As this is written in mid-2023, the market for vacation rentals has grown a bit but the number of vacation rentals has outgrown demand. At the beginning of the growth spurt during the Chinese virus pandemic, people bought without much thought to the outcome. Many just wanted to get away from their home located in a state that kept them from leaving the house. They came to a beach location that had no restrictions and bought that vacation property. Most did not know that at the time, there were more people who wanted to get away than there were properties to go to.
Income was coming in at a record pace. People were grossing $50,$60, and $90,000. This added to the stampede to buy a short-term rental or vacation rental as most call them. Zero marketing efforts were required, just post and they came. Often these people did not use property managers, it was fun to manage the calendar and let them in using a wifi lock. Looking around for a good cleaner was a problem (and still is) but many overcame it somehow.
Then the election came and with it higher prices for everything. People were exhausted from vacationing as they were from staying at home. Remember when you could not find a boat or a motor home to buy? How about a bicycle? Check out the lots, full of RV’s and boats. The same is true of vacation rentals.
The vacation rentals industry has turned upside down. Foreclosures are starting in many areas where you can buy a bank-owned home complete with furnishings. Property owners are walking away from their “hobby” as they simply can not make two payments with such low revenue.
1.4 million U.S. vacation rental properties were available in (est) 2017
2022 estimates are 1.98 million in the united states. A 41% growth over the last five years. 5% growth in 2023 alone
Things have changed in two years
All of the above has come from personal experience. I am a co-owner of a property management business on the Mississippi Gulf Coast called Christies Gulf Beach Rentals. My personal experience comes into this article and hopefully, it will help you understand this business and if it’s right for you. Owing and operating a successful vacation rental property is far different now than it was two years ago.
Bell Curve
The bell curve above (pardon my rough line) is a depiction of how the vacation rental market has evolved in the Mississippi since 2017. As with most bell curves, early adopters get into the market and set the trend. These early adopters buy in at lower costs and are often profitable from the start. As you can see, more and more investors came to the market pushing up prices and increasing the number of properties available.
Most of these initial buyers were experienced investors who wanted full-time rental properties. These were not second homes or even for the most part vacation homes. Later as the Chinese virus hit hard, people wanted to get away from home. The Mississippi Gulf Coast was wide open and prices were a bargain. The frenzy did not stop except for experienced investors who saw the over-supply hitting the top of the curve. They bought in early and started to offer properties for sale.
As the income stream started drying up in late 2022, many vacation rentals hit the market. Some were early foreclosures. People bought expected to generate a profit and they were not covering operating costs. Second-home buyers started entering the market. These are buyers who can afford to buy their property without support from renting. They will rent for “extra” income.
More vacation rentals will hit the market in late 2023
I believe that more properties will hit the market fully furnished by the end of 2023 to head off foreclosure. Second-home buyers will have many opportunities to buy. The supply of vacation homes is still increasing but perhaps some of the foreclosure sales will be to full-time residents, reducing supply.
Google my business, ChristiesGulfBeachRentals.Com, it’s a good place to start for several reasons that I will get into. First, I took time to look at several articles on essentially the same topic as this article the Best Successful Vacation Rental Strategies. All of them say the same thing.
That’s good and then it’s not so good. Every one of the articles could have been written by an AI. They are structured to get your attention with lots of charts and numbered lists. That’s an excellent way to rank high on Google but does not exactly pass along any original information.
Get into a vacation rental that will actually earn money
Now that I have your attention on the state of things, let’s get into what can be done about getting you into a vacation rental property that will actually earn a few dollars. Hear me well, I will not tell you that you can make your vacation rental business fully pay for itself and generate a profit.
The only way to buy a property and cover all of the costs and be profitable renting the unit exclusively as a vacation rental is if you pay cash. There was a time when a 10% down payment loan at 5% interest would have generated a very nice income. That time is gone at least for now. Since no one has a crystal ball, it’s hard to tell when the supply of vacation rentals is meeting and not exceeding the demand. Things can change in the future but this is where we are now.
We will get into the details of a strategy but first and very importantly, you must answer the following questions for yourself:
- What are your goals for this property?
- Can you afford to pay any shortfall in income up to 100% of all operating costs including a property management fee?
- Do you want lots of guests paying lower rates or fewer guests paying higher rates?
- How much time will you spend at the property and will that be during the high season?
- Do you want to set up the property for the maximum revenue or are you more interested in unique decorations and furnishings for your own use?
- Have you considered a budget to furnish the property?
