5 Considerations For The Luxury Vacation Home Investor
Luxury vacation homeowners often have mixed feelings about placing their fine homes on a vacation rental program, especially when a revenue return was not necessarily a requirement for making the investment. There is a significant demand for high-end vacation rental properties in the Big Bear market. Renting out a luxury vacation home, even part-time, can benefit the investor in more ways than just a revenue return. The following 5 points touch on ideas that just might make the squeamish luxury vacation homeowner rethink this niche.
1. Local Property Management
Whether you rent out your Big Bear luxury cabin or not, you will need some level of local property management for your investment. Full-service vacation rental companies, such as Big Bear Vacations, offer comprehensive property management for their clients. Snow removal, weed abatement, or emergency matters such as fire, weather, or security, are just a few reasons you need to have a local resource keeping an eye on your property.
2. Expect Excellence
Your luxury property has the potential to generate an significant return for you and your vacation rental management company, so it is warranted to expect excellence. Identify your bottom line zero tolerance concerns and make sure you will not have to worry about them. If you do not want pets in your home, ask your vacation rental management company candidate what they do to ensure that pets will be disallowed. If damage to your cabin or items in your cabin is a concern, ask your management company what they do to prevent and/or repair issues that could come up. Establish clear boundaries and expectations upfront so key concerns can be addressed in a manner that will set you up for the best possible professional partnership with your vacation rental management company.
3. Controlled Use
There are many ways to control the use of your luxury cabin to help ensure the risk of problems is kept to a minimum. Pricing above the average for comparable properties, limiting the number of guests you allow to stay in your cabin, and limiting the times it is available to rent, are ways to help keep all but select renters from renting. If your property can sleep 14 but you only allow it to sleep 8, you will be capturing renters who will pay more to accommodate a smaller group. Make sure your management company ensures that your requirements are being honored and respected by the company and the guests.
4. Building A Rental History
When the time comes to sell, an established rental history with “turnkey vacation rental” status (ready to rent, registered and fitted for the purpose of renting) will add to your ability to capture the best buyers and price for your property. For every luxury vacation homeowner in Big Bear who does not want to rent, there is one who absolutely does. All things being equal, the cabin that is ready to rent will sell faster than the one that is not.
5. Tax Advantages
This is perhaps the most relevant reason to have your Big Bear investment property on a vacation rental program. A second home, if not classified and utilized as an investment property, must pay capital gains tax when sold. The property can be sold as part of a tax-deferred 1031 exchange for another investment property without capital gains consequences if it is a vacation rental property that generates a revenue return. Only a minimal amount of use will qualify your luxury vacation rental property for a 1031 exchange (i.e., the property may only be required to be rented for 14 days/year), so this can benefit the investor who wants to keep renters to a minimum. Make sure to consult with your tax professional if considering a 1031 exchange.
Have Your Cake And Eat It, Too
The luxury vacation homeowner need not lose the quality of their personal use experience if he is clear on his personal needs and is partnered up with the right management company. With a little preparation and proper expectations, the luxury vacation home investor can benefit from using his or her property as a vacation rental.
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