Most people that know how the vacation rental industry operates often look on in awe of those that own their own property and are able to rent it out as a vacation rental. However, you do not have to own your own vacation rental property to get involved in the industry. A great way to start a business is by renting out other people’s vacation rentals. The way in which you do this is by opening your own property management business.
How Do Property Management Businesses Operate Vacation Rentals?
There is no one single explanation as to how a business can operate their own property management business, so we will cover the most important points out of many. We do advise that you use this guide as a starting point and if you are interested in the information we have shared, then you can go off and do some more research.
Check out Lodgify resources for vacation rentals for some great information on how you can successfully set up and market a vacation rental.
Their advice is useful for property management companies learning how to market their clientele’s property for short term leases.
Occupancy Is Key To Success
As a property management company, you have two choices to lease out your customers’ properties.
Firstly, you can opt-in for a long term lease contract that spans over the period of one year. Once the year is up, the contract usually continues with the tenants only needing to provide your company with one or two months notice if they decide to move out.
Find out what occupancy rate means: What is occupancy rate?
The second option depends on the location of the properties that you are managing. For example, if you are managing properties near the beach, then it would make sense to rent any managed places out as holiday homes on short term leases. Short term leases yield much higher returns than long term leases in the property business.
Other properties you manage will simply be receiving a certain amount of money from your client to look after their property. This is to maintain the place while they are not there. These are going to be your bread and butter customers, but they will not earn you as substantial returns as short term leases will.
In order to make your money, you need to make sure the properties are always full – as in the occupancy rate is high. This because the properties being managed by your firm are owned by people that expect a monthly rental deposit in their account from your business. That is why they would have come to use your business in the first place. They save themselves the hassle of having to deal with contracts and searching for tenants and leave all the hard work down to your property management expertise.
The Best Way To Make The Highest Profits Is Via Short Term Rentals
If you have a good team and set processes such as a team to answer inquiries from holidaymakers, cleaning teams, maintenance teams, and so on, then you will be able to manage all the aspects needed to rent out your customers’ properties as vacation rentals.
The returns of short term leases far outweigh the returns of a long term rental. Usually, the amount in peak seasons will be 4 to 5 times the daily rate of a yearly rental contract. When the off-peak season begins you can begin to give discount rates for weekly, fortnightly, and monthly stays that are still slightly above the going market rate compared to properties in the area listed for yearly rental agreements only.
See more information about ROI here: What is a good ROI for vacation rentals?
As a property management business, your firm will be looking for higher margins and vacation rentals are the best way to achieve this.