Vacation Rental VS Standard Rental | What’s The BETTER Investment?

This video explains the pros and cons of a vacation rental property and a standard rental property. It will help you decide which investment strategy is best for you.

Chandler David Smith has been investing in real estate for the last seven years. He currently owns 99 units of rental real estate and uses 2 to 4 of those units as vacation rentals. In this video he talks about the pros and cons of a vacation rental in comparison to a standard rental property. He explains that there is more risk and more expense when investing in a vacation rental property. He also explains that there is a higher potential financial upside tied to vacation rentals as well. In this video he breaks down the pros and cons of both and emphasizes always purchasing a property that would work as a standard rental. Chandler explains that if you buy a property so that it works as a standard rental property you always have a back up plan if things don’t work out as a vacation rental.
#vacationrental #rentalproperty #investmentproperty

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[JT-jdxs]

I owned and ran a four plex in a high end beach resort location in south Florida
for about ten years. We cashed out with a heavy profit last year along with a lot of the old
time Landlords in the area.
Ive gone both routes in the same building at the same time actually,
so I have a unique prospective on this comparison.
Here's the breakdown.
The regular long term tenants in our area just became a rouges gallery of squatters, deadbeats, cheats, three time losers, drunks, hustlers, thugs ect.
Evictions, fights, domestic issues, bounced checks, police cars, always running out of money, weirdos in the yard, dangerous dogs running around, broken toilets, cat ladies,
every conceivable midnight call ect were just becoming the norm rather than the exception.
I did well but ultimately packed it in.
I would rather just rehab and flip old buildings knowing what I know now.
The whole thing was just too much of a liability for me and alot of the other owners.
With vacation rentals you reduce or even mostly eliminate the psycho drama associated with long term tenants in a major way and if handled well
you stand to make three times the money or more.
When you have a 600k property, is it worth the risk and hassle
to bring in 1300 a month before expenses for a 1bdrm assuming all goes well,
(and it rarely does)? Your responsible for fixing everything at a moments notice, taxes, code violations, utilities, keeping the yard up ect every waking minute a leased tenant
is in your building. Even if they have not payed the rent in months.
No thanks.
I am here to tell you once someone has a key and even a monthly lease for one of your doors your really taking a gamble that they will be the bane of your existence.
The honeymoon, if there even is one will be over in a week. Trust me.
I'll choose the extra work needed to book a vacation stay here and there
from out of state travelers with five grand up front all day.
Take the money up front like a Hotel and keep their credit card wide open for the whole stay.
That becomes like a running defacto damage charge deposit that you can hit them with at
anytime you see fit. That's what the smart Landlords who did short term right in my area
would do and the guests behaved themselves pretty much always.
I don't care if my guests party or get crazy if they can afford it,
that's why they are on vacation. Right? I want them to have fun and come back next year.
I would much rather provide a great stay for the right short term vacation clients with money and good vibrations ect
than long term tenants with their day to day baggage, issues and endless problems.
Sorry folks, it's just the way it is.
Ive had good long term tenants that I really like and care about but few and far between.
Vacation stays also virtually take the need and pressure/ worry for you to collect the rent out of the equation, which is the hardest part of being a Landlord or property manager.
If they wish to stay longer you try to accommodate them if you can.
But you don't have to.
Just run the credit card again that's on file. Done. They are never staying a single day that is not paid up in advance. Your always in the drivers seat and calling the shots.
I like that.
With traditional tenants, they really own your lunch before the ink is dry on that
lease agreement and your taking on a liability I say.
They know they can stay for
many months on your dime if it comes down to it and make no mistake they will.
The main problem on the vacation side is that your property has to be a vacation worthy
destination in the first place and that is serious money usually. Next is more vacancies and upkeep, but this is my take on those supposed setbacks.
I can absorb a few weeks of a vacancy after a profitable vacation stay or more.
You have made three times the rent for that short stay so it's justified.
You also have some time to improve the property, get things right, relax a little
and do it again better. Without the psycho tenants on your back 24/7 you can step back,
live a little, decompress, get some perspective, improve some booking techniques ect.
Wash rinse and repeat.
Short term rentals are not that easy to arrange and manage.
Don't think you need back to back bookings all the time to be solvent.
Work at a realistic pace you can live with.
You can opt for outside help or management if you really want the property booked
all the time. It's work. As far as wear and tear on the
If you think short term vacation tenants are tough on a room, try a long term nightmare
hoarder that's really dug in with kids, bills. pets, furniture, belongings ect and feels like they own the place for many months or even years on end.
You will be fixing the apt for a month.
My apartments were trashed by long term tenants almost at a 7 out of 10 ratio.
Again, I am out of that mess. Been there done that.
Vacancies?
Long term tenants bug out or need to be evicted all the time.
Your getting vacancies either way.
Everyone talks about how reliable the cash flow is on these videos, but in my experience
things fall apart real easy when your knocking on the door asking for your $1500
at the beginning of the month.
At least with vacation, you can make up for months of rent in short bursts and have more time to improve and monitor your property during dry spells and even enjoy the property alone for a while which is nice. And as this video suggests, you can always fall
back to a very well qualified annual tenant if absolutely needed.
With vacation rentals your more likely to have upscale clients from out of town who
may be more demanding for certain details, but they at least have funds, leave when they are supposed to and don't have much recourse
or incentive to give you any future headaches.
I'm OK with that.
.
My two cents for anyone out there looking for advice. Thanks.

