Vail is a top destination for passive income through VRBO for a few reasons. As a year-round tourist economy with two peak seasons (Summer and Winter), it has a high Average Daily Rate of $506 and steady occupancy with 3 million visitors a year. Nothing attracts a crowd like a crowd and since VRBO has 2,240 listings in Vail, the market is strong. Although promising, there are a few specific wrinkles to this market worth considering before taking the plunge.
Pay A Lot, Earn A Lot
First, there’s cost, which can be a barrier to entry. Vail has a few $450,000 homes for sale but generally speaking your money-making properties are $1 million and up. Obviously you’ll have a mortgage, but for a loan on a property that isn’t your primary residence, you’ll need a substantial down payment of 15–20%. That may tie up a fairly substantial portion of your investable assets in one property.
Is it worth it? Well, let’s run a simple model. We’ll assume a $1,000,000 property, a 20% down payment, a 30 year mortgage, 5% interest, 42% occupancy, and a $506 a night return.
Your monthly payment is $4,053. You’re renting 12.6 nights a month and pulling in $6,375. That means you earn $2,322 per month above and beyond the monthly payment. A $27,871 annual return on a $200,000 down payment is a 13.9% return on investment. Plus you’d get to use the property 204 nights per year FOR FREE and you’d own a $1,000,000 house free and clear at the end of this. Naturally, expenses like insurance and utilities will change this picture somewhat, but you get the idea.
Is it any wonder that this is a competitive market for short term rentals? The second unique aspect of Vail is the hot competition. Unlike, say, rural North Dakota, your property is going to run up against many properties that look—at least to a casual observer—functionally identical to yours. What’s the difference between “3 bedroom ski-in-ski-out modern home in the heart of Vail” and “Slopeslide paradise up-to-date Vail 3-bdrm”? Basically, there are two answers: professionalism and luck. Great photos, well written text, a slew of good reviews, and quick responses to guest inquiries are how you convey professionalism. Luck is a little harder to control…but the harder you work, the luckier you get.
Passive Vs ActiveThat leads us to our third point. Passive income comes on a spectrum from a professionally managed trust fund (so passive you might not realize it exists) to business ownership (not passive at all). Long term real estate investments, like the classic Rich Dad, Poor Dad landlord scenario, aren’t terribly time-intensive. But daily rentals are a different beast. This isn’t a quirk of Vail short term rentals as much as short term rentals overall, but there’s a lot to think about! Housekeeping, management, responding to inquiries, handling complaints, can all take up huge amounts of time. At Away Agents we can do this for you. Write to firstname.lastname@example.org you’re interested.