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Vacation Rentals – Opportunity for Realtors and Property Managers

January 11, 2019

Changes in Vacation Rental Market

When Airbnb announced recently that it was getting into the homebuilding sector, we got a hint of the future of rental housing. It gives built to rent a whole new dimension too.

Change will come from all directions and short term rental market demand is bringing change to both commercial and residential property management.

And Realtors, property managers, builders, and investors will have to navigate the business opportunities stemming from these innovations. New tech and software innovations along with changing demand for short term rentals, is leading to innovation and new business models. From the US to UK to Australia, short term rentals are making an impact.

Monthly luxury rentals are lucrative and in demand

With all the new property related software, demands of modern tenants, and property management services available now to tame the vacation rental market, should this be the next one for you?

The vacation rental market is having a substantial influence on multifamily developments today. Developers are integrating more “vacation type” amenities into their longer term rental developments including lagoons and spas.

The Rental Housing Market is Evolving

The real change in demand and influence has to do with an ever evolving rental housing market, including the views of investors. The lines between submarkets are becoming increasingly blurred and it’s creating innovation.

Investors demand flexibility before they’re willing to invest in multifamily or single family developments. Investors and property managers biggest concerns in 2019 is vacancy. They’ll be open to solutions to get leases renewed and raise occupancy rates.

Rental Prices are Alluring and demand is growing via VRBO, Airbnb, Homeaway, etc — Screen Capture courtesy of Airbnb

National Multifamily Housing Council estimates that about 65% of recent Airbnb bookings are in multifamily buildings — such as apartments, condos and new hotels.

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Vacation Rental Portal’s Big Success is Changing Attitudes

Younger renters more open to short term rentals in communities

The Success of Airbnb and VRBO

Considering the growing success of Airbnb, VRBO, Homeaway, Flipkey, Hometogo, Luxury Retreats, and other rental websites, short term rental markets could be lucrative for investors. And they’re a healthy growth target for property management companies. People are more mobile and renting for extended periods which might be from 2 weeks to 12 months.

“The picture we see is that short-term rentals represent a new source of high-quality demand for assets you already own,” said Joe Fraiman, president and COO of Parallel, which leases blocks of apartments from apartment firms for luxury short-term rental purposes. “The challenge is, how does the industry capitalize on the demand? Short-term rentals will go from something forbidden to something actually courted and seen as a fixture in the industry.” – NMHC report.

The Resistance Will Weaken

Many monthly leasing apartments, developments, municipalities, and homeowners associations prohibit short term rentals. They’re resisting yet demand is too strong.

However, property investors aren’t ignoring the revenue potential of vacation properties and property management companies can play a key role in managing properties and tenants effectively.

Rental market demand is altering builder’s choices on developments and affecting what property investors are investigating.

Have you used Airbnb or VRBO yourself? I’m sure you’re surprised at the rental prices quoted. Any property management company that has the skill and resources to keep these units occupied can grow their revenue significantly. How does $250 to $1000 a day sound? How about $40,000 a month?

The advantages for investors are obvious:

  1. higher overall revenue
  2. charging more additional services
  3. tenant market willing to pay more – charge them by the week
  4. buying for your use and generate revenue by renting it out for the rest of the year
  5. higher appreciation in vacation regions
  6. higher occupancy rates
  7. vacation rental management companies can manage it for you

Travel and Mobility Driving Factors Too

Americans are travelling more, the economy is strong with a good outlook, and vacationers have a lot of money.

Vacation rentals are in big demand in hot vacation spots such as San Diego County, Naples, South Carolina, Sarasota, Fort Lauderdale, Miami, Sydney, Melbourne, Mexico, and Arizona, and the gulf region, and Vancouver. And in 2019, demand for vacation properties will be most intense in the best cities.

Luxury Condos in Sarasota Florida – High Priced Monthly Rental Luxury

What Resources Exist to Help?

Consider how you would have the assistance of the top rental marketing sites online, and that you can adjust the rental terms to define favorable rental periods only? And there are so many tools available to help you manage cleaning, maintenance, tenant management, asset management, and online marketing. Using property management software, you can manage vacation rentals much easier.

The knock against vacation rentals has always been higher management costs, increased asset costs (TV’s major appliances, furnishings, and potential behaviors and complaints. There’s a corollary between vacation rentals and furnished apartments.

The downside is the increasing regulations on short term rentals. Is there a difference between a 3 month rental and a one year lease? At what point do you need added security deposits and tenant background checks? The line between vacation rentals and the today’s typical home rental is getting a little blurred.

8 Tips for Buying Vacation Rental Properties

1. state your goal for buying a vacation rental property (part time home pluse rental income, or full time vacaton rental)
2. research the best cities for rental properties
3. visit the areas you might purchase a rental vacation property
4. hire a Realtor with experience in managing vacation rentals
5. find a good property management company who can handle the demands of shorter term rentals
6. interview current rental property owners and managers
7. research the costs in detail
8. assess the rental prices, revenue potential against costs and vacancy rates

Many migrating workers may turn to vacation rentals when they arrive in town. Companies will pay their rent when relocating them to another city.

Before investors purchase any property, they need to consult with a Realtor who has experience with vacation properties. And many Realtors do. In cities such as Sarasota, St Petes, Fort Lauderdale, Naples and Fort Myers, San Diego, Oceanside, Orange County and Long Island NY, realtors have mixed property portfolios. They’re certainly big in Costa Rica, Mexico, Belise, Hawaii, Australia, and the Caribbean.

Rental Management is Easier

Why would a Realtor avoid vacation rentals? With modern marketing and management software platforms, the issues and logistics are more manageable. Realtor’s own lead management funnel, revenue, and operational efficiency improves as their scope widens.

As the number of rental homes and apartments increase, more of these properties are being bought and sold by Realtors. Realtors typically are aware of this real estate sector and can help investors and landlord looking for a good rental property management company.

Nightly and weekly vacation rentals might be beyond the common scope of some Realtors or property managers. The logistics, regulations, financing, tax management, and tenant management might be too much to handle. Right now it’s not for everyone. For smart Realtors and property managers, capturing the leading edge of this new market is wise.

Yet short term rentals are coming. Millennials especially, are more mobile and they’re looking for flexibility in renting. This “work hard, play hard” demographic will shape the market for the next 10 years. They believe digital technology makes everything possible and that all real estate related businesses should fall in step.


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