Furnishing and operating a rental home
Operation of a rental property in the Outer Banks may seem promising but can be quite complicated. Many people run into the challenge of not treating the operation as a business, they use it as a vacation home which is rented occasionally when they are not there. Let's dive into the factors that go into a successful rental, and why the details matter.
What type of clientele do you we to appeal to?
Am I going to have a more family focused rental?
Do we want to cater towards large groups or couples?
These are the initial questions that are going to impact the entire setup process. When it came to deciding on our priorities, I wanted a midsized property with a family focus that was kid friendly. I also wanted to cater to more affluent renters. These factors influenced the furnishing and design of the property.
The costs of operating a rental may come as a surprise to many people. Rental projections can be over inflated, and performance can vary by year. Also, if you’re in a position where affordability relies on the rental income, covering the basic expenses must be a priority.
The initial factors to determine if a rental is a good fit aren’t solely related to price. Remember location, location, location...close access to the sound or ocean comes at a premium but will certainly up the desirability of your property. Alternatively, semi ocean front or sound front may be a better investment depending on costs. Either way just having a place in OBX doesn't cut it anymore to guarantee a successful rental. We just went through a period of significant expansion in the Outer Banks along with one of the hottest markets I have seen in 30 years. Assuming just because you’re close to the beach you will rent couldn't be further from the truth. As rentals are becoming more competitive, the amenities and decor within the home have a much larger effect on the success of your rental season. Consider the comparable properties in your category, you must stand out and this is where those extras matter.
Environmental conditions and higher interest rates have caused purchase prices, building costs as well as operation expenses such as homeowners insurance to increase significantly over the last few years. So initially choosing between a property management company or self-management must be carefully considered. You may pay a premium with a property management company, but it comes with professional websites, paid advertising, name recognition and experience. Many of them have relationships and resources such as professional photographers, sales representatives working to help with reservations and more. If you're local to the Outer Banks and have time to be involved, self-management may be an option. I found that if you're off-site, it can be harder to have timely responses to problems or established local relationships with vendors.
What is your perceived value?
Attracting renters through additional property amenities is becoming more important also how you showcase your property. In addition, positive reviews and repeat customers will greatly affect the bottom line. Adding welcome gifts or amenities such shampoo, conditioner, detergents, and soaps can go a long way. Initially we offered sample sizes of these amenities, but based on guest feedback, we installed full sized versions in each bathroom and laundry room. This was a beneficial change as long-term costs are cheaper, and it provides an extra free amenity whether the guests use them or not. Avoid items that are too fragrant or have the potential to affect people with allergy sensitivities such as almond based shampoos. Also utilize bulk purchases as it’s significantly more cost effective; you can find options through Amazon and other vendors. Always make sure you try them out before having it be your new option for a season. Below are images of our newly installed items.
Showcasing your property
Utilize professionals for your photography or videos and take advantage of social media to drive potential guests to your property. Below is an example of one of our rentals and how to showcase it online to prospective renters. Increasing site traffic is one of the largest factors in helping a property to get booked. Remember DETAILS MATTER...having the inviting color’s themes and household items along with pictures that stand out makes all the difference.
YouTube Video (Property Walkthrough) - Click Here
Business Instagram Account - Click Here
Stress Less Facebook Account - Click Here
Cable vs streaming services
Streaming services have improved significantly over the years where there are few differences between channels through a cable box as compared to streaming services. Performance can also be greatly improved through newer model smart TVs where the streaming apps are built in. Also, if you’re using a streaming device many people recommend Roku 4K where I found the TiVo stream is better suited for rental. Unlike some of the other streaming devices, the TiVo remembers the passwords and logs you back in automatically where the others require you to re-login throughout the year.
Based on my experience, consider paying for several streaming services so guests have them included in their stay. Not having guests use their own login is a nice feature and helps pass time on those rainy days. This is a relatively low cost add on and people appreciate the availability.
Consider the following services
Keeping your property modern and desirable
We have all heard the saying keeping up with the Joneses, so what is needed to attract renters? Pools, hot tubs game rooms, new TV's and modern appliances are all factors to help drive interest in your property. There is defiantly a quaintness around the Outer Banks with many homes having vintage traditional brown exteriors and basic beach box style. As they say though, times they are a changing and people want more value for their money. Adding entertainment items such as the newest game systems to entertain children and adults alike is important. You can get subscription services which are well worth it to offer hundreds of games to your renters. We include a PlayStation 5, Xbox S and Nintendo Switch OLED. This costs about $900 to $1,000 for all the systems, but having options for people avoids them spending additional money to pass the time. Having quality wood furniture, bedding and linens and extras gives them amenities and luxuries they may not have in their own home. These features are what get you booked and make people want to come back. Game rooms, a fully stocked kitchen, beach chairs and surround sound all add to the rental experience. Also, it may sound cliche but buy it locally. Not only does this support the local economy where your rental is, but having people who will be out there regularly and back up their work is well worth it. I also maintain service contracts as it will prevent many headaches down the road. While there is a slight premium by using a local vendor, it could save you the hassle of offering concessions or refunds to unhappy renters if something isn't working and you are unable to get a repair fixed in a timely fashion.
