Vacation rentals are among the most popular real estate investments. Not only are they fun and flexible investments, but they can also be highly profitable. The question is, are you maximizing your rental income profits?
Here are a few simple ways you can boost revenue and bolster your ROI:
Set a Competitive Rate
As you’ll see throughout this article, bookings are the linchpin to vacation rental property success. The more you keep your property rented out, the higher your revenue. And the starting point is a competitive rate.
People get far too caught up in the price per night and how much they’re charging, when they should really be focused on setting competitive rates that allow the property to stay booked for more days each month.
Getting $500 per night for a property is great, but you’re only generating $7,500 per month. By renting it at $400 per night and upping your bookings to 25 days per month, you create $10,000 in monthly revenue. At the end of the month, revenue is what matters – not that you charged less per night.
Take Great Listing Photos
Nearly 100 percent of booking decisions are made online these days. Very few people have the ability to drive by a vacation property or visit in person prior to booking. For the most part, bookings are done online with nothing more than a listing, some reviews, and a map.
If you want to secure more bookings, you need to pay for professional quality listing photos. You’ll get your money back in the first month.
Speaking of listings, take time to develop crisp copy that sells your property and addresses any and all questions or common points of friction. This is your one chance – take advantage of the opportunity to wow potential renters!
Collect Social Proof
A good listing is a must, but prospective renters want more than just your promotional spiel. They want to know what other renters think. And this is where social proof comes into play.
“Social proof is the positive reaction that’s generated when people see that others are doing the same thing and assume that it’s the right thing to do,” industry insider Carla Chicharro explains. “It’s kind of how trends begin – someone starts a new trend, many others follow and eventually, people like yourself join in because it’s really cool or appealing.”
In terms of a vacation rental, social proof includes things like customer ratings and reviews, certifications and credibility badges, celebrity endorsements, concrete data and numbers, media mentions, and glowing social media posts.
Upgrade and Update
When people vacation, they want to get away from the mundane nature of everyday life and enjoy luxury – even if it’s just for a weekend. You can appeal to this desire by investing in the right upgrades.
Cosmetic upgrades to bathrooms, bedrooms, and the kitchen are well worth the investment. Whether it’s a simple backsplash upgrade, an accent wall, or new flooring, you’ll almost always see a positive ROI immediately.
Establish a Point of Differentiation
If you’re in a highly congested rental market with hundreds of other similar properties, you have to find a way to set yourself apart.
Consider, for example, a popular beach town. If you’re trying to compete on price, you’ll always have someone who can go lower. What you want to do is win the battles where a family is choosing between three different properties that are all basically the same. You do this by establishing at least one point of differentiation.
A point of differentiation could be a chef’s kitchen, a hot tub on the deck, a theater room with an 80-inch projection screen, or complimentary use of a golf cart.
Don’t Forget About the Offseason
If you own a rental property that’s driven by high seasons – like a beach rental – it’s easy to forget about the offseason. However, this is the time when you can really bolster your revenue for the year.
Don’t be afraid to be flexible during the offseason. Consider lowering costs, offering one-night stays, and/or including steep discounts for month-long rentals.
When people are renting a place to stay for a vacation, they usually want to make a decision fast. If there are three properties they’re interested in, they might send questions or requests to each property owner. Sometimes it’s the first person to get back with them that gets the booking. If you can’t be ultra-responsive, work with a booking company or property management service that can.
Create a Multi-Unit Property
Is there a way to turn a single rental property into a multi-unit property? In some cases, this is as simple as throwing up a couple of walls and adding some new appliances.
If you have a property that’s well suited for a multi-unit conversion, you could see a serious increase in cash flow. It’s not unreasonable to go from renting the entire property at $500 per night to renting each half of the unit for $350 per night ($700 total).
Modify Your Tax Classification
This last tip won’t apply in most situations, but it’s something to consider. Depending on where you’re located and how the property is used, you could look for opportunities to modify your tax classification.
For example, you might be able to add a certain number of beehives to your property and get it taxed as agricultural land. (Seriously! It’s a thing.)
Green Residential Professional Property Management
Real estate investing isn’t for the faint of heart. It requires discipline, fortitude, and a willingness to embrace risk. But it doesn’t have to be something that frustrates you and causes undue stress. With the right approach, you can enjoy hands-free profitability.
At Green Residential, we work with Houston-area landlords and investors to help manage the details of their rental properties. From finding tenants and drafting lease agreements to collecting rent and managing repair requests, our mission is to streamline your day-to-day responsibilities so that you can focus on the big picture. Contact us to learn more!