Strategic (capital costs)
The outlay you make on items that will increase rental value can positively impact your bottom line over time, but may also significantly affect start up costs. I term them strategic because the outlay can usually be recovered by the increased occupancy generated or the higher rental rate achieved by adding the features. For example, installing a hot tub may allow a small rise in rates and give the potential of higher occupancy in low season periods. Over a longer period, the return on the investment can be significant. Some things such as a deck replacement may not have as strong an impact from a feature perspective, but can increase the appeal of the property through the images on a listing. This in turn generates more 1nquiries and subsequent conversions. These are a few examples of the type of investment features you could consider:
· Hot tub
· Automatic generator
· Entertainment systems
· Furniture replacement
· Exterior upgrades - e.g. deck, docking, etc
Operational (running costs)
It's important to calculate running costs at an early stage, before diving into expensive capital improvements and upgrades. If you are on a tight budget, and your operating budget is limited, it may be better to get a season of rental under your belt at a lower rate before shelling out on the big stuff.
Write down your fixed costs first. These are the expenses that will remain the same, regardless of whether the place is rented or not and will include:
· Property taxes
· Fixed property care costs such as yardwork/pool maintenance
· Snow plowing
Variable costs are those that are impacted by rentals taking place and might include:
· Heat and light
· Cleaning & changeover management
· Guest supplies (paper products, cleaning supplies, bottled water, welcome gifts etc)
Over spending on marketing is easily done, with so many options available for listing, so determine your budget before spending those first dollars. Keep it simple and on track and you won't get carried away by every offer that drops into your inbox. Budget for a simple Wordpress website you can build and manage yourself; a major listing site such as Vacation Home Rentals; a more region-focused listing site, as well as some print materials you can give to people, or drop off at your local tourism office.
Keeping a track on all rental-related spending is important if you want to run your vacation property in a professional manner. It's helpful for the bank balance too!
Leave a comment
Sign Up for Newsletter
Latest Owners Tips
Apr 30, 2015Spring Clean Your Vacation Rental With These Tips
With winter’s icy grip finally letting go across the U.S. and other parts of the world, it’s time to get your rental property ready for spring and summer travelers! While it’s easy to hire a cleaning service to come in and handle the chore, that can get expensive and the end result may not be […]
Feb 18, 2014Let’s Buy a Vacation Rental!
I think we all do it. We’re on holiday in a fabulous vacation rental and decide this must be a great way of investing; reaping the benefits of rental and getting to use the place when we want. So, we spend time exploring the Multi Listings Site and browsing in realtor windows. I was speaking […]
Jan 07, 20149 Things That Make Your Home Away From Home
photo© William Warby I always loved going to hotels when I was young. It was a time to escape the house, jump on the beds, and drive my parents insane. However, as the end of our trip would draw closer, I always wanted my own bed, blankets, towels, and room. Homesickness can set in fast […]