If you are considering buying a vacation home, for instance on Canyon Lake, Lake McQueeney, or the Guadalupe River in the beautiful Texas Hill Country, you may be wondering about renting it out when you're not using it. The income could offset some of your costs and make your second home more of an investment.
The question is whether to rent it out short- or long-term. There are some big differences between the two scenarios.
Drawing on years of experience owning and managing rental properties, and leasing them both short- and long-term, I've come up with some things for you to think about.
Pros – More profit (maybe!)
- Short-term rentals can generate two or even three times as much income per day as long-term
- You have more flexibility to visit your second home any time of the year
Cons - More hassle
- Your neighborhood association might have restrictions on lease terms
- Your property manager charges a higher fee because they do more work
- You need to advertise on various rental websites, paying more for better ads to beat the competition
- Repairs and replacement of furnishings and home must be made immediately
- Home must be in perfect condition or guests might complain, leave bad reviews, or ask for refunds
- You must keep a supply of things like toilet paper, clean linens, and soap
- You need to keep utilities on year-round and provide yard mowing – and watering - services
- You need to clean the property after every guest checks out
- You may have to accept credit cards for bookings
Pros – Less work
- Tenants live in “their” home instead of treating it as a hotel room
- Fewer complaints; tenants will accept the property as is
- Tenants pay for utilities, yard maintenance, cleaning
- Your property manager can advertise your home for rent on the MLS (for a fee)
- You can charge a month’s rent for security deposit to cover any damage more than wear and tear
Cons - Less profit
- Your furnishings may need to be put in storage if tenants have their own
- You will probably need to accept pets (although kids can cause as much damage as pets!)
- You can only stay in your second home during the months of the year when it's not rented
There are also tax implications to discuss with your tax adviser. Then you can decide which of these scenarios would work best for you. You might start out with long-term leases, and then switch to shorter ones as you gradually get more time to visit your second home.
Who knows? It could end up being your retirement home.