Manage a Vacation Rental Property: Maximize Profits by Managing Your Own VRP

It may seem daunting to manage a vacation rental property from hundreds or even thousands of miles away. It’s tempting simply to turn over the management of the property to a management company. But those companies typically take a large cut (often 35% or more) of any rental money earned by the VRP. Many people rent out their vacation homes as a way to make having a second home affordable; the large cut taken by management properties often changes the math so substantially that it may no longer be financially possible to own that dream vacation property. Luckily, it’s fairly simple to manage a VRP and keep all the profits.

Find a Trusted Cleaner for the Vacation Rental Property

The hardest part of managing your own vacation rental property is finding a cleaner who will not only do basic cleanin, but who will also do the chores that are critical to the success of a vacation rental property. You’ll need a cleaner who will:

  • Clean all surfaces.
  • Launder and change linens.
  • Wash and put away any dirty dishes left out.
  • Keep track of stock of cleaning supplies (like toilet paper, paper towels, soap, and any other amenities provided at the property).
  • Let you know if there’s any damage to the property.

The best place to start looking for such a person is by asking the Realtor used for the purchase of the vacation property. Very often he or she will have a few names to recommend. If that fails, try posting an ad on services like Craigslist. Always interview the candidates, preferably in person, and select a licensed and bonded professional. Be sure that there is good rapport and communication. This person will play a critical role in the success of managing a vacation rental from afar.

Effective Advertising of the VRP

  • Once a suitable cleaning person is found and the property is well furnished and ready to rent, it’s time to advertise. The HomeAway corporation has recently bought many of the vacation rental by owner portals out there. This makes it easier to advertise on their multiple portals, like VRBO.com, Homeaway.com, and CyberRentals.com. Listing on these portals is worth the investment; you’ll make back the cost of the listing with the first rental, and you’ll secure far more business with the listings than without.
  • Another valuable (and free!) source of advertising is Craigslist.org. Post an ad every couple weeks.
  • Be creative. Is the property near a ski resort? Ask to put up a flier on the bulletin board in the ski instructors’ lounge. Have the perfect spring break spot? Advertise on the local college campus.

Regardless of where you advertise, post as many pictures as possible. Renters love pictures, and the better they feel they understand the property, the more likely they are to book.

Respond to Inquiries Promptly

This is critical. Answer the phone. Answer emails. The faster you respond, the more likely you’ll be to secure a booking. Often, the potential renter fires off several emails or phone calls to VRBOs in the area. Responding quickly inspires confidence, so be attentive.

Accept Credit Cards

Renters love having the option of being able to pay by credit card over the phone, and it’s the best way for you, as a business owner, to quickly, efficiently, and dependably get payment. It’s also valuable if there’s ever damage to the property; there’s no argument and haggling with the guests, the amount can simply charged to the card on file. Accepting credit cards is one of the best ways to run a vacation rental property smoothly.

How to Invest in Rental Property: Step-By-Step Instructions on Buying Investment Properties

Investing in rental properties can be very easily done with proper knowledge, guidance and a good mortgage broker. With the tips provided in this article, hopefully investing in rental property will be simplified and made easy for all concerned.

How to Invest in Rental Property

There is a vast array of opportunities available today in the rental property business. For every millionaire that gets lucky in the rental field, there will be 100 that are not so lucky. On an average 20 percent will lose money on rental properties due to lack of knowledge and hasty decisions.

Investing in rental property can be very rewarding if done with due diligence and care. It is a buyer’s market and many deals are offered daily. Learning how to proceed will save the investor hardship and possibly lots of money.

First Steps Towards Investing in Rental Property

In order to be well informed, learn to make some smart decisions. Knowledge is the key in learning how to invest in rental property. There are a few ways to obtain knowledge in real estate:

  1. Hire a mentor or guru
  2. Join a real estate investment club
  3. Search for information on the internet

Where Are There Guru’s for Hire?

In order to learn proper procedures in buying rental properties, a mentor is needed or a guru. Someone who will show the investor the “ropes of the trade” so to speak. Guru’s are for hire and may be quite expensive. Many investors will opt to get around this problem by working side by side with a trained Realtor who specializes in selling and listing investment properties.

A mentor will guide the investor in looking for the best deals, how to shop comparables and the art of negotiating. A smart Realtor will not teach everything, because then the service of the Realtor is no longer needed. The term due diligence is used much and this simply means to research a property thoroughly including the title report to look for all liens involved in the property.

A complete and thorough net sheet is needed to show all cost involved in ownership of this particular property also. Do not just look at the mortgage payment minus the rents. Look at the full cost of ownership including maintenance, water, utilities and repairs.

