challenging market. The basic business model for short-term rentals is much better understood by a professional staff. There is a fee for property management and that should be calculated as part of your cost of doing business. How much better will you do with a partner who operates a successful vacation rental business? Perhaps they can help you earn additional income.
Facebook/Twitter- Social Media
Use your own Facebook and Twitter accounts to promote your property. Go to your property manager’s website and grab a link to your property. Paste that link into your Facebook and Twitter accounts. Tell your friends what a great place your property is and why they should stay there. Work out a plan with your property manager to give a discount to Twitter and Facebook referrals. This is a good business strategy to help push your property out there.
Don’t stop with a one-time listing, create a plan to push your property out on social media at least once each month in the slow season. Social media is one of the best places where people go to learn about properties that are referred to by others. As people create their travel plans for the year, your property should pop up.
Improve your property
The best way to ensure your property rents for the maximum is to be sure that it is well maintained. It must be inviting. Read past comments from guests to help improve your property. During this slow time, your property manager should be making deferred repairs e.g. replacing the water heater. It’s difficult to make repairs during the busy season so get it done now.
Lower labor rates are typically available in the winter and spring. Contractors who have been working with vacation rental property owners and managers need work now, their business is slow. It’s time to negotiate a better rate for those repairs.
Take a good look at your furnishings and linens. Can you improve them? It may seem silly to spend money when you are not earning it but you must consider that your investment now will reap rewards next year. Domestic travel in 2023 is expected to improve so be ready.
New photos, new listing
Perhaps it’s time to have new photos taken. Rearrange your furniture, and capture all of the new things you have done to the property e.g. new flooring, paint, art, etc. Our professional photographer charges less than $100 for a full house of excellent photos.
Spend the money to get the best lighting and angles for your property. Rewrite your listing. Think about what people want today, not yesterday. Focus on the improvements. If a potential guest has seen your property in the past and gone everywhere, your facelift may catch their attention the next time.
Accept Pets
Consider allowing small pets with rules and large fees and deposits. Airbnb is trying to accommodate people with pets and they are pushing hosts to permit them. Not only can adding pets improve your rental income but the rental pool will increase for your property. If you have a high-end property you may not want pets. Some properties are not viable for pets but others with yards can be accomodating. If you decide you may want to permit pets, do the following:
* Pet fee of $xxx, non-refundable. * Pet deposit of $xxx which is refundable. * Pet can not be larger than xx pounds and must be potty trained. * Pets can not be left unattended inside the building, they can be left in the yard as long as they do not bark. * Your fee to remove pet hair and deep clean is $xxx which will be deducted from the deposit and the balance will be due.
You can add more about pets if you want, the items above are important. We have had good and not-so-good experiences with pets. At this point, there have not been any that have urinated inside. Your pet policy can include full costs of replacing the carpet, flooring, repainting, etc. Airbnb has some protection for hosts but you may have to fight with them to get paid. ChristiesGulfCoastRentals.Com offers damage insurance for about $50 per stay which will cover up to $3,000 in damages.
Amenities
As with allowing pets, you may want to add amenities that are in demand but will not cost a lot. Add a fire pit, horseshoes, bag toss game, and other diversions. Provide a wagon for the beach. Consider providing a golf cart, boat, kayak, and other toys. You can purchase insurance to cover the liability for toys. Some amenities can earn more income, while others improve the experience. You can add more to the bathroom areas e.g. shampoo, soaps, etc.
Read through listings with five stars, and look through the comments. What makes that property stand out? Was it the black facecloth for removing make-up or was it the welcome basket with chips, cookies, etc.? It’s time to improve rental income through some things you can do differently.
Redesign your property
Perhaps your property sleeps four. The community would permit more or they have no requirements. Consider adding bunk beds to accommodate more people. Add a sofa sleeper in the living room. At this point, you can not accommodate five or six so you lose out on those larger parties.
ChristiesGulfBeachRentals.Com suggests accommodating up to 10 or more people depending on the area. Lots of family groups congregate at the beach and need space for multiple families. The more you can accommodate, the greater your opportunity to improve rental income and rent your property in a slow economy.
Consider this. You offer your property for $200 per night. Divide that by four and you arrive for $50 per night. List your property that accommodates 8 for $220 which comes to $27.50 per person. Which property is the best value? Not everyone is looking for value, major cities may attract couples for a weekend for example and they are not concerned about saving a few dollars. Other Urban markets may be similar in that they rent to fewer in a party.
More rural destinations, on the other hand, may cater to large parties such as ski resorts. Also, larger groups may ask for longer stays. This past year, most of ChristiesGulfBeachRentals.com properties were rented to large groups from 8 to 12. Total prices for these larger groups were comparable to properties permitting just four. Larger groups are more focused on price because they know how to do the math.
Rent for the long term
This option was mentioned above. Many properties can break even or earn a profit as full-time rentals and improve rental income. I suggest this to most people who are “stuck” with mortgage payments they can not afford, considering the long-term rental. Rental rates are up which can help improve your rental income. At least on the Mississippi Gulf Coast, rates are continuing to climb. To be fair, they have been under the market for a long time.
You may have looked at your financial situation before and determined that a full-time rental would not pay the bills. It’s time to look again. I just sold a property that I purchased three years ago. The rental rate for a duplex unit with four bedrooms went from $900 to $1,300 at that time. The same unit would probably go for $1,400 in a few months. I would call this type of market the kind that can help improve your rental income.
Lease to the short-term rental company
There is another possibility, you can potentially lease your property to a company that rents short-term properties. They will agree to pay you a fixed monthly lease payment and rent your property on their short-term platform. Some of these companies have a large returning guest list and along with the third-party sites may be able to keep your property occupied.
The lease would be very similar to leasing on a long-term basis. Your property would be maintained as if it were rented by your property management company. Some property management companies may also agree to lease the property from you on a long-term basis and rent it on a short-term basis. You may consider a lease-to-purchase contract with them as well.
Selling your short-term rental
The last thing you want is foreclosure. I am not suggesting anyone sell their property if they can afford to retain it. The short-term rental business is here to stay and it will turn around eventually. Don’t wait until the last minute to put your property on the market. Properties are taking longer to sell now. If you are at break even on your property meaning value to mortgage, talk with a real estate agent about options including renting.
Logan-Anderson Gulf Coastal Realtors specializes in working with investors. They often have clients waiting to buy properties that are suitable for short-term and long-term rentals. Perhaps there is a deal to be made if your property is located on the Mississippi Gulf Coast. If it is located elsewhere you can contact them and they can help you connect with an agent in your area.
The economy always rebounds
Don’t lose hope, the economy always rebounds. History and statistics indicate that with every slowdown or recession, there is always a recovery. Remember that there are opportunities in any economy. If you are sitting on cash, look for a good buy, they are available, and more will come along in future months.
If you must sell your vacation rental, so what? Reposition yourself to recover and buy another using all of your experience. Christies Gulf Beach Rentals will work with you to help improve rental income to promote your vacation rental and help you do your best to make it a top pick of guests. We can’t make people take vacations and we can’t cure the flu or colds but one thing is almost as certain as the sun rising, people will want to get away.
We understand what happened with COVID, the vacation rental business exploded. I believe that new demand is now building. Some can’t afford to take a vacation now but they will be better positioned later. If you can weather this downturn, you will come out the other side even stronger. If you can’t make it, don’t stress, check the options above. We will work as hard as possible to help improve rental income at your property but you need to help also.
Please visit our website at ChristiesGulfBeachRentals.com and check out our blog articles and our properties. If you are an owner click on the link above and tell us about yourself. Thank you for visiting Christie’s Gulf Beach Rentals.