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8 Key Things you Need to Know About Your Neighbourhood

Uncategorized Mar 16, 2019

The questions that short-term rental investors have are generally very different from a residential buyer. They are rarely interested in schools, the availability of medical facilities and where the nearest mall is located.

In contrast, their concerns are related to the travel market. Will this property rent? Who is likely to rent it? And, will I get a good return on my investment 

There will be a lot of questions, and if you don’t have answers based on a solid foundation of fact and statistics, there will be another broker who has that information to hand.   A savvy investor will often make a decision on whether to engage you as their buyer's agent from your response to their first email. 

When you are armed with up-to-date information that can help buyers make a quick decision as to whether it is even worth viewing in a particular neighborhood, you will earn your buyers trust and respect.

 

1. How many rental properties are there?

Since vacation homes can be offered for rent independently and from management companies, it can be challenging to get really accurate figures. Of course, if you are in an area where permits or licensing is required, a call to the registration department of the town or county may be sufficient. Otherwise, time spent researching on the major listing sites should yield fairly good results. 

 

2. Which type of property rents the best?

Should I buy a condo, a townhouse, a family home? Is it best to be in a gated community for security? I can’t afford beachfront – will an off-water property rent well?

Knowing this market is essential to providing the best information for your clients so the research you do will entail in-depth analysis.

In some areas multi-family properties are the most popular while in others a waterfront condo might be the best one to direct your buyers to. If security is an issue in your area and there are higher break-in rates, then a gated community may be a better option than a single family home in a less-safe location.

 

3. What are the occupancy levels

There may be a dozen rentals in a particular location, but if none of them are renting, it might not be a good place for your client. All listing sites have availability calendars and  so check them out and see if what their occupancy is like. Contact property managers and find out which neighborhood has the highest occupancy.

 

4. What is the range of rental rates?

The vacation rental market is competitive and pricing too high will result in low occupancy. Prospective buyers often have unrealistic perceptions of the rental rate they can charge so it’s important to have statistics showing the average rental rates for different times of the year. 

A low season rate can be as much as 50% of the high occupancy period, and even then discounts may be needed to get the place rented. Once again, property managers should be able to provide this type of information.

 

5. What is the seasonality?

I recently looked at an area of Florida for buying a vacation rental. Not being familiar with the state but having some idea that it is hot in summer and pretty nice in winter, I figured that it would be popular with tourists year-round, just because of the weather.

So, I asked the question but the realtor who had sent me copious information on listings didn’t have an answer. She just told me there were a lot of rentals in the area.

Epic fail! Not just for the area but for this realtor. There was no coming back from that one and if I pursue the idea of buying in that location, it will be with an agent who knows at least something about the business.

 

6. What is the demographic of the inbound traveler

Yes, you need to know about tourism in your region to sell vacation rentals to investors!

What are the characteristics of the travelers to this location? Are they families, couples, retirees, young couples on a romantic getaway, reunion groups, conference and concert attendees.

Every area will have different inbound demographics and you need to know what types are attracted to each neighborhood. This will help you guide your buyers to the right property to meet the needs of that demographic. 

For example, if you are in a year-round city destination, inbound travelers could be going to conferences and exhibitions, or sporting events or music events such as SXSW in Austin, TX.

 

7. Are there any restrictions governing rentals?

Rental restrictions are being imposed across the US and Canada. Not necessarily outright bans, but restrictions on lengths of stay, occupancy levels, and the number of units available in a condo or gated community perhaps. Many areas require licensing and permits and the collection of tourist taxes. 

At a community level, some condo units have restrictions on a rental that prevent pure investment purchases. For example, they can only be rented out after the first year of ownership. 

Check with municipalities, check by-laws and Home Owner Association rules and be aware of every potential for rental restrictions. If your buyer was to find after purchase that they were unable to fulfill their rental goals, they could be in an unhappy situation and you would be#1 on their blame list for not sharing that information.

 

8. What property management services are available?

The majority of vacation rental homeowners live more than 180 miles away from their property, so will be looking for a property manager to be available for their guests. The services would include housekeeping, general maintenance, emergency management, dealing with laundry, and maybe offering concierge services.

Your knowledge of what is available in the area, from the largest rental management company to a list of maintenance and support workers, will be invaluable. 

Who is the best plumber? How long would it take to fix a broken AC unit? Which cleaning company is the most reliable?  These are just questions you will need to have the answers to. 

When you have all this information to hand, why would a buyer want to go anywhere else?

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If you have these figures ready for your clients during your initial consultation, it will be the key to securing a contract.