- Who will set up the property for rental e.g. order furniture, decorate?
- During the set up which could take a couple of weeks to a couple of months, can you cover operating costs including a mortgage payment?
- Are you buying the property in an area that is likely to generate income or because you like it there?
Decide in advance why you are buying the property
These questions are important. The point that I am trying to get across with the questions is that you must decide in advance of buying a property why you are doing this and why you have selected a specific area for your investment. Just because it’s a great place does not mean that potential visitors will see it that way. I recently had a conversation with a prospective client who liked an area in Florida and they were considering buying there.
They ultimately decided to buy on the Mississippi Gulf Coast but my point is that they “liked” the area in Florida without any consideration to the local area and if it was one of the popular destinations that prospective guests want to travel to.
I have other clients who decided that they truly wanted to own a “second home” and then rent it for income when they were not in residence. Now this is a concept we can talk about. Considering rental income as secondary to their need for a second home in an area that they loved. Then, use the condo as a rental home for vacation-bound guests. What a concept. This solves the issue of earning enough income to cover costs. This concept takes the pressure off the owners because they can afford to pay the bills regardless.
A second home
As a second home, there is no need to create a price to attract lots of guests. It’s better to list the property at a slightly higher price and the best way to attract that ideal guest. You may not be in a position to buy a second home without some income to offset some or most of the costs. In this case, you are the person who has come to this article to learn about the Best Successful Vacation Rental Strategies.
Keep in mind throughout the remainder of this article that it is highly unlikely that you can earn enough income to cover 100% of the income necessary to cover a mortgage and all operating costs. There are some benefits that will help you take the edge off such as passive income tax deductions, appreciation, and reduction of the principal payment. All are helpful but will not necessarily pay the immediate bills.
What you need to do
Christies Gulf Beach Rentals uses a multi-disciplined approach to marketing our client’s properties. Much of what we do is listed in the articles that I mentioned. Let’s start by listing them. Everyone likes lists:
- The property is completely set up to be comfortable and permits guests to prepare meals and launder their clothing.
- Amenities are added when practicable. Outside: Firepit, bbq, horseshoes, picnic table, chairs. Inside: Flat screen TV living and bedrooms, coffee service, and more.
- Property Management company website advertises the property as a rental listing. The use of a professional photographer is recommended for vacation rentals as photos are key in the decision-making process.
- Airbnb, VRBO, and the companies they own (automatically) are posted by a property manager
- Facebook and other social media channels posted by a property manager
- Owner posts on their Facebook and social media accounts. Their friends and family post it also.
- The property manager creates a podcast for the property plus other valuable podcasts on a regular basis to draw people to the website
- Youtube walk-through of your property will attract guests. Walkthrough is posted on the property manager’s website also
- Blog articles written about the property managers’ properties and other topics about the area attract readers to the website
- Discounts offered for previous guests, first-time posting discounts, and other promotions using social media marketing
- Programs such as the “Snowbird” program are specifically for those who come to the South from cold climates in the winter. Promotes longer stays
- Other target markets. In Christies case, the military comes to attend school and can rent local properties.
- Coordination with other bloggers who write about the area and connect Christies to their articles.
- Mingle with local businesses and influencers who can recommend the property management site and therefore your property.
- Email marketing through a newsletter is another way to communicate with previous guests about returning. People return to vacation rentals, so why not yours?
Marketing vacation rentals is an art and a science
Marketing vacation rentals is an art and a science. It all starts with the property being located in the right place. Properties closest to the beach on the Mississippi Gulf Coast will usually rent more often. Ones that have a beach view will rent more than those that are across the beach but have no view. Christies has two properties that are both early 20th-century houses that have been completely rehabbed. Guests can sit on the porch and see the water. These properties are in demand and at higher prices.
Properties that accommodate more people will usually generate higher income. If your property can only accommodate two, it will not appeal to a wider audience comprised of 4,6,8+ guests. When owners come to us already owning properties that are not in the most ideal situations, we focus on the things that will bring people in. High-quality photos are critical particularly for properties with low light. The professional photographer will lighten the rooms and make them more appealing.
We focus on unique features for the property that others may not have. If yours is a condo in the development of condos, we must target market your unit as being different than the others. We rarely promote development. Most people will be first-time guests and do not have a clue that the property is located in the famous “XYZ condo development”. If everyone else is promoting the same development they can not stand out.
