Jumping into this new hospitality business head first is temping. Generating passive income is a key component to building a comprehensive wealth plan.
But before you do, here are a few things to consider:
Some communities slap restrictions on the ratio of owner occupied versus investors that own in a given community. Do your homework before buying and don’t wait until you’re in the 10 day inspection period. Some community associations only allow for a certain number of investment owned properties.
Having a private pool for your short term rental property is not worth the headaches, trust us on this one. Private pools may add $30-$50 premium per night, but it’s just another maintenance item that can break and create more liability. Also, if you’re home becomes “Bachelor Party Central” with raucous pool parties, you may make the local PD’s naughty list. Some cities are enacting task forces to curb neighborhood disturbances. Rentals with resort style community swimming pools are desirable for both short and intermediate term renters.
The mortgage payment for a lock and leave condo in Scottsdale may look good on paper, but consider the home owners association (HOA) fees as well. Most HOA’s are in a better place than they were 10 years ago, but some still charge absorbent amounts for modest amenities. HOA rates will also affect marketability when you eventually sell your cash cow.
We’d suggest having at least 5 top ranked restaurants with in .75 mile radius from your new rental home. Added bonus if you have high end shopping, a Spring Training facility, or a major airport nearby.
Our clients have found the sweet spot to be between $250,000 and $300,000. With relatively low interest rates, this provides an ample budget for reasonable accommodations.
Before we close this out, make sure you check your insurance policy. Most home sharing companies offer their own policy, but we highly recommend getting an umbrella policy to limit your liability as the property owner. Be sure to audit the property at a minimum of once a month to check for potential safety hazards.
Competition is fierce in this market. Your home needs to show well! We’d start with new interior paint and a descent budget for furnishings. IKEA is a treasure trove for reasonably priced stylish decor. Once your home is fully furnished, shell out the extra $100 to have your property professionally photographed by a real estate photography company. We’d suggest www.listerpros.com.
If you’re interested in buying or selling an investment property in the Phoenix metro area, or just want to say hi, we’re here to help! Call or text us at 480.628.8691.