January 23, 2018

Should You Invest in a Vacation Rental House or Condo?

January 23, 2018

Should You Invest in a Vacation Rental House or Condo?

If you're in the market for a new home that will primarily be rented as an airbnb, you'll want to decide whether you invest in a vacation rental stand-alone home or in a condominium. Like most things, each has its advantages and disadvantages. Take the time to sort through all the pros and cons before making your final decision. Think about your lifestyle, what you enjoy about renting property and the types of guests you like to work with. Here are some advantages and disadvantages of each to consider:

The Advantages of a Condo

When you make the decision to purchase a condominium, you're essentially buying a single unit of housing within a commonly used building. In doing so, you abdicate many maintenance and repair responsibilities within the shared portions of the condo complex, which leads to advantages such as:

* Outside Property Upkeep. Condominiums take responsibility for all exterior maintenance, which means grass cutting, weeding and other landscaping is handled. Snow removal as well as parking lot and sidewalk repair is also included. Shared exterior such as siding or brick repair or roof repair or replacement are the condominium owner's responsibility as well.


* Shared Space Maintenance. Although condo owners are typically responsible for repairs and maintenance within the inside of each individual living unit, the common areas such as stairs, garages, hallways and elevators are maintained by the condominium owners.

* Additional Maintenance-Free Perks. Many condominium complexes may offer access to a pool, fitness center or clubhouse for its owners. Although you would have to review the requirements and availability for renters, these areas do not require you to maintain or care for them.


The Disadvantages of a Condo

As in most things, the items that are appealing about condominiums can also generate additional challenges. Here are some disadvantages to consider:

* Size Restrictions. Many condominiums are small or medium-sized, which can limit the types of guests that would be interested in renting the property. Larger families looking for a yard or more property may not be as interested in renting a condo.

* Rules and Restrictions. Most condos require owners to abide by a set of rules when purchasing a unit. If you're planning on renting the unit out, you are responsible for your guests' behavior. This may require greater screening and limits set on the renters you can accept as some condos do not allow pets or have noise level or age restrictions.


* Fines and Fees. Depending on the amenities available and the contract agreements, you may incur fines or fees for your guests' activities and behavior. You will want to understand completely what is expected in the condo community and the consequences for violations. In addition, you may need a more complicated renter agreement so that your guests take responsibility and incur the consequences of their own actions.

* Close Proximity. Remember that in a condominium, you may have neighbors living on either side of you as well as above and below you. If you find yourself renting to guests who are louder, you may end up fielding many complaints about sound or other disturbances.

* Association Fees. Although one major advantage of condominiums is having all the upkeep managed for you, this se


rvice can come with a steep association fee. Check what the fees look like as they can range from $1,000 to $10,000 each year. Then weigh the advantages you receive from this added expense.

The Advantages of a Home

Stand-alone single-family homes come with greater freedoms for a property owner than a condo and these freedoms can result in significant advantages. Here are a few to keep in mind when selecting a single home as a vacation rental property:

* More Space. An individual home with property to go with it is often significantly more spacious than a condominium. You can accommodate many more people in a rental situation as well as highlight your yard or the privacy of a large home in your listing.


* You Set Rules. If you are the home owner, you can decide if things like pets or smoking is permissible at your property without consulting a lengthy condo contract. If you are open to many different guests, a single home may allow you to cast your net wider for more renters. Larger families, younger guests who enjoy a party or animal lovers may be more attracted to an individual home.

* Freedom to Upgrade. As time goes on, you may want to customize your property to better meet the needs of your guests. For example, you may want to add a hot tub outside or remodel your kitchen. With a single family home, you can make changes as you see fit in your vacation rental investment.

The Disadvantages of a Home

Single family homes come with potential disadvantages as well. Here are a few to remember before making your decision.

* Neighborhood Associations. In some cases, single family homes may be part of a subdivision neighborhood that has its own set of rules and regulation. Be sure to look at any homeowner's association requirements and understand what is expected, allowed and prohibited before buying.
* Fines. Neighborhood associations may fine owners for certain types of behavior, and similar to condo agreements, you should ensure that you understand the rules and consequences. If needed, pass along this information to your guests so that they understand they will be charged additional fees for violations.

* Maintenance Responsibilities. With the freedom of an individual home comes the responsibility to handle all repairs, problems, landscaping and maintenance. If your home is newer, this many not be as large of a problem. However, renters coming in and out of a home can be particularly hard on a home as well. Consider the costs when you're setting your rates.

* Onsite Management Required. If you're managing your own rental property that is a single home, you need to be nearby. Emergency repairs must be tended to immediately, and being an off-site manager is not reasonable. A local property manager can also suffice if you own property away from your home.

* Higher Taxes. In most cases, property taxes for single-family homes are higher when compared with condos. 

How a Property Manager Can Help

Property management firms can provide a great benefit whether you choose to buy a condominium or a single-family house if you invest in a vacation rental property, especially if you live far away from either property. Here are questions to ask when selecting a property manager:
1. Do you have experience with homeowners' associations?
2. How have you worked with condominium management?
3. Tell me about a conflict that you had with guests regarding violations of rules in either a neighborhood or condo association and how it was resolved.
4. What is the greatest value that you add?
5. Can you help me navigate all the rules and regulations and incorporate them into my listing?

Regardless of whether you choose to invest in a home or a condominium, you'll find advantages and disadvantages of each. Think about your lifestyle, why you want to be a property owner with vacation rentals, and the types of guests your property will likely attract and make your final decision wisely. Spending the time upfront will save you a great deal of problems down the road. Rely on a property management partner to help you navigate the details of the rental once you decide on a purchase. 
Air Concierge is a California-based vacation rental management company specializing in handling every aspect of your vacation rental - from optimizing your listing to interacting with your guests and overseeing turnover cleanings after guests depart, reviews, damages, maintenance. If you want to learn more about our services:  

Tagged: vacation rental investment