to 50 percent of the rent, compared to the long-term property management fees that are usually between 8 and 12 percent. If you’re looking for a way to recoup some of the costs of your vacation home, rental housing may be an avenue that’s worth exploring. Here are a few things that you should know about making the switch from vacation home to rental property. THINGS TO DO BEFOREYOU GET STARTED DO YOUR HOMEWORK While making the move from holiday home to long-term rental often makes sense, it’s important to do your research up front, just so you’ll know what you’re in for. Long-term rentals often provide better yields, and a more consistent income compared to their vacation counterparts, which often fluctuate wildly depending upon the month. But of course, it’s important to remember that, with a residential unit, it would be difficult to use the home as a vacation getaway since the unit will most likely be occupied year-round. Make sure that’s something you’re OK with before mak- ing the transition. You’ll also want to en- sure that there’s enough demand to keep your rental full, with minimal vacancies.
long-term rentals. However, this 14- day maximum is something that may be problematic for those who want to spend more time at their vacation rent- al. With a standard rental, of course, you’ll be able to write off many of the expenses associated with the rental, including maintenance, repair costs, travel to and from the rental, and prop- erty management fees. Property taxes, insurance and advertising can also be written off. Finally, you’ll want to consider wheth- er you’ll be managing the property on your own, or outsourcing some of the work. While you may be able to take on the management if you live relatively close to the property, for rentals that are out of state, it often makes sense to enlist the services of a property manager to handle tenant sourcing and screening, as well as any day-to-day issues that arise. They’ll also be able to keep an eye on your property for you, giving you peace of mind when you can’t be there. Ultimately, the decision to have a vacation property or long-term rental comes down to which one will work best for your situation, depending on the local rental market and the mar- ket for holiday rentals. Be sure to do a careful cost and cash flow analysis of both options, and carefully consider which route will help you to reach your financial goals sooner. • CONSIDER DOING IT ALONE VERSUS OUTSOURCING
If you can, try to get in touch with a local Realtor or property manager to see how much your property could rent for per month as a rental. You could also head over to Trulia and Zillow, to have a quick look at what other, similar rentals in the area are renting for. RUN AN INVESTMENT ANALYSIS Next, check the financial viability of your property as a rental. Use a rental property investment analysis calcula- tor to run a cost analysis, and see how much your expenses per month will be, and determine how much profit you’ll be making. While it’s true that vaca- tion rentals tend to rent for a higher profit than long-term rentals, with the additional costs that they incur, they won’t automatically net more. Weigh both options carefully, taking care to list as many expenses as you can think of to get a fair and balanced picture. For long-term rentals, this usually includes the mortgage, taxes, insurance, mainte- nance and property management fees, as well as any potential HOA fees. Cal- culate in vacancies as well. While stan- dard rentals often have a much lower vacancy rate than vacation properties, it’s good to factor in about 10 percent of the rents as a vacancy cost since this will help to cover the mortgage payment and utilities should the rental be empty for a short time in between tenants. It’s also important to note that the tax implications for a rental property are very different from a vacation property, and gener- ally less restrictive. The key to maximizing your tax deductions on a vacation rental is to limit your personal use to fewer than 15 days per year, or less than 10 of the total rental days, whichev- er is greater. By limiting your use, your property will be considered a rental for tax purposes, which means that you’ll be entitled to the same deductions that you could have for UNDERSTAND THE TAX IMPLICATIONS
The president and CEO of Renters Warehouse, Kevin Ortner first joined the company in 2009 as a franchisee for the Phoenix region. After the retirement of
founder Brenton Hayden, Ortner went on to take the reins of the company, helped see it through monumental growth and helped double the com- pany’s total number of franchisees in the country since 2013. In 2015, he was honored with both an American and International Stevie Business Award for his achievements as Executive of the Year. With Ortner at the helm, Renters Warehouse secured elite honor roll status on the prestigious Inc. 500|5000 list of fastest-growing privately held companies in America for its sixth consecutive year.
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