There are a whole host of things you can do with a property. One possibility that could help cover the bills, and maybe even generate a little income, is renting out your property. There are two types of rentals: a standard, long-term rental with a specified lease term or a vacation rental offering daily or short-term lease options. I’ll explore both of these types of rentals and shed some light on the pros and cons of each.
When creating a rental you need to determine what you must recoup to break even. You’ll need to factor in all of your costs including, but not limited to, your mortgage, insurance, utilities (whether they are included in the rental or when the property is unoccupied), taxes, maintenance and upkeep, and occasionally upgrading the interior finishes and electronics. Once everything is budgeted you’ll get a good idea of your running costs. Note that you can only rent your home for what the market allows, so if your running costs are too high, you might run at a loss until the market becomes more favorable. At the very least you will be building equity.
Renting Out Your Property Long-Term
The most common type of rental is a standard, long-term lease. Typically, a property is rented for a specific amount of money over a specific amount of time, usually one year. One advantage to renting out your property long-term versus a vacation rental is that you don’t necessarily need to furnish the property. However, some corporate rentals are fully furnished, like a vacation rental would be. Another advantage is that your home doesn’t need to be anywhere considered a vacation destination. If your home is located near a town or city, especially one that has a college/university or big industry, the rental demand will usually be high.
Analyzing the rental market is very important. Websites like Zillow.com and even Craigslist.org are great windows into what the rental market is like in an area. Look at the supply and at what price they are renting. Even if an area has a lot of rentals, don’t be deterred. Looking at the competition will help give you a starting point for the rental price, but be ready to adjust this price if need be. If you notice you aren’t generating much interest, it may be priced too high. Consider offering a discount if someone is willing to sign a 2-year lease. Having the added security and reduced cost of not hunting for another tenant in a year is worth shaving some money off the rent to attract potential tenants.
Once you’ve decided to rent, you’ll want to start getting the home ready. Start thinking about how to make your home as inviting to as many people as possible. Make sure that accented features in the home, like wall colors or carpet type, aren’t too personal. While personal touches like colored walls may excite you, it may deter tenants that have different tastes. Also think about the little things that make life a little nicer within the home. Consider adding or upgrading light fixtures, ceiling fans or appliances. These things help your home stand out and, once you get a tenant, to keep the tenant happy and hopefully extending their initial lease.
The most important thing you can do when renting your property is to ensure you have a strong lease. The lease is your legal protection if things go awry with your tenant. Your best option is to have a real estate attorney draft a lease specifically for your property. If this exceeds your budget, find as many examples of leases as possible and begin to compile them to create one that contains all the pertinent clauses. The last thing you want happen is to have a weak lease that allows your tenant to stop paying their rent; a legal battle to evict them will be costly and exhausting.
Once you’ve got your home ready to rent, you’ll need to get it listed for prospective tenants to find. One option is to list it with a local real estate agent or rental agency. This is often the easiest option. These agents will handle the showing of your home and any concerns or complaints from the tenants. For this service, they typically will keep your first month’s rent and a certain percentage thereafter. If you live locally and can handle these tasks on your own, the better option may be to list your home online. There are a number of options, but some of the most popular websites regarding home rentals are Zillow.com and Craigslist.org. Be sure to include plenty of photos and in-depth, catchy descriptions. You may only have 5-10 seconds to catch a prospective tenant’s attention as they are glancing over a long list of available rentals.
Renting Out Your Property Short-Term
Renting out your property as a short-term vacation rental is a little different. Typically, a vacation rental will be fully furnished and is therefore priced a little higher than a long-term rental. However, there is a higher likelihood that the home will remain unoccupied, and not collecting rent, compared to a long-term rental. Some of the same strategies mentioned above for long-term rentals apply to vacation rentals as well, however there are a few exceptions.
You’ll want to make sure your vacation rental is as hospitable as possible. Unlike a long-term rental, vacation rentals should be fully furnished. Add colored accent walls and decorative artwork that go along with a central theme reflecting the surrounding area. If you are near a beach then try a maritime or ocean theme; if you are near the woods and mountains then consider a log-cabin theme. Studies indicate that vacationers spend upwards of 30-40% of their time in bed relaxing, so make that time memorable. Everyone remembers the hotel stay where the bed was amazing or dreadful. Don’t skimp on mattresses for your rental. Along with a nice mattress, splurge on nice linens of at least 400 thread-count. 800 or 1200 counts would be even better. When looking for other furniture, try to find pieces that add additional sleeping areas. Fold out couches, futons and large throw pillows that can double as an on-the-floor mattress help attract larger families and groups.
Along with posh sleeping accommodations, be sure to provide the basic essentials for cooking. Not only should there be the standard appliances, including a dishwasher, but also be sure to stock the cabinets with plenty of quality dishes, silverware and non-stick pots & pans. Consider stocking spices, condiments and some basic bake ware. Although not all guests will like to cook, the ones that do will appreciate not having to spend their vacation money on ingredients that they only need a teaspoon or two of.
Finally, don’t forget the small details. Consider adding little touches like dimmer switches to your overhead lighting fixtures. A nice media center setup with a TV, DVD/Blu-ray player, and even a printer can be helpful so that your guests can print things like directions or coupons for local attractions. Factor the cost of maintaining and upgrading this technology into your running costs. It is important to offer Wi-Fi throughout the home so guests can easily use their laptops and tablets as they please. One final touch would be to include a binder or booklet that includes information for your guests. Highlight the good places to eat, best attractions to visit, local knowledge not published in the travel guides, and contact information in case of emergencies.
All of these things are aimed at making the whole vacation experience as comfortable as possible. You are providing the amenities of home without the hassle of daily chores or worries. The more you can accommodate them, the more likely they are to become repeat clients returning year after year for their family vacations or company retreats.
Once your home is ready for guests it’s time to get it listed. Along with listing the home locally with real estate agents or travel agencies, there are many websites where you can list it yourself. Below are some popular choices:
As with a long-term rental, be sure to include plenty of photos of the rental itself along with surrounding areas and attractions in your listing. Describe some of the fun things that can be done in the immediate area like swimming, hunting or skiing.
For more information regarding renting out your property as a vacation rental, check out this Vacation Rental Guide HomeAway.com published. With a little work and the proper setup, you’ll have turned your home into a revenue-generating machine.