Do you own a vacation home in a scenic location or are you considering purchasing one? If so, you might consider renting out your house to travellers in order to make some cash on the side.
If you are looking into that option, you might be unsure how to go about leasing out your vacation property. Read these steps to place your tropical oasis on the market now!
Buy a Place to Lease Out
If you have some savings but need extra cash flow in addition to your salary, buying a second home for the purposes of leasing it out might be your best option, especially if it is a buyers’ market. Not only can you rent the house or apartment out most of the year, but you and your family can also use the unit yourselves for vacations. Your income could be as much as double or even triple the mortgage cost, depending on its location and the market. However, this additional means of cash flow will also come with a lot of hard work.
Make Sure Before Buying That It Can Be Used as Intended
It is important to know and understand all of the rules before purchasing anything for any purpose. Not every property can actually be used as rental property, so read all of the home or condo association rules. Some vacation resorts actually require homeowners within the vicinity to use their program, but they handle all of the management for some percentage of the payment from your tenants, according to US News. Research all of these rules before buying to make sure that you are not purchasing property that is not suitable for your goals, or you might waste your money and time.
Decide Whether to Use a Management Company or Manage It on Your Own
There are pros and cons to using a full-service management company. While the management company can save you a lot of hassle when it comes to dealing with vacation tenants, you will also owe the company about 20 percent, or even more, of your leasing income, according to Bloomberg. If you want to save that money for yourself, you need to put in a lot of time and effort to managing your place. You will need to book and market to clients and hire housekeepers to help keep the unit clean before, after, and even during tenants’ stays. You will also need to stay on top of communications, email, phone and otherwise, between you and current and prospective tenants.
If you present yourself as a host rather than a landlord, guests are much more likely to treat your vacation place with respect. They will be more likely to keep the place clean during their stay and let you know if anything goes wrong or they damage anything in the house.
There are a number of property listing sites to choose from when it comes to listing your vacation spot. Do you live in Kuala Lumpur? Try listing your house for rent in KL on PropertyGuru Malaysia. Especially if you are in a competitive market, it is worth it to spend at least $1,500 per year to make your house as visible as possible. Plan on paying for top tier visibility to make sure that you appear at the top of vacation rental searches.
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If you are leasing out your vacation property to young adults, you might be concerned about damage to your home away from your home. The solution is adding a clause to the agreement that caps the occupancy to a reasonable number and that damages to the place will result in additional penalty fees. Make sure that you take the tenant’s credit card information before their stay, so that you can automatically charge them any additional fees if need be.
Consider Getting an Insurance Policy That Covers Tenants
Even if you do include a damages clause, there can be incidents that occur, which you will want your insurance policy to cover. Make sure that your insurance policy covers tenants. If it does not, you might want to consider getting a new policy or making a change to your current policy, especially if you are leasing out your vacation home year round. This policy should be in place for large incidents like fires and thefts, while smaller incidents can be covered by the damages clause.
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It is crucial that you are specific when it comes to detailing the house rules to your tenants. For example, do you want to avoid having smokers or guests with pets stay in your property? Spell it out in your ad. If you do allow pets but want to charge extra, simply list that in the ad or agreement. What is your policy on parties? If you are capping the occupancy on tenants, make it clear if your guests cannot invite extra people over during their stay. Be as clear as possible in your agreement to ensure that everything runs smoothly during your guests’ stay.
Now that you have read this guide, you are ready to lease out your vacation home. Get ready for some extra cash flow, but keep these steps in mind and make sure that you understand all the rules and know how you are managing the unit. Happy renting!