[vacuumbed]

The one thing many people don’t mention about vacation rentals, is all the work that has to be done during turnover. I would rather have a standard rental. Thank you for the video.

[shorttermsage]

Sound advice.
1. Always make sure you get a solid return as a long term rental and if it works as a short term rental then that's just icing on the cake!
2. Know your highs and lows using tools like AirDNA to know how to reserve capital.
3. Diversification is key.

PRO TIP: If you don't have the capital for furnishing you can always rent furniture as well.

What are your thought Chandler on master lease investing? (Rental arbitrage)

[Real.Estate.Report]

I’ve bought and sold a couple vacation rentals over the past 3 of years. And sold for a reason! Too much overheard, expenses, headaches with short term rentals. I sold 2 of mine for a profit and currently converting the last one to a long term rental.

[Neilhouse]

I have both and if you don't mind a little extra management then short term rentals are the way to go to maximize your return.

[Pat]

I literally make 70k/year on ONE vacation unit rental only 700 square feet. Renting it on a year lease id make 1/3 of that. The decision depends on the location.

[Artbynayome]

Thanks so much for this video. My husband I are currently considering renting out our home as a vacation rental or standard rental and this was super helpful!

[jakebodensteiner]

You're the man! thanks for the info! Love the rich dad book on the shelf! He is the master!

[ParkFTAirbnb]

Greetings from Borneo, Malaysia! Good sharing thx !
Vacation rental is good but many risk involved. We used to be having amazing business on Airbnb before the Covid-19 happened. Now we took more diversified approach to channel some of our properties into longer term rental. ☺️

[staplez]

LOL, I have a vaca rental as well as a lot of standard rentals. I had the exact same thought process when I did this almost 2 years ago. While the vacation rental worked out for me, it's always comforting to know that I could always fall back if I needed to. It's nice to get this kind of confirmation. Thanks Chandler.

[infinitewireless]

I been curious about rental vs vacation rental. Thank you for clarifying what they are.

[sanjaygoopta]

I've been looking at vacation rentals as an option, but I think I've been using it to justify purchases that would make sense as a normal rental. Glad you pointed me away from it.

[Bruhzabroad]

Why is your channel not bigger?? You’re videos are every bit as good as GS or MK

[carsonswheels]

I had been pondering this question just out of curiosity. Thanks for the information.

[chrisdeanrei]

Very Helpful. Loving your calculator too.

[bbie]

This video was helpful thanks! Me and my family are wanting to take the next year and a half to save for a condo down in Florida. Does anyone know any books or other YouTube channels or videos that would help me and my family make the right choice when it comes time to buying our investment property?

[jorod]

Chandler, thank you for this vid. I have been looking at vacay rentals. I only have 1 SFH rental. Glad I haven't decided to purchase a vacation rental. Thank You

[Chris_]

Excellent information, sensibly explained.
Thank you.

[TheStrategicKeys]

Thank you! I was just trying to go through your videos last week for a video like this.

[robertentrican]

This calculation seems to be more difficult to make in different states. At this point, I really struggle to imagine how owning rental cash flow in California makes any sense at all. Property tax increases, eviction moratoriums, and the slew of other tenant protections make it very dicey to own long term rental cashflow (commercial property yes, residential no). I'm not saying nobody does it, it's just more complex and fraught with risk in a tenant friendly environment.

All of the maintenance items mentioned in your video like the AC unit and other repairs ... it doesn't matter if it's a long term or short term rental, tenant rights demand an immediate response. I would actually consider the opposite, home repair service expenses change with the seasons ... if a property is a vacation rental, you can choose to forgo the rental cashflow in exchange for making a repair in a more cost conducive part of the season.

Lastly, how would you change your calculation if the property were purchased free and clear? A big part of many RE investors is based on using other peoples money (loans). If the property is owned free and clear, does that not open the door to different strategies?

I enjoyed and agree with most of your video, I think it really just boils down to seasonality and rates more so than occupancy rates. Cycles in the economy impact the rental market just as bad as the travel market ... more specifically the reduction in interest rates drive up home purchases resulting in lower demand for rentals which drives monthly rates down - possibly to the point of being a net negative cashflow.