How We’ve Made $30K/Year Renting Our Primary Residence as a Vacation Home
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This is the first in a series of guest posts by owners sharing their unique stories.
Robert Kiyosaki, author of the Rich Dad, Poor Dad series, created a bit of controversy when he said that a home is not an asset, but a liability. This is because your home doesn’t make you money each year, but actually costs you money. My wife and I found a creative solution to reverse that dichotomy. Since then, we have seen several friends of ours take the leap into doing the same with their own homes. One family travels around the country in an RV with their 5 kids, bringing in over $10,000 a month in the summer renting their home out to groups wanting a large house for family reunions. Now, I’m not going to say this is for everybody, but if you are willing to live a bit of a flexible lifestyle, this could be the perfect opportunity for you.
My wife and I got into real estate at the worst time in the past half century. In 2005, the advice we were given was to buy as expensive of a home as possible because if you wait, houses will be even more expensive. So by 2008, we owned our own house and a rental property that were financially crippling us. We decided to sell the rental property, but we knew it was going to take some time. That’s when we remembered hearing that a couple we knew would rent their small house in Seattle every summer through a vacation rental website, then travel around the world on the money. It seemed worth trying with our rental property while it was on the market.
Setting our rental property up as a vacation rental ended up being one of the best ideas I’ve ever had. Not only did it help us not lose money while waiting for the home to sell, we actually made money! The following summer, I convinced my wife that we should try putting our own house up as a vacation rental for the summer, then use that money to take a vacation of our own. The first summer was the toughest because we didn’t have any good systems in place. But ever since then, we have used the vacation rental income to travel ourselves, pay down our mortgage faster, and use some of the money towards home improvement projects.
At this point, you are either thinking I’m crazy or brilliant. If you are still intrigued, here are a few things that we have worked through that make the process less painful:
1 Find out if this is an option in your area
If you live in Rawlins, Wyoming, it might be that no one is interested in paying a couple thousand dollars for your house for a week. Do a quick search on a vacation rental site like VRBO.com or AirBNB.com. See if there are other homes in your area, what the average price is, and if they have any bookings on their calendar. There is nothing exciting about our house; it is just a typical 4 bedroom suburban home located 30 minutes from Seattle. But as many travelers are looking for affordable places for families and larger groups to stay for weddings, family reunions, business trips, and family vacations, we can consistently expect to rent it out for 6-8 weeks each summer, as well as Thanksgiving and Christmas weeks. Obviously, we can turn down any inquiry we receive, so our goal is to travel for about 4 weeks each summer, as well as either Thanksgiving or Christmas. This brings in about $12,000-$15,000 each year.*
2 Don’t feel the need to negotiate
Vacation Renters are often looking for a bargain. But unless you are desperate for the money, dropping the price can come back to haunt you. In our experience, bargain renters tend to be critical renters. Also, we would rather rent fewer times in a year for the full price than more often for a discounted rate. That may mean turning down some offers. But there are few things more disappointing than renting your home out for a discounted rate, then getting a full-priced inquiry days later for the same time period.
3 Set up your own storage space
We set up our garage as our storage space, locked from the inside of the garage. That way, we don’t have to leave all of our stuff in the house, nor do we have to take it all with us. I installed a clothes-hanger line across one wall, bought storage racks and bins (each labeled with the contents), and now clothes and valuables go in the locked-off garage. Now, we don’t move all of our clothes into the house after renters. We keep just the stuff we will be using for the next couple months into the house, leaving the rest in the garage. We put a refrigerator in the garage, so we just move any food that we don’t want to bring with us into the garage fridge. At this point, getting out of the house is as easy as packing our bags and putting the rest of our personal items in the garage. We even lock off one of the bedrooms unless it’s a particularly large group. This way, we can store a few things there if we are only going to be out of the house for a few days.
4 Pay someone else to clean the house for you
My wife would obsess over having the house perfect for people the first two years we rented it out. It was the most stressful part of the whole process. To remove that pain point, we created a thorough checklist and now use the “non-refundable cleaning fee” to pay someone else to clean the house for us. They make the beds, deep clean every room, and set up flowers and the welcome letter. All we have to do is grab our bags and get out of the house. Since we average between $2,000-$3,000 per week, it is well worth paying a couple hundred dollars to have someone else do the dirty work for you.
5 Add rental insurance to your policy
We have been renting our house out as a vacation rental for over four years now and have yet to have any serious problems. Sometimes we need to get the carpets cleaned or something gets broken. But at over $2,000 each week, there isn’t a lot that their rent wouldn’t cover (not to mention the $250 security deposit we hold against damages). However, depending on your risk tolerance and how often you rent out the house, it is probably worth adding rental insurance to your policy. This costs very little and produces an incredible amount of peace of mind. (note from Editor: We would always recommend insurance for rental – regular home insurance cover could be voided if a catastrophic event occurred and paying guests were in residence)
6 Make the most out of being gone
We use the “vacation time” to visit new places and see friends that we otherwise might not visit. Because we travel so often, we make sure we travel frugally. But we always make sure to do something extra so that it doesn’t feel like a chore being out of our “castle.” If we stay with friends or family, we provide plenty of fancy groceries and make sure to take them out to a nice dinner. By simply doing a few extra things and not going to the same place each time, it keeps the experience fresh and exciting (in case making money isn’t exciting enough on its own).
I am the first to admit that renting your primary residence as a vacation rental isn’t for everyone. But if you are looking for creative ways to pay for your travels or make some money while visiting family, we have proven for over four years that this can be your solution!
*This year we decided to spend 6 months in San Diego, renting our house out for over $4,000/month while staying at a $1200/mo month-to-month apartment near the beach.
This is a guest post from Colin Jones. Colin has been an unorthodox entrepreneur for nearly ten years, previously co-managing one of the largest card counting teams of the past decade. He now runs Time To Get Awesome, helping people grow, monetize, and market their online business.