Thinking of buying a vacation rental? Start with Mike Harrington’s “Big 4”

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It’s no secret that the real estate market is more dynamic than it has been for over a decade. A lot of factors seem to play into this. Record low interest, squeeze in inventory, more and more people working from home moving to the area, and of course FOMO. As many search for their next primary residence or relocate to the Cape Fear area, a large percentage are capitalizing on these trends and are snatching up traditional vacation homes in our seaside towns at a breakneck pace.

Since North Carolina “reopened” for travel during the COVID pandemic, demand for vacation rentals in the leisure and drive-to markets has reached record levels. This, along with some other economic factors, has clearly highlighted vacation rentals as the lodging of choice for travelers and the Cape Fear and Brunswick Beaches areas. Vacation rentals have officially moved from an “alternative housing” category to a traditional real estate investment asset class.

We get calls daily with questions about what to look for when purchasing vacation rental investment property. With so much attention now paid to the vacation rental and short-term rental industry, it can be difficult today to find the “right” property, especially in a booming market. It’s important to look at all of the factors that make up a traditionally successful vacation rental, although it may not match your vision of what it could be.

At Carolina Retreats, we analyze and run comparison models every day for clients trying to find the “right” vacation rental property. Here are some of the many variables we look at in our due diligence process:

1) Location – This one is obvious, as this factor alone can have a major impact on potential long-term performance. For our analysis, we create “zones” of work within our markets and compartmentalize properties within those zones before starting to identify comparables of a like nature. For those familiar with our area, there are many sub-markets, neighborhoods and directional locations that can vary potential rental income from region to region.

2) Bedrooms and bathrooms – Bigger is not always better. From a pure gross income perspective, large properties will tend to generate higher gross income. However, when you measure the purchase price and other costs of ownership (utilities, insurance, taxes, maintenance, etc.), your ROI percentage can decrease if you’re not careful. Generally speaking, in the more traditional beach markets of the Cape Fear and Brunswick Beaches area, there are plenty of opportunities in the more modest 2-4 bedroom size range due to increased demand from families and individuals. wishing to escape for shorter trips (think 3 to 5 nights), but more frequent.

3) Accept pets? – There are arguments on both sides of this decision. This is a personal decision for many homeowners. Some may have allergies and simply cannot accept pets or dogs. Some think their extra wear isn’t worth it. When analyzing the income potential and the addressable market, there is no doubt, however, that allowing pets will have a positive effect on the income potential of your property. Most of the time, responsible pet owners will go the extra mile to ensure the property is well looked after during their stay. Our advice is that if you are hesitant to allow pets and there is no specific safety reason why you cannot house them, we suggest that you become the pets.

4) Comp sets – This is where we really start to dive into specific numbers and historical or potential performance. There are currently many new data analysis companies offering products for aspiring vacation owners and investors to assess the potential performance of a specific property. While these companies have done a good job aggregating data retrieved from some of the major online travel agencies (OTAs) like AirBnB and VRBO to help investors with the analysis, it is always a good idea to verify these numbers with your agent. real estate, or through a local agent. professional management company like Carolina Retreats. Availability is not always a good measure of a true ‘booking’, due to variables such as landlord use, maintenance blocks, or the withdrawal of homes from the off-season rental market due to seasonality.

While there can be many other variables in the decision process to invest in a vacation rental home, these can be seen as sort of a “Big 4” in the initial analysis and due diligence. . Many times in our local beach markets there are historical rental figures on properties to help you jumpstart your research, but as we are seeing in real time, 2021 has been a game-changer with new demand and opportunities for potential income for traditional vacation homes. .

If you are considering the vacation rental investment market on Topsail Island, Wilmington Beaches, or Brunswick Beaches and want a little bit of advice to get you started, please contact us and we will be happy to help. happy to help you !

Mike Harrington is the CEO and Owner of Carolina Retreats, an accommodation and vacation rental management company serving over 300 vacation property owners throughout the Cape Fear area. Prior to founding Carolina Retreats in 2015, Mike spent 10 years in the Outer Banks as CEO and Managing Director of Resort Realty, an upscale real estate and vacation rental company with 600 properties under management, five offices and over 100 full-time. employees and real estate agents. Mike is a past president and board member of the Vacation Rental Manager’s Association (VRMA), the largest international trade association for the vacation rental industry, as well as the past president of the North Carolina Vacation Rental Manager’s Association (NCVRMA). He is frequently invited to speak at seminars and professional conferences on the latest trends in vacation rental management in terms of marketing, operations and strategy. Mike holds an MBA from East Carolina University as well as a Bachelor of Business Administration and is a member of the East Carolina School of Hospitality Leadership Advisory Board.



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