Dream of running your own Airbnb or having a home by that you can use when you are on vacation or rent out when you aren’t. You don’t have to buy into a time-share deal to find a great vacation rental. But don’t buy any property just because it is in a beach town you love to visit. You may find that buying a property in Cincinnati or Northern Kentucky can be equally as profitable as a vacation rental. Take the time to properly evaluate the business and develop a system on how to buy a Greater Cincinnati Area vacation rental.
My First Cincinnati Vacation Rental
In September of 2010, my first son was born. At the time, my wife was working full time at SD1 as their Education Coordinator, but were looking for a way to supplement her income, so that she could stay home with our baby. We had heard of some friends who had rented their house out on VRBO.com (Airbnb was still making it’s way to notoriety in the midwest), so we decided to give it a try. We ended up renting out our little 4 bedroom home in Anderson Township all summer and a huge light bulb went on for us. People wanted to stay in vacation rentals … even in Cincinnati, OH!
So, if you are looking to get the most cash flow out of a property, let’s walk thru some of the steps to consider if you want to turn a local NKY or Cincinnati home into a vacation rental.
Calculate the Costs and Your Budget
Most people start with a rental property with this notion of being able to personally use it whenever they want to. They also assume it will be booked solid the rest of the time. The reality is that many rentals don’t have a 100 percent rental occupancy. Some properties in areas like ski resorts have peak seasons that command high dollars but that is also when you want to use it. The bottom line is you have to be able to afford the property based on realistic numbers.
We found that you can expect Memorial Day through Labor day to be the peak renting seasons in Cincinnati, and you can probably book the holidays as well. Other than that, prepare for some down months in the winter.
Look at the property cost and mortgage. If you didn’t have a rental for six months, could you afford to swing both mortgages along with maintenance and utilities? Then consider rental rates in both peak and off-peak seasons. These may be two very different rates. Assume conservative rental numbers, perhaps 70 percent in peak season and 30 percent in the off-peak season. If the cash flow jives and you can afford the property, go for it.
Find an Appreciating Location
Most people look to buy vacation rental properties in locations they love to visit. If you go to Hawaii each year, you might prefer to house the entire family and friends while in the islands in a beachfront condo. If you spend four weeks every year skiing in Aspen, a condo near the slopes is a perfect vacation rental. However, just because you love to go there doesn’t mean the real estate market is favorable and in a phase of strong appreciation. Take a look at the local economy. Remember you have just been a tourist there. You need to look at it like an investor and local now.
Talk to local real estate agents and find the areas within the market that will have the stronger appreciation value. You could buy the property before you have kids and realize that soccer season is really killing your ability to go on long-term vacations to the property. If that is the case, being able to liquidate it for a profit is simply smart business sense.
You want to be thinking of appreciating areas as well as short term rental friendly zoning departments. We’ve been burned by this one before when we opened a short term vacation rental in Newport, KY. So, talk to us! We’ll help you know where to pick.
Prepare for Emergencies
Remember that you are not on the property regularly and might not even be within a five-hour flight to it. Make sure you have a plan for emergencies when you are there, when guests are there and when it is vacant. Of course, this starts with the right insurance plan but it also means having emergency supplies such as first aid kits, food and water for 14 days and evacuation plans clearly outlined for anyone to follow. A ski resort could get snowed in. A tropical location might get hit with a hurricane or flood. Understand the risks and create a plan for the location.
Have a Business Plan
Another plan you need to establish is the business plan. While this is a vacation rental and considered a personal use location on many levels, you do want to treat this as an investment and business expense. Real estate is expensive and shouldn’t be purchased just because you like a location. Run the numbers in the budget and set a strategy that will have the property pay for itself with cash flow. Properly listing it with rental agencies and websites is a start. You could market in the offseason to companies seeking to host executive retreats. This would increase cash flow in periods of time when you aren’t planning on being there or rentals are slow.