4 Things You Should Know Before Renting Your Alabama Vacation Home

4 Things You Should Know Before Renting Your Alabama Vacation Home

Vacation homes are fun and exciting as they provide an escape from your everyday life and your reality. This escape is essential for a person’s health and medical professionals recommend such breaks. However, the likelihood that a person will use the vacation home year-round is low. Therefore, a great option is to rent the property when it is vacant to maximize the use while also creating a source of income. Also, this source of income can lower the cost of ownership and produce a profit. However, individuals that want to rent their vacation property need to consider a few factors.

  1.     Treat the Property as a Business

According to the Internal Revenue Service, if you are renting your vacation property for less than 15 days, the income from the rental does not qualify for taxes. However, you cannot claim expenses on the property as would be the case if the property was a source of income. For example, expenses that arise from listing fees, advertising, maintenance, insurance, cleaning, and utilities, among others, are part of the cost of running a business, thus are tax-deductible and reduced from the revenues that the business activity generates. Regardless of whether you will be renting the property and taking the deductions, recordkeeping is an important action. If the IRS ever audits, you will need to prove that you either meet the criteria for not paying taxes or show the documentation for the business and business activities.

Some experts believe that it is not necessary or incorporate or establish a Limited Liability Corporation if a person has one property. However, if the idea is to create a business out of renting vacation property, then it makes sense to formalize. Furthermore, the cost if incorporating is low. Most professional service charge around 60 dollars plus state filing fees. Individuals can also register with the state and avoid the professional fees as these can be filed online through the Alabama Department of Revenue. Alabama businesses must also apply for any local business licenses and register to pay sales tax. At the federal level, the business owner can apply for a Federal Employer Identification Number online.

The advantages of treating the rental as a business is that the process creates a separate entity that protects an individual’s personal assets from any liability arising from the activities of the company. Furthermore, the structure for running the operation, such as maintenance and other operational expenses, is managed as costs, thus allowing said costs to reduce the profit for tax purposes. Also, the IRS has specific business structures such as S Corporations and LLCs that are built for small organizations with tax benefits, such as avoiding situations of double-taxation. For example, S-Corporation owners can save money on self-employment taxes. Also, these types of businesses do not pay taxes at the corporate level and income is passed through to the shareholders. Overall, the benefits of incorporating outweigh any costs involved in the process.

  1.     Property Management

There are many vacation rental websites where property owners can list their home. These provide a huge advantage over trying to find vacation renters on your own. The sites attract a huge number of visitors and their popularity provide high rankings in search engines results. Therefore, it does not make sense to try to compete. Instead, listing with these services provide the property with an expanded visibility that will increase the probability of finding interested parties. Furthermore, these rental sites represent large companies that can provide a wide range of services that can help property owners manage the difficult aspects of rentals.

Most of the available property management companies provide all the services needed to handle anything that can arise from the rental activities. This includes handling maintenance and repairs while also taking care of rental issues, collecting fees, and marketing. Unless you are dedicated to property management, it is advisable to allow these companies to handle the tasks associated with dealing with renters. Individuals that are good at maintaining property can manage the repairs and maintenance as these services are additional to the fees that these companies charge for renter interaction. However, these activities can consume a lot of time and become a burden, thus making it worth the investment of paying for a professional service. If you decide on handling the process on your own, make sure to use free rental application software that can help filter tenants with problematic pasts that can be a problem to deal with.  

  1.     Consider the Renter

Most renters are accustomed to obtaining certain services and amenities often available when renting a hotel room. However, vacation property owners that list such amenities will create a more attractive property. People expect hotel-quality beds, entertainment, and cable. Therefore, it is important to invest in the attractiveness of the property and understand what renters are looking for in vacation homes. Pool tables, gathering spaces, and board games will provide attraction. However, it may be necessary to make your listing stand out by increasing the amount of information about the property and the area around the property. Describe activities inside and around the property that the renter will be interested in and include pictures of these activities.

As with any marketing strategy, property owners should try to understand the behavior of their customers before, during, and after the rental to determine how the property can be more attractive to renters. For example, parents with small children looking for a vacation home will be interested in local child care services while those interested in renting a cabin for a hunting trip may be interested in a full-line hunting and outdoor store in Jasper, AL. This interest defines behavior before the rental, thus suggesting what renters will be looking for during the rental. Others may rent a vacation property in a location where they intend on moving to feel the place out before deciding. This would suggest behavior after a rental. Therefore, the tenant will be interested in aspects that revolve around future activities. Including information on local schools, churches, and entertainment will be helpful. Some may even be interested in a car dealership in Tuscaloosa, AL or other businesses that will provide important items for establishing residency.

Last, you will be competing against other properties, and these properties are all listed in the same platform. Therefore, your listing will need to be visible, mark a difference, and stand out, so that interested renters pick yours over everyone else’s. High-quality pictures, virtual tours, and a detailed listing are critical, and each detail will make a difference. Renters need to feel as if they are visiting the property. Having a professional take quality photographs of the home will make a difference when renters compare such photos to other property owners that may have used a cell phone or digital camera to take the pictures themselves. Sure, doing this on your own will be free. However, professional photographers are trained to highlight aspects of a property that will be hard to replicate. When this is combined with a well-written description of the vacation home, renters will take notice. These aspects can help develop a prosperous and lucrative business out of your vacation home.

 

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