Once you have the prospective tenant’s application and the credit report, there are further steps to evaluate their application. You should also meet with the tenants and the family. Sometimes a face to face meeting and interaction reveals more information. Let’s look at some of the checks you need to perform before renting your home.
• Credit check – You should check the credit report for their credit score, outstanding debt etc. they may not have the best credit scores but you should look for any evictions in their past. If they have had evictions, that is a red flag and you should ask them for an explanation. A lot of people have fallen on hard times and have had foreclosures or short sales of their primary residence. You should evaluate this on a case by case basis, although this in itself may not be a big deal if other criterion work out.
• Employment check – The tenant should be currently employed and be making enough money to be able to pay the rent and other expenses. Ask for their previous two pay check vouchers and verify with the employer.
• Criminal Check – You can optionally do their criminal background check as well.
Once you are comfortable with the above mentioned checks and if both parties agree you enter into a lease agreement. Standard lease for single family homes is for a year but you can sign a longer term lease if you wish. I do not recommend offering a lease less than one year. Typically you will also include a security deposit amount, which is approximately one month’s rent. The security deposit cannot be used as rent but will be returned back to tenant, less any cleaning or damage charges, when they vacate the property at the end of their lease.
Property management for vacation homes
Renting vacation homes require a more hands on approach. Depending upon the area, your renters may be looking for a place to rent for a short duration, somewhere from a weekend to a few weeks.
Advertising – vrbo.com and homeaway.com are the two most prominent websites where you could advertise your vacation home. I do not recommend advertising on craigslist for vacation homes. We tried it but only got people who were lowballers and did not result in any success. Make sure you have some good quality pictures of the vacation home that show your property as well as the surroundings. You should also highlight the amenities that will interest a potential traveler and make them want to stay in your property. Highlight keywords in the heading of your vacation rental advertisement. You can certainly look for advertisements in similar areas to get ideas.
Pricing – Just like single family home rentals, pricing is key for your vacation home as well. you are competing with hotels as well as other vacation rentals in the area. Granted, in most cases a vacation rental property is better and has more amenities than a hotel, so you can command a slightly higher rate. You have to be somewhat flexible in your pricing specially if you have a vacancy for the dates in the next three to four weeks and you suspect you may not be able to fill the property. Of course you can hold your rates if the dates in question are months in the future. Furthermore you should provide discounted rate for longer rental. For example, you may charge $120 a night for the weekend nights, and $600 for a full week. You may charge $110 for two weeks but $1900 for a full month. As you can see the longer the renter stays, the higher the discount that you would offer to them. Hotels typically do not follow this pricing model and hence vacation homes are a good option for people who rent for slightly longer term.
Also try to find longer term renters if your dates are in the future. Longer term for vacation rentals means one week or more. This will help you minimize the vacancies and will have less wear and tear on your property. Of course the goal is to keep your property 100 percent occupied so as the dates gets closer be flexible on shorter term rentals as well. Typically it makes sense for you as well as your renter if they are renting for three or more days. Anything less you will not be able to make much money if you offer them a price advantage. Sometimes it is better to leave the property empty than to rent to someone for one or two nights at a small revenue.
You want people who are not necessarily looking for the cheapest rental, but someone who is looking for a fair price and will respect and appreciate your property. Of course everyone wants a deal but if your renter appreciates the amenities of your property and wants to enjoy the experience, they should be willing to pay a fair price.
You should also consider how many people will be staying there. It makes a big difference whether there are only one or two people or is it closer to four people crowding into a one bedroom condominium. Many hotels don’t’ care if it is four people but you should charge extra per person if such is the case. More people in your property means more wear and tear so you should adjust your pricing accordingly.
Communication – Timely communication with potential renters who respond to your vacation rental advertisement is extremely important. You should respond to them within 24 hours. Also be very clear and explicit about what is included in your price and provide a complete breakdown of the costs. Keep a template for communication and customize it in your response as needed. This will reduce the back and forth communication and the potential renter will appreciate all the information they can get from you in the beginning.
Property manger and cleaners – Unless you live in the area you would need a property manager and a cleaning service company. Property managers typically charge 15-15% of collected rent for vacation homes, therefore if you can manage without them, you will have a better cash flow. Even if you utilize a property management company, you still do the additional advertizing and marketing of your property. Keep in communication with your property manager to avoid any double bookings and if possible use a common calendar for bookings. If your vacation home is in a resort, you may be able to hire a cleaning company and use the resort service to give and collect keys. You can do the rest of the communication, collect rents etc. directly from the renters. This way you can avoid having to hire property managers. As far as cleaning goes, in most cases vacation homes do not include daily cleanings. You need to be upfront with your renters on what your policy is in regards to cleaning and how often you would offer it.
