In times of economic distress, recessions, market contractions, and government-issued shutdowns. Airbnb, VRBO, and short-term rental properties take a huge hit. If you own a short-term rental property, Airbnb, VRBO property in the Orlando and Central Florida market, you may be asking yourself what am I going to do? My bookings have been completely canceled for the foreseeable future. We are currently navigating uncharted waters. Orlando, Florida, had 75 million visitors last year (2019) as the theme park mecca continued to be the most visited destination in the United States. By Associated Press, May 9, 2019. Unfortunately, COVID-19 has completely rocked our world, bringing central Florida to a screeching halt and possibly forcing us all into what looks like could be another recession. When the world goes into recession, everyday people begin to cut back unnecessary expenses, and that once a year trip to Disney World gets put on hold, and your booking begins to drop to non-existent. With cancelations happening left and right and refunds demanded by tourists, vacation rental property owners are in a world of hurt and very concerned about what they can do next as their Orlando vacation property sits vacant. Mortgage payments, HOA dues, and Utilities are still due, but the demand has completely dried up. The solution to your problem will likely come down to one of two options, sell your vacation rental property or convert your vacation rental property investment into a long-term rental property.
This information is not to fuel the fear and fire of COVID-19 and a possible recession. Vacation rental properties do great in times of prosperity and strong consumer confidence. The market is cyclical, and what goes up must always come down. Cooler heads will always prevail when faced with adversity in unique, uncertain times. Selling your vacation rental property on emotion and sudden economic correction is not the hand to play in our opinion. You have another option and today we wanted to provide you with a plan to convert your Orlando vacation rental property into a long-term rental property.
If you look at this situation from a different perspective, this may be a great opportunity for your asset. As guests cancel, your property will be free and clear of visitors. This gives you time to reevaluate your vacation rental property. If you look closely at your asset after paying a vacation rental manager, cleanings, almost 12% tax on rental income (The Tourist Development Tax also referred to as tourist tax, bed tax or resort tax & State Sales tax) on the revenue from rentals of six months or less, and vacancy days throughout a month, you may notice your property wasn't truly making a profit every month anyways. You have the opportunity to convert to a long-term rental property. As a professional Orlando property management company, we have owners that have converted their short-term rental and have seen great returns with their new long-term rental property. So how do you properly turn your vacation rental property into a long-term rental property? Take a look at the following outline provided here—the first conversion item to address.
Item #1: Make sure all your future scheduled bookings are canceled.
Depending on your policy and/or your vacation rental manager's policy, you may or may not have to refund their money. For Example, a Vrbo spokesperson recently responded to BuzzFeed News in a statement on its website, which read: "Refunds of payments made for vacation home rentals are based on the homeowner's cancellation policy. If a homeowner or property manager refunds a booking due to COVID-19 (coronavirus) concerns, Vrbo will automatically refund the traveler service fee." They go on to say further, “refunds for previously booked before COVID-19 are at the discretion of the owner.” To be clear, we are not against vacation rental properties. We have a family vacation rental property in Big Sky, Montana, that has been affected by the current environment—resulting in refunds up to $11,000 to the vacationers as Big Sky Resort shut down the mountain for the remainder of the ski season.
Item #2: Search, interview, and choose a professional long-term rental property management provider.
Your current vacation rental property manager may try to pitch you into staying with them, and they'll simply list your property as a long-term rental. We advise against this; they specialize in short-term vacation rental management. They are two completely different beasts. Vacation rental management is highly unregulated at the moment and regulated by the DBPR, Division of Hotels and Restaurants. Any rental over six months and one day is considered a long-term rental property and regulated by the Division of Real Estate. You need to work with a professional property management Orlando FL, long term property management provider, not a jack of all trades.
Item #3: Address the mess.
Your vacation rental property is likely fully furnished. You have three options here. Your long-term plan for the property will determine what you will need to do. Do you plan to convert the property back into a vacation rental property when the economy picks up again in a year or two? Or have you had it with the vacation rental investment strategy? If you've picked the ladder of the two, we highly recommend clearing the property of all furnishings. The vast majority of long-term tenants typically have their own furniture, beds, dresser, pots, pans, etc. If you plan to try and rent the property with all the furnishings in place, be sure you are not attached to them as when the tenants move out, they'll have a year's worth of wear on them and definitely not in the same condition. Also, be aware as a property manager in Orlando we see fully-furnished rentals take about 60 plus days to rent compared to a completely unfurnished property.
Item #4 Change/Secure/Rekey your property.
A lot of vacation rental properties have smart locks and or lockbox combinations with keys for guests to access the property. Even the best smart locks out there right now have issues. For long-term tenants, we recommend an excellent ole fashion lock and key with a deadbolt. Fewer problems, and you don't have to worry about replacing batteries and malfunctions throughout the lease term. You'll also want to make sure there are no keys out there floating around. Many guests have had their hands on that key, and you'll want to reduce any liability issues by rekeying and securing the property.
As previously mentioned, during unprecedented, untested times, cooler heads prevail. Investing in real estate is still the safest place for your money. As stocks get obliterated, your asset will always be there. You may need to adapt and pivot from your original investment strategy. But with the right property management team and determination, your property can still perform. Even in the worst market conditions, people will always need a roof over their head, and rent is still due every month on the 1st. If you are interested in learning more about converting your Orlando Airbnb, VRBO, or Short-term vacation rental property into a long-term rental property, please reach out to The Listing Real Estate Management. We are the top choice for Orlando property management, here to help in any way we can!