Many people move to the city because of work. But, with over a year of working from home in our rearview mirror, the need to live in the city for work isn’t as strong as before.
Now, with just an internet connection, many people can work from anywhere...which maybe isn’t always a great thing, but that’s a discussion for a different day. Now with nearly unlimited options for living and working, people are heading out of the city in search of the ‘cottage life.’
Here’s the thing; a couple hundred-thousand people are also thinking the same thing! That means, rental rates are high and availability is low. So, rather than stress about missing that perfect rental, why not look into buying your own vacation home and renting it out when you’re not there?
We can help with that.
An Income Property
We’ve covered what you need to know about the costs of buying a vacation home or cottage. Like any home purchase, you still need to look at:
Where will you get the downpayment?
Will you buy this home as a second home or primary property?
What kind of property or out-of-province taxes are involved?
Will you need more insurance?
And, can you afford the monthly mortgage payment?
If you’ve ever seen the HGTV show, Scott’s Vacation House Rules, they really focus on that last question. This show turns these nearly unlivable properties into high-profit rental properties. By the end of the show, the property is rented out for top rates to pay for the majority of, if not all, the mortgage payments...for an entire year!
Now, this is a great form of passive income and we’re totally for something like this. We are in real estate after all. But (there’s always a but), to really earn the amount of money needed to cover the mortgage, there are a few things the show leaves out.
The Right Mortgage
Of course, we have to talk about mortgages first, but we’ll keep it short.
If you’re planning to rent your vacation property for additional income, you have to let your realtor and mortgage broker know upfront.
There are different mortgages for rental properties, primary residences, and secondary homes. And not all areas allow you to rent out your property nightly. You’ll also need different insurance.
Does all of this mean that a vacation property is out of your budget? Of course not, but it might cost a bit more on the onset as you’ll likely need a higher down payment amount and legal costs to get everything set up properly.
Managing Your Vacation Property
Part of the vacation rental discussion is how much are you willing to do personally or hire out to do? Of course, the HGTV show rarely talks about the cost of hiring professional cleaners or the fees associated with many online booking platforms like AirBNB.
Getting people in your rental means getting your vacation rental online. Booking platforms, like VRBO and AirBNB are great for searchability but there are some fees with each booking. Majority of the time, they are already built into the cost of the rental but that goes to the platform, not to you.
Additionally, are you ready to handle booking requests, emails, social media messages, and telephone calls from people wanting to book? No? Then hiring a property manager could be a good option. They can often provide other services such as promoting your rental, security, and home maintenance.
Finally, to keep charging top dollar, you’ll need to keep the rental clean. If you’re content and able to clean after every guest, then all you lose is your time (which we recommend building into your nightly rate anyway). However, if you’re disgusted even thinking about cleaning up after strangers, a professional cleaner is the way to go!
Planning For Additional Costs
This one is a bonus and likely not a tip you’ll find online. Like we’ve said many times before, we have experience in these things.
We tend to take care of our own homes better than other people do.
That’s just a fact. No matter how qualified you think your renters are, they are going to care less about the maintenance and upkeep of your home than you.
That means, budget some extra dollars for additional heating or air conditioning. You want to be comfortable on vacation after all. Lights will be left on; doors will be left open; sand and dirt will be tracked in; this is the reality of renting your cabin.
Things will likely be damaged faster than they would in your own home (think about the path of destruction young kids can cause), so you’ll have to keep a budget for replacing things like towels, cleaning supplies, dishes, toys, sheets, etc.
Obviously, if there is major damage you can take the damage deposit with each rental, but that can’t be used to cover these small replacement costs.
We Still Think You Should Rent Your Cabin
After all of these things, we still think renting your cabin or cottage (whatever you want to call it), is a great idea and we’d love to help.
If you’re ready to escape the city and start earning passive income, give us a call and we’ll help you navigate the vacation rental market.