How Does an Investor Join a Real Estate Investment Club?

There are many Real Estate Investment Clubs available all over the world and joining is not the problem at all. The problem is picking the right one to join. Having enough knowledge to choose the correct one is the key.

Social Media Sites or Real Estate Online Websites?

Besides hiring a mentor and joining a Real Estate Investment Club, try searching the internet for thousands and thousands of sites offering free advice. From Twitter to the top real estate web sites, the amount of free information will be staggering. This is why in many cases it is important to be involved in the other two choices stated above.

Twitter has evolved in the last few years as the top place to get free information. Social Media is so popular that it would be literally impossible to read all the free information available in 20 years. Deciding who is legit and who is not would be the main problem.

First time investors should never take out a loan on the Internet as there are too many loopholes and problems dealing with a “supposed” good guy or mortgage broker. Bankrate.com is a good website to search and compare mortgage rates and get the latest news on interest rates.

Use Twitter or other social media sites for what they are meant to be used for. Use them for immediate information for research and guidance and then compare that information with a local mortgage broker or Realtor.

There are many websites offering excellent real estate advice also. The top site is Realtor.com and they have every property currently listed on the MLS and a list of every agent or Broker throughout the US. It is a one stop place for everything the investor could need or want. Many Realtors will be glad to refer the investor to a local Realtor to help in purchasing a rental property.

What is a Seller Financed Mortgage?

Now that the investor has all the knowledge available everywhere, they are prepared to purchase, obtain a mortgage and close the deal. Never ever deal with investment property without a trained individual until thoroughly trained in all aspects.

One piece of creative financing needed by any new investor or seasoned one is how to buy a property with seller financing. So in other words where the seller is the bank. This type of financing avoids most closing cost and that is a huge savings. Traditional closing cost can amount to 3-6% of the cost of the home or rental property.

What is a Lease Option?

The next thing a new investor should learn is how to do a lease option. A lease option is an option to buy a property at a later date for a specified amount of money. It is used by many investors in buying rental properties. The difference between seller financing and a lease option is that in seller financing there is no requirement to refinance the property prior to the end of the term of the loan.

Now with this huge amount of information, anyone can purchase rental property and be a success and hopefully rich in the process.

Are you really listening to your real estate agent?

The Real Estate Business is a Slippery Slope

It is essential that buyers and sellers trust and believe their experienced real estate agents whom they hire.

The real estate business has changed dramatically since the housing bubble burst. No longer does the real estate industry see homes go under contract within 24 hours. In most instances homes are sitting on the market for days and months before they are sold.

The value of homes in some states and communities has decreased to half the value of what they were purchased for five years ago. Many homeowners have to do a short sale, which is not short at all. A short sale is when the bank agrees to let the homeowner sell their property for the current market value.

Some owner’s homes went into foreclosure because their loan payments ballooned and they could no longer afford the mortgage. Unfortunately many people lost their homes because they lost income and were not able to make their monthly payments.

Whether your are purchasing a home to live in, rehab it to make money, realtors know the market better than buyers.

The cost of homes have dropped and many people who were not able to purchase homes during the housing boom can now afford to purchase a home, because homes are affordable and interest rates are incredibly low. Investors are currently finding some of the greatest bargains ever in real estate and are buying multiple properties. They are reeling in huge profits from either renting properties or renovating homes and re-selling them.

Sellers pricing your home correctly should begin the first day your property hits the market.

Experienced realtors know when homes are priced correctly to sell. Owners are who put their homes on the market still tend to think about the value of their home when it was appraised during the housing boom. Homes that may have appraised for $350k in 10 may only appraise for $275k in the 2015 housing market.

Sellers truly think that if a realtor market their home correctly that they can ge $350k or an offer close to it. Sellers need to understand that no matter how much time and effort a realtor put into selling your home buyers are not going to pay $350k for a home that is only worth $275k.

If a buyer writes a contract for $350k and they are getting the property financed, and the house appraises for $275k, that is all the lender will loan the buyer to purchase the property. Therefore, the owner is faced with the decision to sell at the $275k, or ask the buyers to give them $75k cash, or hold on to the property. Most owners think that they are giving their property away if they sell at $275k, but they are not if the property only appraises for $275k. The seller is selling the property at current market value.

The most common strategy is that owners want to start at the price they want to get for their home, rather than the actual market value. A lot of sellers think that buyers will offer less than their asking price and, therefore, don’t want to put their property on the market for its true market value for fear that they loose money on the sell of their home. What the average seller doesn’t know is that most buyers will not make an aggressive low offer on property that is new on the market.

