Because California has some of the US's best beaches, potential property owners often ask us if they should purchase a vacation rental investment or an annual rental investment. The investor's income and lifestyle will be the major factors in the decision.
If consistent, steady and modest income is your goal, you'll be much better off choosing the annual rental option. You'll be able to budget and plan ahead because of the stable earnings it provides. Usually, there is very little maintenance required, and the tenant will be in charge of the utilities.
If a tenant remains on the property for several years, then vacancies are not something the landlord will have to worry about. As an annual rental landlord you will be responsible for HOA expenses, financing, insurance and major maintenance expenses.
Utilities for monthly vacation rentals, however, will be the responsibility of the landlord or owner. Because these have such a high turnover of guests, they also carry more maintenance costs than annual rentals.
Monthly rentals typically result in larger profits, but the income is less consistent. Compared to annual rentals, earnings will be much more sporadic. Additionally, will also be in charge of greeting guests, answering calls about maintenance, answering inquiries, and cleaning up after guests. This, however, can be avoided by retaining a property management company's services. A property management company will make your role much less stressful.
If you decide to purchase property in a popular tourist destination, the monthly rental approach will bring you extra income while subsidizing you property investment's costs. You will also have the ability to use the property any time you'd like.
With both of these rental models, there is also the element of value appreciation to think about. You will probably see the home's value appreciate in the mid to long term regardless of which rental type you choose.
We highly recommend contacting an expert on rentals to give you advice on which rental option your property is best suited for if you are still having difficulties deciding between the vacation and annual rental models.
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