When it comes to generating cash flow, VRBO long-term rentals can be a great option for those who are a bit more risk-averse and don´t want to suffer the whims of the short-term rental market. These rentals cater to traveling professionals, relocating families, and remote workers looking for something more stable and long-term. For landlords managing multiple properties, understanding the benefits and challenges of VRBO long-term rentals and how to maximize a real estate cash flow investment strategy is crucial.
What is VRBO?
VRBO, which stands for Vacation Rentals by Owner, is a leading online platform that connects property owners with travelers seeking vacation or temporary accommodations. Founded in 1995, VRBO was one of the first websites to focus exclusively on vacation rental properties, allowing homeowners to list their properties directly for short-term stays. Acquired by Expedia Group in 2015, VRBO now operates in over 190 countries and is widely considered a trusted platform for both property owners and renters.
Initially focused on short-term vacation rentals, VRBO has expanded its services to include long-term rental options. This flexibility allows landlords to cater to a diverse range of renters, from vacationers looking for a weekend getaway to professionals seeking extended stays of 30 days or more.
What are VRBO long-term rentals?
VRBO long-term rentals refer to properties listed for extended stays, which are almost always 30 days or more. Unlike short-term rentals aimed at vacationers or individuals just passing through, these arrangements are designed for tenants who require temporary housing for work, relocation, or personal reasons.
How they differ from short-term rentals
- Audience: Long-term rentals attract professionals and families, while short-term rentals target vacationers.
- Pricing: Long-term stays often come with discounted rates compared to nightly rentals.
- Policies: Lease agreements and tenant screening are more formalized for long-term rentals.
Why they appeal to landlords and tenants
For landlords, long-term rentals reduce turnover costs and provide a stable income. For tenants, they offer flexibility and a more homelike experience than traditional leases.
Benefits of VRBO long-term rentals for landlords
Increased occupancy rates and steady income
Long-term rentals typically have higher occupancy rates since tenants stay for months rather than days. This translates to a more predictable cash flow. For instance:
| Rental Type | Average Occupancy Rate | Monthly Income |
|---|---|---|
| Short-term rental | 60% | $3,000 |
| Long-term rental | 90% | $2,700 |
Lower turnover and maintenance costs
Short-term rentals require frequent cleanings, key exchanges, and upkeep, which can add up. Long-term tenants reduce these expenses, allowing landlords to allocate resources more efficiently.
What’s the best part about short term rentals? We asked Mike Roberts, a mortgage expert for City Creek Mortgage what his thoughts were.
“There’s no beating the kind of flexibility you get with short-term rentals, for sure. You can choose when to rent out your property and even use it yourself on the days it’s not booked. You can really maximize your income during peak seasons while still enjoying your space.”
Challenges of VRBO long-term rentals
Legal and zoning considerations
Both long-term and short-term rentals are subject to specific legal and zoning requirements that vary by location. Many cities have regulations governing rental durations, zoning classifications, and tenant rights. For example, some municipalities require a minimum stay length for short-term rentals to classify them as long-term leases, which can impact landlords looking to transition to extended rental periods. Occasionally zoning laws may limit the use of properties in residential areas for rental purposes, particularly if the property is listed on platforms like VRBO.
Landlords must also consider local lease requirements and whether they mesh with their overall VRBO strategy. Unlike short-term rentals, long-term leases often necessitate written agreements that outline the responsibilities of both the landlord and the tenant, such as maintenance obligations, payment schedules, and eviction procedures. This can be a huge pain for landlords, so therefore they should probably consider the following:
- Research local and state rental laws thoroughly.
- Consult with a real estate attorney to ensure compliance.
- Obtain any necessary permits or licenses before listing their property for long-term stays.
Competition with traditional leasing options
Long-term rentals on VRBO face competition from traditional leasing options, which some tenants might consider a plus, due to lower fees and more established rental practices. Traditional leases often have fewer service fees for tenants compared to VRBO, where additional costs like booking fees may deter potential renters.
However, VRBO long-term rentals can stand out by offering flexible terms and added amenities that traditional leases typically don’t provide. For instance:
- Furnished properties: Unlike traditional leases, VRBO rentals often come fully furnished, which is a significant advantage for tenants looking for temporary accommodations without the hassle of purchasing furniture.
