Going turn key: attracting vacation renters with your rental units.
There are many factors that should be considered when determining to go turn key with your rental unit. As every property has it's own unique strengths and challenges it is best to consult with an experienced property manager before fully furnishing your rental unit as a vacation rental. This post examines from my personal experience some important issues to consider before adding everything from soup bowls to nutcrackers to your investment property. As a Real Estate Merchandiser working mainly in property management, I often see different types of rental units in various conditions. Everything from unfurnished long term to turn key short term vacation rentals and condotels. The former are typically a lot less time consuming and costly for the landlord and the latter can be a bit more involved both monetarily and effort wise but the return on your investment can be substantially faster if you know what you are doing.
In the investment Real Estate market the three golden rules of real estate apply: Location, Price, Condition. If you intend to make money from a turn key investment property the location should obviously be somewhere that people want to live and recreate and resort destinations can make great investment locales. However, there are pitfalls to buying in areas that are JUST resort destinations, mainly that the market value can be highly volatile in an investor only market. You also want a market that has a substantial permanent population that's not going to put their property on the market and move because of difficult financial times. Investors usually don't live in their investment properties and are the first to put their properties on the market in difficult times; the same with second home owners, if everyone is an investor or second home owner in a particular area, property values can plummet quickly when times get tough.
This property was initially offered as a partly furnished 1 bedroom condo for rent in Waikiki. Looking to create a faster return on the investment the property owner considered going turn key. In order to keep costs down it was suggested that the owner purchase furniture and accessories from hotel furniture resale outlets, and organizations like Good Will and Salvation Army. Utilizing personal items no longer needed at home can also save one money when turning a property into a desirable turn key rental. When outfitting a turn key unit, durability and condition are important. If you want to attract higher rents you need higher quality materials, knowing who your target market is is essential in determining what you need to buy and how much you you will need to spend. In the top photos the layout was awkward and the furniture too mismatched. By simply rearranging the furniture, adding some art, and a different sofa the room became more accomodating and comfortable; details potential renters notice and appreciate.
JDS Consulting provides experienced property management and Real Estate consultants to help property owners determine what their target market is and how to allocate money effectively. Some properties no matter how they are furnished or well kept will command only so much rent. Spending money on expensive amenities that renters aren't looking to pay higher rents for can price you too high in the rental market and reduce your return dramatically.Merchandising the property is equally important, as well. Layout, functionality, and appropriate aesthetic helps create a hotel feel that vacation renters are looking for.
Price is very important. You need to be able to put enough money down on the property to see an immediate return on your investment. In other words the rent you intend to receive should cover the mortgage and then some. Rental income can fluctuate right along with real estate prices and you need to be prepared to cover the mortgage in times when renters are scarce and hard to come by. Case in point right after 9/11 tourism tanked in Hawaii creating a desperate shortage of potential renters and vacationers in high density investment markets like Waikiki. Many investors were leveraged to such a degree that any drop in rental income meant they couldn't pay the mortgage; this in turn created a sell off and consequently the Real Estate Market went to pot. Those investors that had enough equity to sweat out the lower rents were able to survive the down turn and were well positioned when the market eventually recovered. In consequence to the investor bailout,however, first time home buyers took advantage of the price drop and a larger percentage of permanent residents moved into Waikiki, stabilizing a once highly volatile market.
Condition will be a determining factor in how much rent you can get along with whether it's turn key, furnished, or vacant.In addition to location the condition of a rental property will help retrieve your initial investment faster if it is well maintained, furnished and clean especially in resort areas like Waikiki. There are several target markets to be found in a typical resort destination. The first and most lucrative is the vacationer. If your rental unit has an ocean view and is available to rent on a short term basis, a month or less at a time, you will mostly likely be able to command a considerable amount of rent from your tenants anywhere from $1000 to $20,000 a month or week depending on the number of bedrooms, amenities location, condition and view. Of course a $20,000 a week property will cost you several millions to buy but thats a great return on a 10 million dollar investment. Even if you have a $500,000 dollar property that's a couple blocks from the beach with no view to speak of you can make a decent return if it's priced right and is habitable, but the nicer it is the easier it is to rent and the more rent you can collect.
Is going turn key with a rental unit a good idea?
JDS Consulting- Hawaii Home Staging and Decor Design. Providing Real Estate Merchandising services including: Home Staging, Interior Decor, Turn Key, Landscaping, Remodeling, & Open House Hosting. Diamond Head, Kahala, Waikiki, Kapahulu, Kailua, Makiki, Tantalus, Hawaii Kai, Manoa, Nu'uanu, Ala Moana, Waialua, Haleiwa, North Shore, Kapolei, Makaha, Honolulu.
Kimo Stowell Copyright ©2009