How do Avon vacation rentals compare to other popular sources of passive income? In an era where bank rates are barely scraping 2%, secure investments are not particularly lucrative. At the same time, the median US house price just hit an all time high in summer 2019, up 10.8% from the previous quarter and 6.4% from the previous year. It’s intimidating to get into short term rentals right before a recession…unless the opportunity is just unusually good.
Let’s start by dispelling a myth about “passive” income. Short term rental real estate is not as passive as commercial real estate, with its steady tenants and long term leases. It’s not even as passive as conventional rentals, where you periodically have noise complaints or arguments about the security deposits. You’re swapping leases measured in months or years with stays measured in just days. That means frequent housekeeping, a bit more wear-and-tear, and lots and lots of questions about how the coffeemaker/TV/hot tub works. In exchange, you can earn a lot more money. Think of this as running a part-time hospitality company. When you join Airbnb or VRBO, you become an innkeeper.
That said, the rewards are generous.
The average daily rate in Avon for vacation rentals is $455 a day. That’s dependent on season (February is $686 but May is $297), and outliers can do much better or worse ($2622 for the top 5% of properties and $121 for the bottom 5%). And occupancy varies as well. March occupancy is 65% for properties at the 50th percentile, but fell to 23% in April! At the top of the pack, the top 10% of properties by occupancy were 100% occupied not just in February and March, but also April, May, June, and July. If we take 50% as our benchmark, you’re looking at $83,000 a year.
Compare that to a monthly rental. A two-bedroom, two-bath condo with a pool and hot tub is renting for $2,400. Even at 80% occupancy, that’s just $23,000 a year.
What about the costs? Most of the costs are similar for a short-term or long term listing. But in short, you’ll first need a down payment of 15 or 20% (rental properties are not eligible for the low down payment loans you can get for a primary residence). Once you pay that, you’ll need to pay insurance, property taxes, maintenance, and utilities. You’ll need to pay to advertise the property (Airbnb takes a percentage, and VRBO charges a once-a-year flat fee) and pay for housekeeping, and withhold lodging taxes.
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