What upgrades do I need to make to a vacation home to Maximize my vacation rental revenue?
Orlando is the vacation rental capital of the world with over 80 million visitors arriving each year. When looking for a home you have many choices on what you can buy and how much to spend. If you are looking for an income-generating vacation rental then there are a few things that you must consider.
Buying a resale home is a popular choice as often the prices on these are more favorable than new builds. Most homes in Orlando will rent, but the upgraded ones always outperform.
Now there are a couple of things to consider here.
Homes that are for sale, typically means the owner is not making money from the rental income. This often leads to an incredible opportunity for a buyer like you.
The current owner is struggling for rental revenue, the home is often listed below market value. If this owner was to invest a small amount back into the house, the home would rent at high occupancy, higher weekly rates leading to a high annual rental revenue.
For example, The exact same house can generate $30,000 in revenue or $130,000 per year. It all depends on how much has been put back into the house.
Let’s take the following homes to give you a real-life example of what to do to your home. Now you are not actually going to believe me here, but trust me on this one. The two homes below are the exact same floor plan. A question for you, which home would you rather stay in and which one would you pay more to rent?
I am assuming you prefer the first house where it is clear the owner has done everything they can to the house and the result is they have maximized their vacation rental revenue, please take a moment and visit the links to see the comparable rooms.
Now let’s look at what this means for a homeowner.
Both homeowners would have paid a similar cost, in fact, owner 1 paid less as the home previously looked similar to the one beneath and was not renting very well. He got it for a good price and spend $70,000 to upgrade the home, the owner was able to write off 100% of the $70,000 on his first year of taxes. And now his home is worth more than the second option making this an amazing investment opportunity.
Now let’s take a look at the rental difference.
Owner 1 charges an average weekly rate before taxes of $3885 and is occupied for 40 weeks per year: $155,400
Owner 2 charges an average weekly rate before taxes of $2030 and is occupied for 25 weeks per year: $50,750
Remember this is the exact same floor plan, same flooring, same walls, similar pool, similar outlook, and exact same room sizes.
So what do I need to do to a house to get the most out of my vacation rental?
Hopefully seeing the above example will give you a good idea of what you need to do to really get the most out of your vacation home.
Upgrade your vacation home
There are several parts of your vacation home that you will need to upgrade on so it all comes together as a wonderful package rather than a half-hearted effort where you will get half-hearted results and rental income. By spending a little more now is going to benefit you greatly later on.
Here is another identical floor plan where the owner has done some upgrades but it is clear there is still a lot more than should have been done.
Owner 3 charges an average weekly rate before taxes of $2400 and is occupied for 35 weeks per year: $84,000
I am buying a fully furnished house do I still need to upgrade it?
It depends, what does the house look like? When purchasing a vacation home it may sound great to purchase a home “fully furnished”. Just imagine you can buy this house and have guests start booking immediately or you may even buy the house with rentals already in place. Before you get carried away here if you are planning on renting this out to families please ask yourself, would you want to book this home with this furniture for your family?
Depending on this answer should give you a pretty good idea of what you need to do. If you are still unsure let us give you a little help.
No one really wants to go on vacation to a run-down house which is filled with 20-year-old furniture, out of date window treatments, old stained carpets nor falling apart pool furniture.
Guests want fresh, modern, up to date furnishings and decor so when they take their hard-earned vacation they can do so in a new feeling beautiful vacation home.
What furnishings do I need to change?
If you are buying a resale home in order to earn money from vacation rentals then you are going to have to spend a little in order to make a lot. Yes, the home will rent ok as it is without changing anything but will typically rent for a cheaper weekly rate. If you are looking to not only cover your cost of ownership you are also going to have to put a little bit of money into it and do all you can to make it stand out from the competition. Again our team is always here to help if you do not know where to start.
The benefit of buying a resale home.
As build rates increase, buying a resale home offers great value, the price of the home already includes the lot price, and always factor in building a home will take you anywhere from 6 – 18 months to build. With a resale, you can purchase and start generating revenue almost instantly. We see this on a daily basis, we can take 2 identical floor plans where one really struggles to book, even at very low rates yet another owner who has the exact same floor plan can be one of the hottest house available for rent and at much higher rental rates. The only difference is the decor.
The tax benefits of upgrading your home.
Not only will your house looks and feel brand new which is not only great for when you and your family come and stay but you will also be able to save yourself a considerable amount of tax. In fact, you can claim up to 100% of the furnishings and upgrades in the first year of ownership.
By upgrading your home makes your home more valuable, most owners in Orlando like yourself are looking to purchase a home to generate income on the short term vacation rental market and will always pay more for a turnkey, already upgraded home. Just remember all they have done is purchased a cheaper vacation home, re-furnished it, and then sold at a profit.
Who should I target my home towards?
The vast majority of guests coming to Orlando Florida are coming here with young kids and family, so make sure your home is as fun as it can be to really target those days and nights after a long day at the parks where a family can come home relax and unwind and spend quality time with the family.
What are the best-themed rooms?
Themed rooms are getting increasingly popular amongst the Orlando vacation home community. The majority of guests who will be visiting and staying in your home will most likely have some children in the group so making it fun for them is certainly key if you want a well-filled calendar. From princess castles to a superhero lair the choice of theme room designs is endless.
Can I do a Disney or Universal themed room?
First of all, you may see a lot of homes in Orlando that have Disney and Universal themed rooms. The most popular being Star Wars and Harry Potter themed bedrooms. You may wish to do the same, so this is where I am going to stop you. Unless you have permission from the copyright holder then you are not allowed to use Disney or Universal characters in your house and this infringes on their copyright and valuable trademarks.
Instead, go with something unique and fun. If you don’t have your own ideas our realtors and design teams can certainly put you in touch with the best artists in Orlando to help you create your one of a kind room.
Amazing games rooms
Possibly one of the most important rooms in the house. Take a look at the best-renting homes on our website and you will see nearly all homes have a dedicated games room. It may be a professionally converted garage or a dedicated games room designed and built during construction. No matter where your games room is it’s very important to again make it look like one and make it as fun as possible. Some ideas for you are full-size arcade machines, pinball machines, golf simulators, pool table, foosball, and whatever else you can fit in your space. Remember this room will help sell your home to kids and adults so again making it as fun as possible so your guests can imagine spending quality time with the family here.
Something that is so obvious but nearly always gets overlooked is the dining room space. The above example takes this to the extreme but where possible make sure your dining table seats as many as possible. I have seen many 12 bedroom homes that sleep 30 people but with a dining table for 8. The reality is that when you stay in a house you may never all sit together nor eat all together. That being said people do not think this way when booking a house. They like to picture themselves all sitting around the dining table all eating together. This is not a deal-breaker but if you have space we always recommend purchasing a dining table that seats as many people as possible and as close to the occupancy of the house. So if your home sleeps 14 try and accommodate 14 guests seating at any one time.
I am not a designer, where do I even start?
Interior designer or not, we are here to help. If you want to design yourself we are more than happy to give you a guideline on what you should do or we are happy to take control and do everything for you. We have the teams, the expertise and the knowledge to help you get the most out of your vacation home.
I hope this has given you some great ideas on what you need to do to Maximize your vacation rental revenue if you are now ready to buy your first vacation home but are confused by where to buy? Then please take a quick read of our guide to the best places to buy in Orlando. Or simply reach out to us and one of our team will gladly talk you through the entire process.