Is Vacation Rental Still Profitable?

When I first wrote Renting For Profit in 2003, I was sharing experiences of buying 6 cottages over 5 years with the accompanying joys and challenges.  I chose the title for the book because over those years the rental income was sufficient to pay the mortgage and the additional expenses, with a good amount left over to reinvest. Five years on and the situation has changed.  Cottage property has risen in price, taxes have gone up, competition has grown, and the rental rate required to meet the costs is pricing many renters out of the market. Add to this the uncertainty of demand given the economic situation and it all lends itself to a more unpredictable picture.

As an example, a property that cost $250,000 five years ago and rented for $1800 a week in high season, may now be $350,000 to buy, but the rental rate might still be $1800 to remain competitive. New owners making an investment purchases are having to work a darn sight harder to created any type of profit.

However, the situation is a little brighter for those with an existing property providing it is already upgraded and ready for rental. The expenses involved in setting it up for marketing may be easily recouped over a few high season weeks, and even larger purchases like a hot tub, can be paid for within a year providing the marketing is right. And the marketing is the key.

Maximising profit requires work and its simply not enough to list a property on a couple of web sites and hope it gets seen. This may be sufficient to rent in the high demand weeks, but competition for the low and shoulder seasons is fierce. Owners must become skilled marketers; learn how to create search engine efficient websites; be budget conscious with their advertising money; and creative at growing new income streams. 

This highly competitive market is likely to weed out the bad apples, which is a good thing. Owners who are not prepared to upgrade their properties with attractive furniture, newer appliances and good mattresses will be at the receiving end of bad reviews on social networking sites, and will not last long. Those savvy owners who have seen this coming are already at the forefront of the push to raise standards and will see their profit margin increase as the word spreads.

There are many ways of maximising profit and I have just finished my ebook on the topic which will be published before the end of the month. It’s free and has lots of tips and advice on capturing the market in the low season.

For now, here’s five questions to ask yourself. If you can safely say Yes to all of these, you are on your way to to making a profit from your cottage investment. If you don’t quite understand some of the terms used, and haven’t a clue what I’m talking about, you may need to do some more homework so stick around this blog as I will be writing about all of them in the next few weeks.

Do you have a written marketing strategy?

Have you set a budget for your expenditure for 2009?

Do you have a search engine optimised web site?

Have you undertaken a complete cottage audit to establish scope for improvements?

Do you have a unique selling point?

Let me know your thoughts. Is your vacation rental enterprise profitable? Does your current strategy work for you? Are you prepared to make changes to be more competitive?