Short-term rentals have become increasingly popular in recent years as a way to generate (mostly) passive income. However, there are pros and cons to both options of renting out your property for the short or long term. Below, we will discuss the advantages and disadvantages of each type of rental structure. We hope that this information will help you decide which is right for you.
By city ordinances, short-term rentals are typically defined as lasting less than 30 days. However, in practice, most short-term rental stays (like those with AirBnB and VRBO) last for maybe a week or less.
One of the main advantages of short-term rentals is that they offer flexible pricing. This means that you can charge more during peak times such as holidays and/or weekends and less during slower times to attract visitors. Additionally, you may use this property for personal vacations provided the property is not reserved.
Another advantage of short-term rentals is that they may be eligible for certain tax deductions for certain expenses. Speaking with your tax specialist will ensure the most accurate, current information to optimize your returns.
There are also some disadvantages to short-term rentals. One of the main drawbacks is that it can be difficult to screen tenants. This is because people who are only renting for a short period of time may not have the same level of commitment to taking care of your property as someone who is renting for a longer period of time.
Additionally, short-term rentals can sometimes be less stable in terms of income, as you may go through periods where there are no tenants. This can be especially challenging if you rely on the income from your rental property to cover your mortgage or other expenses.
Finally, short-term rentals generally require more work than their counterparts, as you will need to find new tenants on a more frequent basis leading to increased property marketing costs as well as maintenance/cleaning fees.
In a competitive market, you want your abode to stand out from the rest. Although coastal Orange County real estate has been a strong seller’s market for years, you can still maximize your sale price by making strategic updates and decor choices in your listing. When it comes to decoration, try exhibiting works of art that are unique and exciting—not just another carbon copy of what everyone else has on their walls. Choose pieces that complement the color scheme and overall ambience of the home.
However, there are also some drawbacks to going the long-term route. One of the main downsides is that you will not be able to use your rental property as a vacation home, like you would in a short-term rental situation. Another issue to consider is the inability to enter the home often to assess for any damages or problems that need to be addressed. Though you may technically own the home, you do not possess the right to go inside as you please. There are important laws protecting renters from landlords, which includes your at-will access to the property. Finally, long-term rentals can sometimes result in more wear and tear, as tenants may treat the home as their own instead of like a short vacation house where they are generally more careful.
Which type of rental is right for you? Ultimately, the decision comes down to your personal preferences and needs. If you want more flexibility in terms of pricing and use of your property, and you are willing to put in more work for a potential higher income, then a short-term rental might be a good option for you. If you want a more stable income stream and less work, then a long-term rental might be the better choice.
Whichever way you go, make sure to do your research beforehand so that you know what to expect! As always, we are here to assist you with all of your real estate needs. To start the no-pressure conversation and discuss your options, please don’t hesitate to reach out.
If you are considering your options to sell your home in Orange County, CA, our top luxury real estate team is here to serve. At no obligation, please reach out for a consultation to discuss your options and see how we can help you plan and execute a strategy to reach the best possible sale price for your property. Contact us today.
Are you interested in purchasing a vacation home? Are you wondering what you should know before you take the plunge?
Whether it’s across the country or across the road, buying a second home can be appealing for a variety of reasons. You may be looking to make a sound investment, establish rental income for retirement, or own your dream vacation home in a destination you love to visit.
That said, it’s still wise to weigh the pros and cons of all your options, before you purchase a second home.
Here are some things you’ll want to consider.
If you’ve worked hard and saved, you may be looking forward to rewarding yourself with that gorgeous condo near the water or cozy mountain cottage you’ve always dreamed of. When reviewing your finances, just keep in mind that the purchase price isn’t the only cost that second-home owners face.
No doubt you will pay taxes and homeowner’s insurance on your new home. There will also be utilities such as heat, hot water, and electricity to consider, as well as inevitable maintenance to keep things in good, working condition.
If your home is a condo or located in a gated community, you might also be responsible for HOA fees. This may include services like lawn mowing or the use of a community pool. If it doesn’t, remember that you may need to pay someone to maintain the property if you don’t plan on living there full time. In this regard, an HOA can be a big plus for a second home, since you won’t need to manage as much upkeep while you’re away from the property.