- Inclusive utilities: VRBO landlords can include amenities like Wi-Fi, utilities, and cleaning services in the rental package, making the property more appealing to tenants who value convenience.
- Flexible contracts: Traditional leases usually require fixed terms (e.g., 12 months), while VRBO landlords can offer month-to-month agreements or custom durations to suit tenants’ needs.
Key things to know before diving into long-term rentals on VRBO
Long-term rentals offer steady income and reduced turnover, but they come with unique challenges that landlords should address before diving in. Here are some key things to know before taking the VRBO long-term rental plunge.
1. Understand local laws and regulations
- Research local and state laws regarding long-term rentals. Does this area require a specific permit? Ar their zoning loSome areas require specific permits or have zoning restrictions that may limit rental durations.
- Verify tenant rights and responsibilities in your jurisdiction to ensure compliance with lease requirements and eviction procedures.
- Consider tax implications, such as changes in occupancy tax requirements for long-term stays.
2. Draft comprehensive lease agreements
A detailed lease agreement is crucial for long-term rentals, as it sets expectations and protects both parties. Include the following:
- Rental terms: Specify the lease duration, payment schedule, and conditions for renewal or termination.
- Maintenance responsibilities: Clearly outline who is responsible for property upkeep, repairs, and any included services (e.g., cleaning or landscaping).
- Security deposit policies: Define the amount, purpose, and conditions for refunding the deposit.
- Rules and expectations: Cover property use guidelines, such as noise levels, guest policies, and smoking or pet allowances.
3. Screen tenants thoroughly
With longer stays come greater risks of tenant disputes or non-payment. Minimize these risks by implementing a thorough screening process:
- Background checks: Verify potential tenants’ rental history, credit score, and criminal record.
- References: Contact previous landlords or employers to assess reliability and financial stability.
- Income verification: Ensure tenants have a steady income to cover rent for the duration of their stay.
4. Set clear policies for maintenance and repairs
Maintenance disputes are a common challenge in long-term rentals. Avoid misunderstandings by:
- Specifying which repairs the landlord will cover and which are the tenant’s responsibility (e.g., major appliance fixes vs. lightbulb replacements).
- Providing clear contact information for maintenance requests and outlining response times.
- Offering optional services, like periodic professional cleaning, to enhance tenant satisfaction.
5. Prepare the property for long-term stays
Unlike short-term rentals, long-term tenants expect a more home-like environment. Ensure the property is ready by:
- Furnishing it with durable, comfortable furniture and essential appliances.
- Including amenities like high-speed internet and ample storage.
- Performing thorough inspections before and after each tenancy to document property condition.
6. Market strategically
Highlight features that appeal to long-term renters, such as:
- Flexible lease terms.
- Inclusive utility packages.
- Proximity to schools, workplaces, or transportation hubs.
How to set up your VRBO property for long-term rentals
Preparing your property for long-term rentals on VRBO involves more than just creating a listing. From understanding market demand to ensuring your property meets tenant expectations, each step is essential for attracting reliable renters and maximizing your returns. Here’s a step-by-step guide to help you set up your property for success.
| Step | Action | Key Tips |
|---|---|---|
| Step 1 | Research local market demand | Analyze nearby job markets, universities, and tourist attractions. Use online rental platforms to gauge demand and pricing trends in your area. |
| Step 2 | Prepare your property | Furnish with durable, comfortable furniture, high-speed Wi-Fi, and fully equipped kitchens. Ensure the property feels like a home for long-term tenants. |
| Step 3 | Create a compelling listing | Highlight features that appeal to long-term renters, like flexible lease terms and included utilities. Use high-quality photos to showcase the space. |
| Step 4 | Set competitive pricing and policies | Offer discounts for monthly bookings and establish clear policies for cancellations and refunds to attract long-term tenants. |
| Step 5 | Leverage tax benefits | Consult a cost segregation expert to maximize tax savings through accelerated depreciation on eligible property components. |
Where are long-term rentals in highest demand in the U.S.?