Getting a good nights sleep
Never, Never, Never cut corners on your beds and pillows. A wonderful experience can be ruined if you're unable to get a good night's sleep. From your design aspects to what's under the blanket, spend some money here. Now understandably tastes are different, so you must try and appeal to the broadest market possible. For the mattresses we use a more moderate firmness with plush tops. Having mattresses with cooling features is also a plus since you're at the beach. Included in our next rental will be the newer Mlily ONYX mattress. Also don't forget your pillows matter...the only pillows I found that I enjoy are latex foam. See the below links to all items we use in the different rentals.
What to include in your kitchen
Having a fully stocked kitchen is important so people do not need to bring anything from home and can just enjoy their vacation. I spent a bit extra as I want people to enjoy themselves with quality items. We used Noritake dishware which was my only decision that I would have changed. Taking into consideration many people have children, they may bring the plates outside or on the deck. Based on the guest feedback we purchased additional hard plastic wheat straw dinnerware sets for people to use on the pool deck. Where I think there is a value is splurging on the cookware. We purchased Viking culinary hard anodized nonstick cookware and JoyJolt assorted glasses, in addition we found the J.A. Henckels in 18/10 stainless steel holds up well. Many of these may be a bit excessive or unnecessary, but the more someone feels like they have everything they have in their own home the more likely they start to treat it as their own and become a repeat renter. Below are a few examples of what was part of the rental Stress Less.
Whether it’s your internet speed, televisions, or devices throughout the home, were in a much more technologically driven society. We included a mesh system as well as backups for power and the internet. Things will inevitably go wrong, so putting safeguards in place helps significantly improve people’s overall experiences. People come to relax but don't expect them to always disconnect from the outside world. The Internet can be spotty at best in parts of the Outer Banks. We purchased Samsung 4k Smart TVs for the bedrooms and a Sony Bravia for the living room. I would recommend purchasing upgraded models as they have faster processers and function better. Since it was a new build, we installed Sonus in ceiling surround to add to the viewing experience. Also spending a few extra dollars and having charging stations throughout the home goes a long way.
Avoiding going into too much detail we bought Trex Loungers and recommend having games, grill, pool, hot tub, and fire pit if within the budget. The one thing I would add here is to purchase items that will hold up. The weather is rough on outdoor items so spending a bit more upfront can save you a lot of long term if you’re not replacing items every few years. We have smart lighting from Ring illuminating the home as well as driveways and outdoor areas. There is limited street lighting so when the sun goes down it is very dark.
Costs to furnish your property
Many people often outfit their rental property by bringing stuff from their own home or second hand or discount stores. Remember who you’re appealing to too. If you want a premium rental price don't expect to put subpar items in the home. If you're a small beach box, some of the added upgrades may not help your bottom line. Leave personal items out and consider increased quality that doesn't have to be replaced yearly. Below is a cost breakdown of what to expect. Below is a range from lower end items to premium as a general idea furnishing your property (4 Bedroom 3.5 Bathroom Home example).
Outdoor Furniture: $4,000 - $8,000 (Trex tables, chairs, and loungers)
Game Room Items: $1,500 - $7,500 (Pool tables, air hockey, arcade machines or comparable Items)
Bedroom Sets: $3,000 - $8,000 per bedroom (Includes Dressers, nightstands, bedding and furnishings)
Fully Stocked Kitchen: $2,500 - $4,000 (Small appliances, dinnerware, and cups along with cookware)
Carpets and Window Treatments: $5,000 - $7,500 (Varies based on home size)
In-ceiling Surround Sound System by Sonus with professional install: $2,000 - $4,000
What are the typical operating costs of a rental?
This is a breakdown of what our costs were in 2023. Insurance and operating costs fluctuate between $20,000 - $23,000 yearly (excluding mortgage costs). Typically, one of the largest expenses is the homeowner’s policy which can be $6,000 and up for a rental. It’s also good to add flood, wind insurance and comprehensive liability; it’s detrimental if something goes wrong and you don't have it. Other common costs are the water bill and electric bill which range from $300 to $500 per month in season and can easily double with a heated pool. Seasonal costs include the lawn and pool maintenance which each runs several thousand per year. The other costs include spring and fall house cleaning power washing, website costs, streaming services subscriptions, and HOA fees if applicable. It is also important to add a contingency for weekly cleaners, lawn and pool care, annual power washing of the home and termite spray. In addition, account for annual permitting and inspections for decks, elevators, and equipment.
Property Management Fee's and Expenses - $11,500 - $12,000
Management Commission can range from 15% to over 25% but we paid between $8,000 and $9,000 for a fully booked season. This includes the brochure fees, cleaning services, linens pest control, marketing etc. We negotiated a flat rate of 15% which in my opinion is the way to go. It is important to make sure you maintain a good relationship with your property manager as they are your eyes and ears. It's critical to reply promptly to problems. Having the Property Management Team report back to you on issues or concerns and working with them for a solution helps avoid larger problems from materializing. Also take guest feedback and make changes that may help elevate a renter's stay. Eliminating reoccurring problems is a good business practice to be proactive and avoid future concerns.
Want to see more about the Outer Banks?
Visit our website: https://www.obxluxuryrentals.com/blog