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Residential Real Estate
Jul 15, 2014

Vacation And Student-Housing Rentals Can Be Profitable Investment

Sponsored Content provided by Michelle Clark - Realtor/Broker, Intracoastal Realty

With attractive beach towns and a major university, the greater Wilmington region offers great investment opportunities for owners of rental housing. But the vacation and student-housing rental markets have their special challenges, which any would-be landlord needs to understand.

“Location, location, location” is the essential factor for any real estate transaction. It’s especially important for these two categories. In our area, the beach is the key draw for vacationers. That means a viable vacation rental property must be near the ocean. Most houses in our area beach towns are within easy walking distance, but be aware that as you move away from the oceanfront, rental rates go down.

For college students, proximity to the UNC-Wilmington campus is the crucial factor. One special wrinkle here is the university’s policy about on-campus parking permits. Students who live less than a mile away can’t park on campus; they are expected to walk, bicycle or use public transportation. What this means for landlords is that rental properties just outside that one-mile radius may rent quicker and at higher rates.

Other factors that improve a property’s rentability include the number of bedrooms, to more easily accommodate extended families on vacation; more amenities such as big-screen TVs; and nicer furnishings. How well equipped a house is can translate into more repeat bookings, and lower vacancy rates in the long run.

Municipal zoning rules are important. Some beach neighborhoods don’t allow short-term rentals. In Wilmington, the zoning code restricts how many unrelated people can share a house, which is a factor for student rentals. To avoid unpleasant surprises, I recommend working with a real estate pro who understands these issues.

Speaking of professionals: While it’s certainly possible for owners to manage vacation-rental properties themselves, it’s a trade-off of time, work and potential headaches against the money spent. Is it worth your time to be doing your own advertising, managing bookings, collecting deposits, inspecting the property before and after each rental, and arranging to get keys to renters at odd hours? When deciding whether to take on the expense of professional management fees, think about how much you are willing to do yourself – and how that will affect your own schedule.

Owning a vacation rental requires being flexible about rental rates, which typically are highest in summertime, lowest in the winter off season, and in between during the spring and fall “shoulder seasons.” Because newly relocating couples or families sometimes need a place to live for just a couple of months while looking for a permanent home, it may pay off to accept a lower monthly rate for that sort of tenant rather than insist on the standard week-to-week rent.

Keep in mind that weekly rentals on beach houses reflect the fact that you’ll be lucky to have a paying tenant even half of the year. While wintertime rentals aren’t unheard of, they are few and far between. A realistic idea of vacancy rates is one of the important insights you’ll get from an experienced real estate agent.

Two other factors vacation property owners need to understand are that weekly cleaning is an essential expense, and that both taxes and insurance will be higher in the beach towns than elsewhere.

In the college student market, landlords don’t have to deal with weekly turnover, but they do have other unique concerns. It’s been known to happen that people whose names aren’t on the lease end up sharing a student-housing unit. And sometimes college students can be hard on the property, or annoy the neighbors with loud parties.

Some simple precautions can help minimize these risks. Make friends with the neighbors, so they know who owns the house, and are more likely to contact you first if they see a problem. Drive by the property regularly, to see which cars are parked in the driveway and to satisfy yourself that it’s being properly cared for. And be sure, especially with tenants under 21, that it’s their parents who sign the lease.

Unlike the vacation market, when you rent to students you can usually keep your property occupied, and generating revenue, year-round. Nowadays many students stay in Wilmington through the summer instead of going home. One exception to this is beach properties that are rented to students only during the school year and then rented by the week to vacationers during the summer.

Getting started in the student-housing market doesn’t have to cost a lot of money. A house costing $100,000 to $150,000 that’s convenient to campus would rent very well. Beyond location, of course, you should consider the question of curb appeal. Ask yourself, “Would I rent here?” or “Would I allow my children to live here?”

Another option that is becoming more popular is for parents of college students to purchase a home for their children to live in while they’re in college. Roommates will pay a little rent to help cover the expenses. This can end up being a better deal for the family than paying rent for four years or more.

Have a question about buying, selling or any other real estate matter? Let me know and I’ll address it in a future article.

Michelle Clark is a broker with Intracoastal Realty, based at the Wrightsville Beach office. She is an Accredited Luxury Home Specialist, ALHS and also a Short Sales and Foreclosure Resource. Whether you are buying, selling, or investing, know that Michelle and her team will go the extra mile for you. To learn more about Michelle and Intracoastal, go to www.intracoastalrealty.com. You may contact Michelle at [email protected] or 910-367-9767. Like Michelle’s team on Facebook at www.facebook.com/MichelleClarkTeam.

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