You’ll also want to consider what it will cost to furnish your home, as well as the ongoing costs of maintenance. Make sure you leave yourself a little cushion for emergencies.
Add up your estimated costs and decide what you can truly afford. Consider the rent you’ll need to charge in order to keep up with your monthly expenses. Is this enough to cover the costs, and will you be able to generate a little income? Depending on the leasing rates in your target second-home area, you may come out with considerable monthly profit, or you may be cutting things uncomfortably close.
Buying a second home or vacation home can be a wonderful opportunity, and carefully planning your budget will ensure that you can enjoy the experience rather than regret it down the line.
As with all real estate, it’s important to consider where your potential second home is located. If you intend it to be a vacation home, will you be happy visiting the same place again and again?
Many of us have somewhere away from home that we truly love, but many others prefer not to be locked down to one location. If your options are a second home or occasional trips to far-flung lands, consider which is best for you. (If you have the resources for both, even better!)
Location is perhaps even more important with an income property. As mentioned above, it’s critical that you research the going rates for rent in the neighborhood to make sure your costs are covered. Also, you will have some responsibilities as a landlord.
If your income property is near your primary residence, it’s less hassle to manage the property and tenants yourself. However, if the property is further away, or if you simply don’t want to deal with the extra work of being a landlord, you may want to hire a property management company.
You may be purchasing a house to renovate and flip, or you may want to use it as an investment property over a period of years. In this case, it’s important that your home increases in value over time. Do a little research and make sure that this is a fairly safe bet before you purchase.
First, the home should be located in an up-and-coming neighborhood. Are there good schools and a growing population? Are there enough amenities to attract young families or retirees? An income property in a dwindling rural area is probably not going to appreciate much in value, but in a popular city or destination it has great potential.
Do some research on the projected growth for a particular area before you make an offer. Interview real estate agents in the area, and find a good fit with an experienced agent whose guidance you trust. As an expert in the area, they will be your greatest resource.
Maybe it goes without saying, but before you drop hundreds of thousands of dollars on a vacation home, it’s important to know you really like the place! To get a sense of living in an area, it’s a good idea to rent a home, or at least a hotel, for a time before making the big investment.
If you’re planning on eventually making your vacation home your full-time residence, make sure you take a trip during different seasons. Are you ready for southern heat in the summer? How about chilly nights in the mountains? Does the area have sufficient local business and amenities to meet your needs while you’re on vacation — say, restaurants, grocery stores, conveniences like gas stations, or medical facilities?
There’s no one perfect place for everyone; it’s just a matter of finding the right place for you. Once you know what you can realistically expect from your vacation home, and you are happy with it, then go for it!
Real estate transactions are among the largest purchases we make, so buying the perfect second home will take a bit of research. However, once you’ve found the right property in a location you love, you’re on your way toward a very rewarding lifestyle! Your family and your stress levels will be thanking you for years to come.
Don’t stop getting smart about vacation and rental homes now. For guidance on buying or selling a home in the Orange County area, please don’t hesitate to reach out. Contact the Stavros Group today!
Owning rental property in Orange County can be a lucrative investment, providing a steady stream of income every month. However, being a landlord can also be a major source of stress, headaches and heartache, from screening tenants to collecting rents to upkeep of your property.
So how do you manage your Orange County investment property or properties while simultaneously managing your sanity? We have some helpful tips that may save you time and money in the end.
Whether you’re managing two or twenty rental properties, it’s critical that you stay organized. Losing track of your repair receipts might mean a hit to your tax deductions. Misplacing a lease agreement may bite you later if you’re forced to evict. Utilizing property management software, you can keep everything safely in one place. Some apps even enable you to collect and track rent payments, manage repair requests, screen tenants, and list a vacant rental on sites like Zillow and HotPads.
Take a look at these reviews to learn about 2019’s best property management apps:
As a landlord, you’re likely not in it for a quick flip. You want to extract the most income from your property over a period of years, even decades. With that in mind, consider undertaking renovations and improvements that may cost more right now but will pay off in the long run. This includes adding in-unit laundry, updating the kitchen and bathrooms, and installing soundproof windows in street-side rooms. It may take a few years for these investments to pay off, but in the end you will recoup your costs, realize higher total income, and have a property that’s more attractive to future renters.
