The Better Investment?
Many owners have approached me over the years to express an interest in purchasing an investment home. A question often asked is what type of home they should buy: long-term rental or vacation rental?
It Depends.
There are a lot of different factors to consider but I'll narrow it down to a few primary concerns:
1. Which one costs more? A vacation rental wins this one, hands down! You have to buy it, furnish it, cover the utility expenses, pay for landscaping, and possibly even pay 25 - 50% of your income towards management fees. You can also experience greater expenses due to the high rate of turnover and increased damages, plus you have to regularly upgrade certain things like towels or bedding. Suddenly, $300 a night doesn't seem like enough! A long-term rental costs less because management fees are much lower, turnover is lower, tenants set up their own utility accounts, and tenants are responsible for some of the maintenance like landscaping.
2. Which one grows wealth faster? Again, this will likely be the long-term rental. If you buy in the right area with a heavier, longer tourist season, you can fare better with a vacation rental. In a market like Cody, Wyoming you should consider the long-term rental.
3. Do you want to occasionally occupy the home? This is where the vacation rental shines! Rent it out to guests throughout the year and block off the dates that you want to occupy it. You can probably earn enough to cover the mortgage and other expenses so your family has a "free" place to live when on vacation.
4. Which is more trouble? If you hire a good property manager, this could be a wash. If you intend to manage the home yourself, a vacation rental will be far more demanding because you have to handle a lot of inquiries, collect payments, clean between occupants, deal with more maintenance issues and complaints, coordinate with vendors like the landscaper, and more. A long-term rental has far fewer moving pieces.
If you are in the market for investment property in the Cody area, be sure to give us a call or check out our web site. We know the market and can help determine what will work best for your situation.
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