Buying a Vacation Rental in The Ledges of St George or Other Areas
by David Ellis
on Friday, July 27th, 2018 at 3:52pm.
Are you thinking about buying a second home in The Ledges of St George community to use as a vacation rental home? There are several things to consider.
The first thing you should keep in mind is that vacation rental income often only supplements the carrying cost of a property - it doesn’t always translate to a profit once other expenses are paid.
For example, if your Ledges vacation rental is rented 30% of the time (optimistic), and you are getting $250/night, your rental would be bringing in about $3,750/month. Sounds good, huh? But not so fast. Property management fees can be as high as 50% of the gross rental income for nightly rentals (i.e. the Ledges of St George). From this example, you would net $1,875 after management fees.
Now, you add in normal expenses of owning a home (vacation rental or otherwise). Utility costs around $400/mo, HOA dues around $200/mo. And, since the home is a second home the property taxes will likely be about twice what a full time resident pays. Let’s say $300/month. So in this example, after all expenses, you may end up with net rental income of approx. $975.
The good news is you may be able to use your expenses as tax deductions. It is also possible you may be able to depreciate the property. Depreciation is a significant tax benefit in the short term but it does have long term consequences.
It is extremely advisable to meet with a tax expert before making a decision to use your second home as a vacation rental property.
Vacation Rental Tenants
One great benefit of owning a vacation rental is the quality of the people staying in your home. Generally speaking, based on the price range of vacation rentals in the St George area, you end up with quality tenants renting your property. Often, it’s families vacationing, or groups of friends that take care of the properties.
In St George, where The Ledges is located, anyone that owns a rental property must have a property manager on record with the city. You need to be very careful who you hire. Don’t just take the first company handed to you by the builder’s representative. Interview at least three property management companies.
In addition to whether you like the property management company you need to be extremely cautious about the contract they will have you sign. It is important to look for the following:
Make sure that there is not an automatic renewal clause in the contract. This clause is there to ensure that even if you’re not happy with the company you’ve hired, you may be locked into using them. The clause is there only for the property manager’s benefit, not yours.
The wording that you really want to see is that after the first initial period of the contract agreement (usually one year), the contract changes to a month-to-month agreement. This helps insure that the company will continue to do a good enough job that you will continue to use them. A win, win clause for you and the property manager.
What you need in your home for the vacation renters:
It is actually pretty simple to know what you have to have in your vacation rental. Just ask yourself what you would need so that you didn’t have to run to the store to buy it. For example a fully stocked kitchen, fully stocked living areas, bedrooms, and bathrooms - and down to the smallest details (kitchen utensils, pots & pans, linens, etc).
Items to include that the owner of a vacation rental might not think of:
Spare batteries of all kinds
A short step ladder
Large swimming pool towels
Filters for the air conditioner/heater
A small cache of tools (screwdrivers, plyers WD 40, etc)
What you don’t need in your vacation home:
Items you don’t want used or that are hard to maintain like golf carts, water softeners, personal computers or anything that is or might be dangerous.
FYI: don’t store personal items in the garage unless you are ok with the tenants using them.
The tenants will want to use the garage. Don’t keep your own car(s) in there.
Another thing to bear in mind that if you keep “it” (whatever it might be) in the home, you are financially responsible for maintaining “it”.
What about your “stuff”?
You can keep a locked hall closet (not a bedroom closet) for storage of items you want to use when you’re there. Put a lock on the door and keep the key with you. Things you might store in there: personal bedsheets, toilet paper you prefer, bathroom items, clothing etc.
What if you want to schedule a stay in your Ledges of St George vacation rental?
You’ll need to let the property management company know if you want to stay in your home and what days you plan to stay there. Planning a year in advance is not too soon if it’s important that you stay there on specific days. Be aware, many vacation renters will schedule their stay up to one year in advance especially if they have stayed in your home before.
Another thing to be aware of is that you will be tempted to clean the home yourself when your stay is done so as to save the cleaning fee. This is usually not a good idea. It’s likely you will miss cleaning areas or items that a professional cleaner wouldn’t. This is because they have system of cleaning that they use over and over again designed so that they don’t miss anything. It’s best just to have professional vacation rental cleaners clean up after you’re gone.
Owning a vacation rental home in The Ledges of St George or anywhere else is a learning experience. Sometimes it’s good, sometimes it might be a lot of work. This is all a part of the business you’ll be involved in.
About The Ledges at St George
The Ledges of St George is a master-planned community of over 300 detached single family homes and attached townhomes. Prices range from $300,000 to well over $1,000,000. There is still plenty of land for future development.
An 18-hole, 7200 yard golf course designed by Matt Dye.
The Fish Rock Grill, a full service restaurant. The lunch menu entrées average around $13. Dinner for two will cost between $50 and $100.
A spacious clubhouse for corporate events, weddings and receptions.