The next time you’re heading to your rental property, try this little experiment: Drive past first without going inside, and take note of the exterior. Does it look inviting, or does it look unkempt and overgrown? Based on the view, would a potential renter want to see more? You don’t need a veritable Garden of Eden outside your property, but a well-kept exterior space is important in maintaining your rental’s curb appeal. Plant some low-maintenance foliage, and set up a system to manage its health. Contract a landscaping company if need be—in the end, you’ll benefit from more renter interest and higher rents.
The stress of being a landlord can vary greatly based on the quality of your tenants. To ensure that the good ones stick around, address their concerns promptly. If something at your property needs repair, express to your tenants that you are working hard to solve the problem, and do your best to get things fixed as soon as possible. Just like you want good tenants, your tenants want a good landlord who cares about more than just receiving their monthly payment. Write them a letter of appreciation for prompt payments and keeping the place clean, or simply thank them for treating your property with care the next time you’re around.
Since a thank-you note may not always be enough to retain your good tenants, consider offering them concessions such as a free month of rent or an extension of their current lease. It’s always easier to keep your current tenants than to find new ones, so losing a bit of income in the short term is well worth it to save you the time and effort of finding and screening a new batch of applicants. If a lease is set to expire during slower months like the holiday season, you can propose an extension to keep your tenants in the property until a busier time of year when new tenants will be easier to find.
To protect your investment, be sure to keep detailed records of your property’s condition between tenants. Before new tenants move in, take photos and video of the entire property and save them securely in multiple systems like your computer and the cloud (a la Dropbox or Google Drive). When your new tenants are ready to move in, prepare a checklist and walk through the property together. Note the condition of each space, and have your tenants sign the checklist to acknowledge that the walkthrough was conducted.
If you’re getting ready to put your property on the rental market, first perform a comparable rental analysis. Just like selling a home, your best resource for pricing a rental is to compare your own property to others in the area. Look at rental properties of similar size, bedroom and bathrooms, and amenities. Make note of their rental prices, and adjust your target price based on differences like recent upgrades or problem areas. Losing rent income due to vacancy is your greatest enemy as a landlord, so it’s important to maintain a competitive, fair price.
This is frequently overlooked by landlords, but it can save you a heap of trouble. Requiring your tenants to have rental insurance will help if your tenants cause more damage than their security deposit covers. If a forgetful tenant leaves on the stove and starts a fire, or leaves the sink running and causes water damage, your landlord insurance might not cover all of the damage. You may be able to recover damages from your tenants’ renters insurance. In addition, your tenants will be more secure from losses to their own personal belongings. Renters insurance is a benefit to everyone.
Whether you are drafting a lease agreement or seeking an eviction for a deadbeat tenant, it is eminently helpful to work with a real estate attorney who knows federal, state and local laws inside and out. As we all know, attorneys don’t necessarily come cheap; but making sure that your i’s are properly dotted and your t’s are well-crossed is worth the price. While on its face a contract or a court filing may look simple enough, it can set you back months of time and thousands of dollars to get something wrong.
Ultimately, your rental properties are like any business investment, and you should treat them as such. Focus on cash flow: pursue late rents and do not hesitate if eviction is required. Invest in improvements which will net higher rents. Follow laws and ordinances to the letter, including Fair Housing and zoning rules. Maintain your property to high standards. And most of all, if you cannot afford the time and effort of being a hands-on landlord (which can be considerable), then consider hiring a property management company. You’ll lose a portion of your rental income, but the majority of the stress that comes with managing a property will be off your hands. Not a bad tradeoff.
As your local real estate experts, we have years of experience helping investors buying and selling rental properties. In addition, we have a broad professional network of trusted vendors, and we are always happy to recommend a contact for any of your investment property needs. Whether you’re looking for a real estate lawyer, a painter, a photographer for your rental listing, or any other industry pro, we are well acquainted with some of the absolute best. Let us know how we can help!