A little secret I learned:

When homes are priced correctly they earn more money and are sold quicker.

Sellers think they can always lower their price later if they don’t get a contract. But what sellers don’t realize is that many opportunities are missed because buyers move on. The first week a house is on the market is when it generates the most interest. If the house is priced too high, buyers will move on to the next house. By the time the seller has priced the house correctly, many opportunities to sell have been lost and it means that the realtor has to generate new interest in a house that has sat on the market too long.

Buyers listen to your realtor’s advice.

Buyers have to trust their real estate agents when they tell them how much they should offer on a property. Real estate agents know the market and have seen much of the inventory that has been sold and what is currently for sale. Buyers tend to have the false perception that they can buy homes a lot cheaper than the asking price. Sometimes that is the case, but most times the price of the home reflects the true market value based on location, size, and the cost of repairs to the home. In these cases, buyers need to offer the asking price or a price close to asking in order to purchase the home.

There is a ton of information on the internet about purchasing a home, but each real estate market is different. The internet uses national statistics and not local statistics. Local statistics are more reliable for constructing offers. When buyers won’t listen to their agent’s advice and make a reasonable offer to the seller, they get very disappointed when their offer is rejected and the seller does not counter because the buyer’s offer was unreasonable.

Thank goodness for real estate agents.

Real estate agents aren’t right all of the time, but a good real estate agent is right most of the time. Buyers and sellers should trust and believe in the knowledge of the agents they hire to represent them

Selling Real Estate and Emotions: Property Transactions and Feelings Don’t Always Mix

Unlike stocks and bonds, real estate tends to be a very emotional asset class. Because owners invest their time, energy and money into making their real estate investment shine, they feel an added connection to their building or home. While a stockholder can easily blame the CEO for the stock price decline, real estate investors can only look to themselves. Rarely do real estate investors accurately assess their value-adds or lack thereof to their investment; instead, they price their investments as they see them through rose colored glasses.

Identify Real Estate Emotions

The biggest value a realtor can bring to a transaction is an outside, unbiased opinion of the property’s value. While it is up to the seller to decide whether or not to trust that opinion, realtors don’t have the same emotional tie to the property.

Emotions cloud a multitude of transactions. In real estate short sales, the seller is obviously disappointed that the value they must sell their home for is less than they paid and even in fact less than their current mortgage. Furthermore, every lowball offer further reinforces their poor investment decision. These sellers will be much tougher to negotiate with because they feel a sense of personal failure.

Conversely, an older couple or family selling the home they built for their family will feel a huge amount of sentimental value for their home. Each memory and investment adds a bit of character to their home that another purchaser could never quantify. Again, a lowball offer personally offends these sellers because they feel as if their memories are being cheapened in the process. First time rehabbers and long time landlords often have these same emotions.

Negotiating with Emotional Real Estate Sellers

When buying real estate, investors need to understand the other sides’ perspective. Getting to know the seller and their motivations for selling can help a buyer tailor their investment pitch. While it still may be necessary to place a lowball offer on a property, potential buyers should do their best to accompany these offers with factual analysis. It might be helpful to submit comparable properties prices or a list of items that the buyer intends to replace or repair. The goal is to submit an offer that will appear fair to an emotional seller.

From an investor’s perspective, buying and selling real estate should be a transaction devoid of emotion; however, real estate transactions always involve two people and are rarely without emotion. Providing a fact-based bid and showing a seller that a the buyer intends to better the property can go a long way in making a transaction happen.

Real Estate is Too Easy…NOT!

It is so easy to sell your own home–right? That certainly is the opinion of the general public. There is skill and expertise required to effectively market your home–that is where a real estate has professional training to help do the job. You see, thie key is to define your target audience, homebuyers, that is, and gear all of your efforts towards them. In other words you would not advertise in an “Auto Trader” magazine or RV Trading periodicals. The people that are reading those publications are not in the market for a home at this time. You are best suited advertising in a local real estate magazine such as “The Real Estate Book” or “Real Estate Source”. There are many publications out there–find out which is the dominate one in your area and go with it. You also might want to advertise in the real estate section of your local newspaper and/or the Internet. But that scoop is not where the skill and expertise end.What you say in your advertisement is equally as important as where you advertise. You advertisement needs to peak the curiousity of the prospective buyer enough to make them call you. Your advertisement does not need to be so detailed that a buyer prospect can make up their mind without even inquiring with a telephone call. The ad needs to call the buyers attention to your property and entice them to call you–you then become the salesperson! Also avoid putting your address in the advertisement–a buyer might drive-by at a time when the curb appeal is not at its optimum and never call!!! There are just so many things to know about the law in advertising–that’s set for another article.