How do you go from a location and some comps to finding a specific property? What are the critical things to look for in a short-term rental or a vacation rental to make money? Now, it is time to narrow down to a property and get serious about purchasing it. Your real estate agent will a great partner in this process. Finding the perfect property takes work.
What makes the perfect property?
In the previous post, “Step 3: Valuing a Property“, we discussed determining a reasonable purchase price. The next step is to find the perfect property. It starts by deciding the important criteria for your property and finding a good real estate agent. To save you and your real estate agent time, you will need to develop criteria to guide the property hunting. The budget is the biggest limiter. With enough money, anything is possible. The second criterion is location. Locations tend to be softer criteria. Do you want something on the beach, close to a shopping area, or next to an attraction? It doesn’t do any good to find something on the other side of the city if you have no intention of buying on that side. The following set of criteria become a trade space.
Short-Term rental laws and by-laws
** Major Warning: Some COAs, HOAs, communities, cities, and counties have banned short-term rentals. It is important that you researched this before getting serious about any property. Asks for the COA/HOA by-laws. Do not take someone’s word for it; make sure you know. Some people ignore these rules/laws, but I believe that they will catch up to you. It will also affect your resale value. **
Bedrooms and square footage
Bedrooms and square footage become the next driving factor in finding the perfect property. It is important to think about the purpose of the rental at this point. Assuming you are looking for vacationers, square footage becomes less important. Other things like the kitchen and living space become less important than buying this for your main home. On the other hand, bedrooms are a key aspect of picking the right short-term rental. How many people you can sleep at the place and your maximum occupancy directly affect how much money you make. For instance, you can look for a spot to add a sleeper couch. Again, though, this is balanced by what type of guest you are looking for. For instance, if you have a huge place that sleeps 18, you are more likely to get house parties than a 2 bedroom condo. Are you targeting families on vacation? Then, you probably want something that can sleep at least 6 people. Another consideration is that families travel with pets. Does the condo/housing association allow pets? This is not a deal-breaker, but it does offer you flexibility down the road.
Evaluating the potential for short term rentals
The next set of criteria is all about short-term rental sale-ability. It is important to remember that you only have about 30 pictures to sell your place. Does it have an incredible view? What makes it stand out from other rentals? Or is this a fixer-up that you have a vision for? What other selling points does the property have? For instance, it may be part of a resort with a pool or other amenities. The size criteria are about the property’s resale, and these criteria are all about making money with it. You need to consider both in picking the perfect property to ensure you make money on both the renting and reselling of the property.
How to find a real estate agent?
A good real estate agent is worth their commission and then some. By the way, in most states, the seller pays both realtors’ commissions. Remember in the previous post; I mentioned that you should be making lots of low offers as an investor. This causes a lot of work for the realtor and their team. It is important to make sure to compensate them for their time. A thousand dollars here may save you 10s of thousands of dollars on the property.
I start my search for a realtor on the internet. You can find individual realtor’s ratings on google. As you google realtors, you will probably come up mostly with business. If you read the comments for these businesses, you will see individual names mentioned. Another good place to get names is various real estate investing clubs/meet-ups; but, COVID-19 has disbanded many of them. Bigger Pockets is a great real estate investing website and blog. They have a list of all kinds of real estate professionals. Realtor.com is another resource to find a list of realtors.
Once you have a list of realtors, it is time to interview them. I know this is not the normal way “home buyers” do it ….. but you are a real estate investor now making a hundred thousand dollar purchase. Once you interview a few of them, you will start to see the distinguishing features. I will share my worst real estate agent interview down below. Here is a start list of questions for you:
- Are you a real estate investor or work with other investors?
- Do you mostly represent buyers, sellers, or a mixture of both?
- What are the best or hottest areas to buy in?
- Is there anywhere that you would not buy?
- (Describe your vision) Is there any particular condo/place that stands out for this vision?
- How long have you been a real estate agent? How many houses do you close in a year?
- Do I have to sign an exclusivity contract with you? How long does it last?
- Do you have any references?
- Can you work with a long-distance buyer?
- Are you a full-time or a part-time realtor?
- Personally, I have found great part-time realtors that work with a support team. My part-time realtor had won the Keller Williams previous year award for the most closings.
My worst realtor interview
I had found a realtor on Zillow. He referred me to a friend that works with buyers. I was in the process of interviewing realtors in several cities, trying to find a beach property. The interview started on a weird note as the realtor asked me to call her “Honey Bear”; okay, I guess. I described my plans to her. As we worked our way through a list of questions, we hit the “is there anywhere you would buy” question. That started our journey into the deep end. She recommended this perfect condo for me.
First, all of the artwork was hand-painted by her; yikes, this does not sound like a professional rental. Then, she went on to describe this one-bedroom condo. With a little remodeling, I could fit the washer and dryer into the single bathroom. It would be a little tight, though. As the details continued, the story got worse and worse.
I really was looking for a two-bedroom, but maybe the price was right? I had been following the steps in this guide; so, I had already a couple of places picked out on my own for comps. Once we got to the price, it was as expensive as the two-bedroom condos with a balcony overlooking the gulf…… What? Let’s say she did not get a follow-up phone call. To read more about my story, see my future post, “My Initial Real Estate Journey.”
Find the perfect property.
I am going to walk you through the process as if you were doing this long distance. If you are local, the process is about the same but slightly easier because of proximity. At this point, you have several places that you have found and sent to your realtor; and your realtor has probably sent you a couple of listing to look at, too. Before getting too far into finding the perfect property, make sure you have lined up funding/financing for the eventual property. It is important to read my future post, “Financing Your Property,” to ensure that everything is set to make an offer. At this point, you are ready to do some home tours.
Due to COVID-19, the virtual world has taken off. A virtual walk-through should be no problem. You and your realtor will need to find a common app to use for the walk-through. I like skype because multiple people can skype together. It also works on Android and Apple. Zoom, Google Meets, etc., will work just as well. Do not just use the virtual tour provided by the seller. It is important to have your agent walk through the place and give you a tour. With COVID-19 happening, you can find lots of horror stories about virtual buying. As you are doing your walk-through, don’t get emotionally attached; remember this is an investment. It would be best if you imagined yourself as a potential guest. Does everything look clean? Would you stay here for a week or two? Would you recommend it to others?
Time to make an offer
Once you have narrowed it down to a place, it is time to make an offer. Most likely, you will have to make this offer from the virtual walk-through and your real estate agent’s recommendations. My next post, “Step 5: Making an offer,” discusses details of an offer.
Remember, if this sounds overly complicated, Relaxing Condos offers consulting services to get you started with any of your vacation rental business needs. If you found this useful, please share it on social media using the buttons below. Also, don’t forget to sign up for our monthly Newsletter, Special Hot Tips, and our cost estimating guide delivered to your inbox!