Ask Cora Hey Cora: Recently, I went on vacation and stayed in a vacation rental, and I thought, hey, I can do this! So, I am ready to buy a home to use as a vacation rental. What are the pros and cons to having one of these? Signed, Wannamake-quick-money! Dear Wanna, okay, this is an interesting subject. For those who don’t know what a vacation rental is, it’s a home or part of a home where you can rent out a furnished area for vacationers, or workers staying temporarily, traveling nurses anything like that. The rate is calculated in days and it’s like a hotel eccept there is a kitchen and outdoor areas, and sometimes a car comes with it as well. I have stayed in 3-bedroom homes with 2 baths and a full kitchen. They are all set up with furniture, appliances, washer, dryer, bedding, pots and pans, everything! You should really only have to bring your toothbrush! It’s great for families that like to travel together. So, let’s take this apart and see where we land. Here are the things we are going to cover. Now, I am not going to tell if I think this is a good idea or not, I am, however, going to give you some facts and you can make the decision: Initial Investment: Because you are not going to live in this property, you will have to finance it as an investment. That will require 25% down payment plus your closing costs. So, if you are going to purchase a $400K house you would need $100K cash plus about 2.5% for the closing costs, about another $10,000. Then, and I hate to tell you this, but sometimes, you are required to have six months (yes, I said 6 months) of cash in the bank to show that you can make the payments for that long if something goes wrong and you are unable to rent it. Holy Schnikies Batman, that’s a lot of cash! So that would be another $12,000 or so in the bank. Bottom line approximately $122,000 cash for the initial investment. CCRs and local city code: Okay, this one, you will have to ask your realtor to help you with the research. Some Covenants, Codes and Restrictions, (CCR’s for those of you who are acronym savvy) do not allow day to day rentals. They must be at least 30-day leases. So, this would rule out being able to use the property as a vacation rental. Sometimes, city codes don’t allow for these types of rentals within the city limits. Furnishing and set up: You have already invested $122,000 into this, and now you have to buy furniture, cookware, dishes, towels, bedding, BEDS! It goes on and on. Remember, it must look nice to get your best daily rate, too. Setting up the rental: just like any other rental, you need to have an application and a lease all set in place. Something simple that
Brought to you by people can fill out and sign online. You may want the help of a property manager to do this. Not all property managers will manage a vacation rental, so when you do find one willing to help, ask what they charge. Maintenance and on Call. You will need to have some sort of handy man unless you want to be the handy man! This means that when the water won’t get hot, it’s you that fixes it. When the dishwasher is leaking – oh that’s you. When the toilet needs plunging – yup, you again! Some people are really good at this, and others don’t want to be bothered. Make sure you know which one you are. Management: Someone has to keep the books, hire the furnace guy, pay the bills. You may want this managed for you. Get references and make sure that you like their policies. You may not agree with how they want to manage your property. Read it all carefully. Cleaning: if you have a manager, they will have the cleaning company most likely. If not, you will need to get online searching for a reliable cleaning crew. Each time a tenant moves out, cleaners must come in and change all the beds, and towels. Online Maintenance: there are several websites that you can use for booking your vacation rental. There is VRBO, Vacation Rental By Owner, or there is Air B and B. Several others. But it’s your responsibility to keep these sites maintained with good photos, updated information on availability. Again, if you have a good manager, they will take care of this for you – if not, or you just want to save the money – it’s all you baby! Bed fees and taxes: This is a thing! If you are going to act like a hotel, you are going to have to pay the taxes that a hotel pays. Now, this may not be a requirement where you are going to purchase this lovely little get away – but check it out to make sure. So, let’s talk about the best places for a vacation rental. Alaska is very popular for vacation rentals, but of course, it’s going to have to “attract”. I know people who have these in Anchorage, and they do well because there is such a variety of reasons why people need to be there. But as you get further out, the reasons change. Peace and quiet, tranquility, lake front, fishing, hunting, riding, hiking. All kinds of different things. Choose your location wisely Grasshopper! This will make or break your great little business venture. Get good advice, talk with your realtor, see if they have experience in what you are trying to do, if they don’t you may need to use a realtor that understands how these work… and how they don’t. If you want to talk vacation rentals, give me a call and we can chat away about the good, the bad and the ugly. December 2021
Call Cora Today! Keller Williams Realty Alaska Group Of Wasilla 621 S Knik-Goose Bay Rd Wasilla, AK 99654
www.clcandassoc.com
907.982.5700
GreatLander Real Estate Guide
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