Though businesses are beginning to reopen in many areas of the country and we are all adjusting to what might be our "new normal", many things still remain uncertain. One of those uncertainties lies in the future of short-term/vacation rentals. Those who own vacation rentals have taken an economic hit over the past several months. This is due to several factors including travel restrictions, big tourist draws like beaches, theme parks, restaurants and bars being closed or operating at lower capacity, and increased cleaning/sanitizing requirements placed upon vacation rentals which has led to longer vacancy periods.
So, what does the future hold for those who have invested in short-term vacation rentals? Unfortunately, there is no clear answer which has left many investors in a precarious situation - what should they do with these investment properties if they're no longer turning a profit? One option to consider is converting your short-term rental property into a long-term rental investment. There are, of course, many factors to be considered before ultimately making this decision. But, if handled properly, a long-term rental investment can provide an excellent return and be a relatively hands-off investment if you employ the services of a professional property management company.
Short-Term vs. Long-Term Rentals at a Glance
Though the market for vacation rentals, especially in coastal areas like Wilmington, has always been a seasonal one, this has been a predictable ebb and flow that property owners could expect and prepare for. However, with the advent of Covid-19, no one is sure when (or if) the market will ever bounce back to its once-thriving state. Not only have there been a host of restrictions to contend with, but many travelers themselves are now experiencing anxieties about leaving home and may not be planning vacations they once would've, thus lessening the amount of potential renters.
Long-term investment rentals, on the other hand, have historically provided a more predictable and stable cash flow. When long-term rentals are managed correctly, they oftentimes don’t see a high turnover rate and require maintenance and upgrades less frequently since they have tenants who are using the property as their personal home. Another interesting trend that has been brought about by the pandemic is the huge increase of people who are working from home. Though it may be too early to say if this has increased the amount of people looking for long-term rentals, it will be interesting to see in the coming months if this leads to people looking for places to rent alone vs. with roommates or needing to rent larger spaces that allow for home offices.
Converting Your Property from a Short-Term to Long-Term Rental
If you're new to long-term rentals, there are several things you'll need to consider before putting your investment property on the market. First and foremost, you'll need to understand that in North Carolina, there are different laws that apply to long-term rentals versus those that apply to vacation rentals. The process outlined below may sound a bit complicated and involved, and, if not undertaken properly, it can be.
One of the best things you can do if you're entering the long-term rental market for the first time is work with a professional property management company like Sweyer Property Management. We have experts who can guide you through every step of the process from preparing your home for the market and advertising to tenant screening, lease signing and beyond.
Getting Started - Once you've made the decision to enter into the long-term rental market, you'll need to make sure that your home is in prime condition to attract great tenants. After all, long-term tenants are probably looking for different things than people who are on a two-week vacation, right? Consider the condition of everything in your home - paint, flooring, counter tops, appliances, light fixtures, bathroom fixtures - do they function properly? Do they have cosmetic issues? Could they use replacing? What about the exterior - could the lawn use some maintenance or is the sidewalk or exterior siding looking a bit dirty? Long-term tenants are looking for a place to call home and will opt for rentals that are in excellent shape so if you want your property to stand out among others, you'll need to make sure everything looks and works great. A professional property manager can help you decide exactly what work needs to be done in your home before ever putting it on the market.
Pricing - This will be another vital component of putting your property on the market. You of course will want to set yourself up to turn a profit each month, but you don't want to go so high that no one takes a second glance at the home. Looking at comparable properties will help give you a good idea of how to price your home, but you'll also need to consider what features your home has that others perhaps don’t. This is another area where a professional can play a key role and having the home priced right can aid in decreasing your vacancy period.
Advertising - Once your property is ready to be shown, where do you advertise it? Probably not the same places you've been advertising a vacation rental. You can of course go it alone and try sites like Craigslist, but that often isn't worth the headache and isn’t likely to produce high-quality tenants. Professional property management companies already have solid reputations in the markets they serve and therefore have well-established websites that rental-seekers visit often. They also typically syndicate their listings out to other home search websites. Working with a professional will ensure maximum exposure for your property.
Tenant Screening - This is another area that is vastly different in the long-term rental market vs. the vacation rental market. There are different laws and requirements at play, and you must be very careful to not violate fair housing laws. If you're not prepared to take a crash course on the Federal Fair Housing Act and NC Tenant/Landlord Laws, you may want to bring in a professional to take care of this.
Leasing – Long-term leases usually run for twelve months, a lot longer than the 1-2 weeks that vacation rentals are secured for. As you can imagine, a lot more goes into a twelve-month lease than a lease that lasts for just a few weeks. Employing the services of a professional property manager who already has a standardized lease that addresses all necessary areas of renting a property will alleviate the worry of making sure you've covered your bases when entering into a long-term rental agreement.
Maintenance - If your short-term rental property was being managed through a vacation rental company, they likely had a maintenance service that would respond to tenant emergencies, right? When owning a long-term investment property, you probably want the same type of service, otherwise it will be you getting the 3 a.m. emergency calls about busted water heaters. When bringing on a professional property management company, they will have a maintenance department who can handle everything from small repairs to late night emergencies to turnover work.
Ultimately, only you as the property owner can determine if entering the long-term rental market is right for you and, as you can see, there is a lot to think about before making a decision. But, with some help from the professionals, long-term rentals are a sound investment with steady cash flow that can be as hands-on or hands-off as you'd like them to be. If you'd like to discuss what would be involved in converting your vacation rental into a long-term rental, please reach out to our team of experts today.