Decorate for the market, not your personal taste
Your property must be properly decorated and themed to gain the highest income. If you have decorated it to suit your personal taste and do not need much income, then we work with what we have. If you want to earn more money, we may suggest that you install a sofa sleeper and put some beach-themed art in place of the deer antlers. Basically, we need to create a vacation rental brand for your property. We want to improve the guest experience so that you earn positive reviews.
After posting the property on VRBO, Airbnb, and our property management website, we start pushing the postings out to create brand awareness. Essentially we start a social media campaign that will consist of posting your property on Christies Facebook page and other social media sites. We will create a video walk-through that is fully narrated not just music.
The video will describe what the viewer is seeing and encourage them to visit the Christie website and book VRBO, ABB. The video content is then posted to your property listing on the Christies website. People will visit Youtube to see your walkthrough and book your property as a result.
Your own social network is key
We pass out lots of business cards directing people to the Christies website. We also offer to our clients the opportunity to have business cards for their own property with a QR code. Why would we do this? With all of the competition, it’s important that your property be advertised to the maximum extent possible. This includes all of your contacts and those of your children and other relatives. Why not help in the process?
Talk about your property, you are proud of it and want others to experience it. Pass out cards in addition to using social media. Your friends can scan the QR code which will take them to your property on Christies Gulf Beach Rentals website.
You can also suggest that they look at the website. They should use the menu read about the area and all of the great things to do. This is part of the marketing effort not discussed on the other sites. A simple thing handing out a business card but now that I have brought this up, it’s time to talk about your short-term rental business.
Yes, that’s right, your short-term rental business. If you have not already created an LLC in the state where the property is located, do it now. Then transfer the property via quit claim deed to the LLC. This will help protect your personal property in the event someone sues your property LLC.
Protect your asset
I recall a recent discussion with a prospective client where I told him since he paid cash for his property it is ripe for a lawsuit. Create the LLC and make the transfer. That’s a good thing to do when you have a mortgage. If you pay cash for the property, you need to take one additional step. Create a first mortgage against the property to your trust.
This means that the property you just paid cash, for now, owes about 80% of the estimated value to your trust in the form of a mortgage. The mortgage is filed with the county as a lien on the property. This way if someone comes after your LLC, its assets are tied up. I am not a lawyer, seek help from one if you want to know more.
After the big push on social media platforms to promote your business (property), and the business card we discussed, the market will start making some decisions for you. The most effective way beyond a successful marketing strategy is to make sure that your property receives high marks from guests.
Vacation homes stand out with high ratings and that draws more people. When your property is first exposed to the market on rental websites, there are no comments. It takes time to build a reputation. Your property management company can help. Paying attention to all comments about how to improve is important.
Long term rental
Recently, a guest called about a garbage disposal that was clogged. One of our team went there and found part of a dish rag and glass in the disposal. We know it was working well when the cleaner was there. The guest said it was that way. They forgot when they called they said it was working and then not. If this was a long-term tenant, they would have paid for this service call.
Our team cleared it and asked the guest if they were satisfied with the property, the answer was a resounding yes. They and we know who caused the clog. The point here is that great guest service from the property manager reinforces the marketing effort.
Rental hosts are key to customer service finding creative ways to improve guest satisfaction in the form of good reviews. New guests will see that what they read was accurate and that will help with their rating. There is no substitute for great reviews. Potential guests often make contact with the hosts (property managers) about the property. These contacts are often by telephone making the service more personal.
Effective vacation rental marketing plan
Every short-term rental needs an effective vacation rental marketing plan using some or all of the elements described above. That plan along with the personal touch from the property managers will focus efforts based on your type of property. An important factor is your completing the list of questions above before moving forward. That’s the first step. There are a lot of rental properties on the market, what will make yours special?
I hope that this article has enlightened you somewhat and that you know more now than when you first started reading. If you decide to look at the Mississippi Gulf Coast as a potential vacation rental site, contact us before you do anything. Learn the area first.
I am a real estate broker and I often receive requests about properties that are “cheap” and of course, that is a real statement coming from outside of this area. You can buy properties for less than $300,000, even as low as $85,000 but they are not all prime for vacation rentals. The worst thing you can do is to buy a property and find that it is located in an undesirable area for vacation rentals.
Read the blog articles on this site under “news”. Check out Logan-Anderson Gulf Coastal Realty where you can read even more about the area. One more recommendation, RetireCoast.com a blog about the Mississippi Gulf Coast.
Please leave comments and return to our website for more about vacation rentals and to book a vacation rental.