This chart offers valuable insights into cities across the U.S. with significant renter populations, reflecting areas where long-term rentals might be in higher demand. By identifying cities with a high percentage of renters, landlords can better understand where opportunities for long-term rental investments are most favorable. These cities often attract professionals, students, and families looking for flexible housing options due to factors such as:
Job markets
Cities with thriving job markets, like San Francisco, Boston, and Washington, D.C., are magnets for renters. There are all sorts of new cities that are blowing up in terms of population, including Austin, TX, and Nashville, TN. These areas attract professionals in industries such as tech, finance, and government, creating a steady demand for rental housing. For example, Elon Musk and several other tech-minded people have moved significant operations to Texas, specifically Austin.
Higher education hubs
Cities with major universities, such as Boston and New York, experience consistent demand for rental housing from students, faculty, and staff. These education hubs host a transient population that prefers renting for flexibility. For instance, Boston’s student population, driven by institutions like Harvard and MIT, ensures landlords a steady stream of potential tenants year-round, making it an ideal market for rental property investment.
Urban lifestyle preferences
Urban centers like Los Angeles and Chicago are popular for their vibrant culture, entertainment options, and convenience. These cities appeal to renters who value access to public transportation, dining, and nightlife. For example, young professionals in Chicago often prioritize living close to downtown, even if it means renting, to enjoy the perks of city living without the long-term commitment of owning property.
Economic affordability
Cities like Cleveland and Memphis, while offering lower average rents compared to metropolitan hubs, maintain high renter percentages due to their cost-effective housing options. These markets appeal to individuals and families looking for affordable living without compromising on quality. For instance, Memphis attracts renters with its reasonable cost of living, making it an attractive location for those seeking financial stability while enjoying a comfortable lifestyle.
Cost segregation: Unlocking tax savings for VRBO landlords
Cost segregation is a powerful tax strategy that enables landlords to break down their property into specific components, each with its own depreciation schedule. By identifying which parts of the property qualify for accelerated depreciation, landlords can significantly reduce their taxable income and increase cash flow. This approach is especially valuable for VRBO landlords, as many property features and improvements commonly found in rental properties—such as furniture, appliances, and landscaping—are eligible for faster write-offs.
Here’s an example of how cost segregation can work:
| Component | Value Allocated | Depreciation Period | Estimated Savings |
|---|---|---|---|
| Furniture & Appliances | $50,000 | 5 years | $10,000 |
| Landscaping | $30,000 | 15 years | $3,000 |
| Building Structure | $400,000 | 27.5 years | Standard Depreciation |
For landlords with multiple properties or significant upgrades, cost segregation can lead to substantial tax savings. For instance, furniture and appliances, which typically depreciate over five years, can yield faster deductions compared to the longer 27.5-year schedule for the building structure. Landscaping and outdoor improvements, with a 15-year depreciation period, offer another opportunity for accelerated savings.
By leveraging cost segregation, landlords not only enhance their immediate cash flow but also create more financial flexibility to reinvest in their properties or expand their portfolios. For the best results, consult a cost segregation specialist to ensure compliance with IRS guidelines and to identify all eligible components. This strategic approach can transform your rental property’s tax planning, making long-term rentals on VRBO even more profitable.
FAQ
What is the minimum lease term to qualify as a long-term rental on VRBO?
On VRBO, a long-term rental is typically defined as a stay lasting 30 days or more. However, specific minimum lease terms may vary depending on local regulations. Landlords should check local laws to ensure compliance with any requirements for long-term rental classifications.
Do I need additional insurance for long-term rentals on VRBO?
Yes, it’s recommended to have landlord insurance for long-term rentals. This policy provides coverage for risks like property damage, liability claims, and lost rental income that standard homeowner’s insurance may not cover. Review your insurance options and ensure they align with your rental’s duration and purpose.
How can I attract high-quality tenants for my long-term VRBO rental?
To attract reliable tenants, create a detailed and professional listing that highlights key amenities like Wi-Fi, furnished spaces, and proximity to local attractions. Use high-quality photos and offer flexible terms to appeal to a broader audience. Thoroughly screen potential tenants through background checks and references to ensure they are a good fit for your property.
