Beach condos can’t always pay for themselves. However, they can certainly contribute to a homeowner’s annual income, helping them cover a range of expenses throughout the year.
This blog breaks down the most responsible investment decisions and pricing strategies to help you become one of many homeowners whose vacation rental revenue accounts for 24% of total income.
- Pick a Prime Location
- Make Marketing a Priority
- Set the Right Rates
- Select Conditions for Stays
- Manage Expenses and Overheads
Pick a Prime Location
Location is everything when it comes to vacation rentals. After all, no one chooses to holiday in remote environments with no attractions to experience that are difficult to access by air, train or bus.
Vacationers want to stay in places packed with culture, tourist attractions and other amenities that make resorts feel relaxing. Think views with iconic landmarks, guaranteed sunshine and even things as simple as having supermarkets within walking distance.
Everything about vacation rentals should be easy and exciting. They should allow occupants to switch off and feel spoiled for choice with avenues for entertainment. That’s why location is first and foremost when choosing a profitable vacation pad.
Quiet, desolate landscapes don’t make a great condo sell. But pink-sand beaches? That’s the sort of promise that supports a higher occupancy rate throughout the year.
Make Marketing a Priority
If you have breathtaking views to boast and a plethora of attractions on your doorstep, make it known through your marketing. The most successful property homeowners consider their property to be a product they need to present to appeal to everyone.
Telling people about your property’s best features is a solid first step. Better still, take photos and videos to make the offer come alive.
Using rich media like video has a direct impact on sales. For example, 78% of marketers said video has increased their sales. So, whether it’s a staged property tour, a welcome video from the home’s host or an FAQ about the area, you’re sure to see a financial return from filming.
As your vacation home gets more popular, mix client testimonials into your marketing. Ask those who enjoyed their stay at your vacation rental to write a review, film a quick commentary or at the very least, star-rate your place to improve its listing.
If you buy a condo hotel or hotel residence, like the ones at Bermudiana Beach, all of your marketing efforts will be covered for you by the Tapestry Collection by Hilton.
Set the Right Rates
A vacation rental in the right location with the right marketing strategy behind it is likely to generate a good amount of interest. However, none of this matters if your pricing isn’t competitive enough to cover the mortgage. Although this is something you’ve likely given thought to when buying a condo, it’s worth reiterating when you're in the thick of making a live listing.
Firstly, you’ll need to consider your pricing from a personal perspective. How much rental income do you need to achieve each month to cover the cost of the property? How many rental bookings are you likely to make each month? Answering these questions will give you a good idea of what you should be charging per night to cover your total cost.
Within this, you should also factor in other fees such as service and cleaning costs, as well as a small surcharge to start to build a pool of money for maintenance.
However, homeowners don’t need to settle at their break-even point.
If you’ve followed the advice of picking a property in a desirable location and have the suitable marketing materials to back it up, you’ll likely be able to charge more because your rental rates are in line with local demand. Review your rates again from this point of view, assessing what your closest competitors are charging for similar square footage and amenities.
It might be that you can adjust your rates, so they aren’t standardized throughout every season. If summer is a busier period, charge a peak fee. If certain events in your area make finding somewhere to stay difficult, raise the property pricing.
Unlike paying a mortgage, vacation rental income is irregular. Some owners may make a bulk of their yearly revenue in a high-season month or a single week. So, prepare for this eventuality and put a pricing strategy in place.
Again, use a company like Hilton to support your rentals if possible. Their day-to-day use of revenue management systems will ensure your condo rates are set at the highest possible rate while remaining competitive to the vacationing public.
Select Conditions for Stays
While you might have covered your back with reasonable rates, you can further ensure financial success with favorable conditions for stays. Creating rules around the minimum number of nights a person can book or offering discounts on extended stays can help you pursue the right kind of renters.
For example, if you book three stays with a two-day duration in a single month, your vacation rental will be occupied for a total of six days. The same goes for booking two stays with a three-day duration or even one six-day visit.
With fewer stays, there are fewer cleaning costs associated, less service time needed to check people in and out and more widespread availability in the calendar to encourage other (perhaps more fruitful) bookings.
Depending on the location of the vacation home and its size, you may also consider creating a separate fee for events such as weddings or private parties taking place on the property. Since the legal requirements for getting married in Bermuda are relatively simple, this is a common way to increase your income in this area — a tactic like this will likely work anywhere that lends itself to destination weddings.
Manage Expenses and Overheads
As with any investment, the key to coming out above water is effectively managing your expenses and overheads. This means being mindful of how much money you spend renovating your condo to rent it out, as well as the recurring costs of its upkeep.
There’s a fine line between kitting out your condo to get the best cash and spending a large sum on it that you could likely never recover. While investment into a private hot tub might be a good idea to give your rental an edge, building a custom swimming pool might push the price too far.
Another way to ensure your overheads are under control is to outsource some property management responsibilities to a management company that will cover maintenance and other support costs. This means you won’t have to worry about unexpected expenses or keep a portion of money set aside for what-ifs. Instead, all of your outgoings will be inclusive of one management fee.
The truth is you can never be sure a beach condo will make enough money to pay for itself. But vacation homeowners can take steps to estimate an annual return and protect their outgoings.
Whichever way you look at it, there's no return from booking hotels year after year for you and your family. It's dead money. But, if you own a vacation home and rent it out, you at least contribute to your annual property costs, which can make good economic sense over time.
Although we’ve come a long way since this point, it shows the strength in owning a vacation rental gem. Now that the hospitality industry is recovering, short-term stays and rental demand are becoming more and more prominent, promising a sunnier year for all property owners.
Renting Your Vacation Home the Right Way for You
So, if you’re looking to buy a vacation home that you intend to rent out, it’s worth doing your research. Keep our tips in mind and read our advice on the three best ways to rent out your home. Consider going it alone to do it yourself, getting a helping hand from an online travel agency (OTA), or making use of a ‘done for you’ option with a condo hotel model.
Read more by clicking on the link below.
