Your Ellicottville vacation home as an investment? Until very recently, vacation home investment would have been an oxymoron. A vacation home has historically been a cost centre not a profit centre. A good friend of mine once told me that you should only buy a cottage when you are rich enough that you can afford not to use it. To an extent, that old adage still holds true. If you can generate sufficient rental income from your property while you are not using it, then by definition you can afford not to use it! In fact, the less you use it, the more money you make!
Is a vacation home as an investment realistic?
What has made it possible to make money from your vacation home is the advent of sites like Airbnb, HomeAway and VRBO. You could always make good revenues from a vacation home, but the issue has always been the time and cost for you to get those revenues. When we first started in this business over 15 years ago, our first resort development won Best Canadian Development. We still needed to spend over a million dollars in the first couple of years to promote the rentals for a project of just 40 vacation homes. That’s $25,000 per house before we even started with the costs associated with the rentals and we still paid commission. Today, we could use the sites above and pay between 5-10% commission with no upfront costs. The economics of owning a vacation rental for investment have changed dramatically. This should have a positive impact on the Ellicottville Real Estate market.
Long Term vs Short Term Rental
Landlords usually rent traditional rental properties for a minimum term of a year. Short term rentals can be anything as short as a night, but are typically two and three night stays. They are often found in tourist hotspots like Ellicottville. The advantage of longer term rentals is that once you find your tenant, you don’t have to worry about finding renters again for another year or two. With short term rentals, you may need to find fifty or more renters a year. Sites such as Airbnb have made this easier, but there is still a time commitment to doing this.
Long Term Rentals, Long Term Problems
The idea of a long term rental can seem great. Guaranteed revenues and no need to find new tenants. That’s great until the tenant becomes a problem. What happens if they stop paying rent, but refuse to move out? Or they start mistreating the house and refuse to move out. In Toronto, where we live, the law is heavily stacked in favour of the tenant through the Landlord Tenancy Act. If you want to get your tenant to leave, you will often need to pay extra money.
The Best of Both Worlds
If you like the idea of short term rentals for your Ellicottville vacation home, but don’t want the hassle of finding and managing those short term rentals, we have a couple of options. We can manage the whole process for you and charge a 20% commission on each rental (including any commission to Airbnb, HomeAway etc). Alternatively, we can lease your Ellicottville vacation home from you and pay you a fixed amount. We will then rent the property on a short term basis and keep the revenue. You will probably receive slightly less, but you reduce your risk and effort.
Ellicottville Vacation Home as an Investment: The verdict
Yes, it’s possible. Your Ellicottville vacation home as an investment is no longer an oxymoron! Like all financial decisions, there is much to consider. We would always recommend talking to independent professionals before making any decision, but an Ellicottville vacation home as an investment is realistic and this should have a very positive impact on the Ellicottville Real Estate market.