One of the things that always comes up when we’re looking at properties is, can we get the rental history on this property?
The answer is sometimes it is possible to get the rental history, whether somebody makes up a spreadsheet or sends you a bunch of paper with positive, negative, or in between, who knows.
Who knows what’s on those spreadsheets, but we can ask for it. But the bottom line is, it is not very important unimportant. If the property just happens to be with a great owner, with a great management company that has great rental history and you can take it over and everything and convenient, brilliant. But at the end of the day, the rental history really doesn’t matter.
The most important thing is the potential rentals. That is what is going to happen with the property moving forward, not what happened with the property in the past. And why is that? Well, the answer to that is we really don’t know what was going on in the past. Who knows? Maybe it was a bad owner who got bad advice and didn’t set the property up properly. They really struggled with it for a couple of years, figured out that we were losing too much money or it wasn’t working out for him, and did I decide to sell it?
And we are looking at it today, and you get those historical numbers. Well, that’s very likely to put you off. You look at it, “Well, this home doesn’t do very well.” The truth of the matter is, doesn’t do very well and it doesn’t do very well, not because of the home, it doesn’t do very well because of the owner.
The other thing that is really important to keep in mind is the vast majority, I’d say 65, maybe even a 70% of our clients don’t buy a vacation home for revenue. In fact, the majority of them buy a vacation home because it’s a lifestyle investment.
It’s something that they want to have for themselves, their friends and the family, the place in Orlando they can come anytime they like, and they just rent it out a little bit here and there to cover the bulk of the ownership costs.
If you are buying a property from them, you may look at it and think to yourself, “Well this house isn’t doing very well, so maybe I shouldn’t buy this one.” And the reason behind that is because the owner didn’t actually want to rent out that hard. So there can be various different reasons why a property hasn’t generated good revenue in the past and more to the point that it’s important that you understand what the rental potential is moving forward, and that is really the question.
And if you reach out to your vacation home specialist and you want to know about the numbers, you should really not ask what the historical numbers are. You should ask what’s the potential returns for a property like this if we set it up properly and we do the things we need to do to make it successful?
So historical numbers, not really that important. Don’t put a lot of weight on them if you happen to get them, and they’ll look great and they’ll look as though they’re legitimate, then superb.
But the bottom line is, it is far, far, far more effective to sit down and look at the numbers and make sure it works moving forward as opposed to what happened in the past.
