Imagine owning a second house in your favorite vacation destination. What if that property cash-flowed enough rental income to cover the mortgage? Aside from travel expenses, it covers your vacation costs every year. Sign me up!
In 2019 alone, this lucrative industry brought in $57 billion for investors. These rentals give owners a number of tax deductions for the basic costs of operation, too. Some markets fare better than others.
Take Orlando…home of The Magic Kingdom, The House of Mouse, and the Happiest Place on Earth. Disney saw 52 million visitors last year. Aside from Disney, Orlando has 18 other thriving theme parks, practically ensuring a lot of people vacation here!
Except when the economy crashes, governments shut down, a global pandemic occurs, or all of the above. Disposable income vanishes and families forsake vacations to cover basic necessities. But you still have a mortgage to cover for your rental property.
We don’t know how long this will last. We don’t know what spending habits people can afford when it ends. We don’t know if we’ll ever see the same heights of the economy. In the last few weeks, 22 million Americans have filed for unemployment. It would appear that vacations will not make the family budget for the foreseeable future.
Executive Order Banning Vacation Rentals
Since Florida Governor Ron DeSantis recently extended an executive order suspending vacation rental activity, hosts can no longer depend on vacation rental income to cover costs. The original order (Executive Order 20-87) included language stating: “those violating the order are subject to criminal sanctions, including potential 2nd degree misdemeanor charges, and potential revocation of vacation rental licenses.”
The seriousness of violating this executive order cannot be understated. And until rates of new COVID-19 cases diminish, the executive order could conceivably be extended again.
This leaves a lot of property owners concerned about lost income. A once profitable investment property now sits empty, creating bills instead of paying them. Partial repayments from hosting companies or loans for small businesses as part of the CARES Act could help, but don’t come with longer-term solutions. Especially if the ban on rental out vacation properties stretches out longer or if families cannot afford to take vacations anyway.
The Solution: Exploring Longer Rental Agreements
You might wonder: Can I rent out my vacation house for an extended period? Yes, more property owners are considering turning to longer renting agreements for their investment properties. However, by changing their clientele from guests into renters, property owners are subject to a host of other regulations. Under most localities, guests may stay up to a month in a Florida rental home. Any guest staying longer effectively becomes a tenant.
Understanding the Long-Term Value
Even during mandated shutdowns, the government considers real estate an essential industry, so all operations associated with rental and property management continue as normal. That’s right! Showings, inspections, maintenance, and leasing all continue to flourish. At The Realty Medics, we’ve actually seen an increase of showings by 34% in April. We didn’t know what to expect with the pandemic, but this certainly came as a pleasant surprise.
Will you make the same level of income? No, likely not, but it can subsidize a hefty mortgage payment in the meantime and bring you the following benefits:
- You won’t need to pay the high monthly management fees associated with short-term managers.
- You won’t need to worry about consistently procuring new tenants.
- You won’t need to schedule constant cleaning crews or deal with extensive wear-and-tear on the property.
- You won’t need to worry about another crisis! In fact, since 75% of our tenants stay for an average of four years, so you really won’t lose any more sleep for quite some time.
What Are the Legal Implications of Long-Term Renting?
Turning vacation homes and other short-term rental properties into longer-term rental properties comes with a host of other legal implications. Tenancy comes with more rights than a casual guest arrangement. Without an explicitly written lease agreement, tenants hold far more rights than they would as guests on a property. Certain habitability standards change as well, depending on the local regulations.
Under Florida Statute Chapter 83, transient rentals operate under different tax rates and if a guest resides for longer than the prescribed time, the host-turned-landlord is subject to different responsibilities.
You may be thinking: wait, I didn’t sign up for this!
Get Home Rental Management Support
If you’re considering renting out your vacation home for a longer period of time, even temporarily, partner with a tenant management company that understands the field, the legal implications, and the industry’s best practices to ensure you get the most return on all your investment properties.
As the highest-rated property management company in central Florida, The Realty Medics can help you with every step of the process and get your investment property making you money again. We can even coordinate storage PODS to safely store your furniture, for if and when you decide to return the property to a vacation rental.
As a full-service rental and property management company, we can serve as your one-stop-shop to keep your investment home cash-flowing during this time. And with a variety of levels of management service, using The Realty Medics to manage your investment costs less than you think.
If you’re stressed out right now with your vacation rental, give us a call. Even if you just have questions, want to chat, or need to cry a bit to a good listener. We’re here to help you in any way we can.