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Annual Rentals vs. Vacation and Seasonal Rentals

Do Most Sarasota Area Properties Make Sense As Vacation/Seasonal Rentals?

Probably Not, and Here’s Why

Quick—Why do people vacation in Florida? CORRECT! The beaches!

So, that being the case, why is it that so many people have the misguided notion that they can buy a nondescript condo unit that’s 10 miles from the beach and keep it consistently rented on a short-term basis throughout the year?

Is Your Property Located Within the “Resort Zone”?

While you won’t find an official “resort zone” listed on any map, we all know it when we see it. It’s that area within walking distance, perhaps biking distance, of the beaches and surrounding shops and attractions that make Florida beaches among the best in the world for vacationers.If you own a rental of even moderate appeal in one of these areas, you can virtually guarantee yourself a steady stream of bookings—and cash-flow—throughout the year. It’s true that most resort areas do have a high-season and an off-season, but even the off-season attracts its fair share of vacationers, and with an appropriate seasonal price adjustment on your part, it’s not unreasonable for one to expect high annual occupancy rates.

The Realty of Short-Term/Vacation Rental Ownership in Much of Florida

As you move further out from the resort zone, your reality could be quite different. You can reasonably expect your property to be vacant for at least half of the year—six-months or more!

While you won’t have any income during those vacancy periods, you will still have to maintain the property and keep the utilities on in your name. Also, you have to keep it furnished and fully stocked with kitchenware, bed-linens, ironing boards, etc.

The cash-flows can be very unpredictable—rented three months one year, six months the next, then two months the next—all the while your expenses are ongoing. That’s a crazy way to run a business, which is exactly what a rental property is—a business.

Why an Annual Rental Might Be the Way to Go

Annual rentals are much simpler—no furniture, and the utilities go into the tenant’s name. Rent comes in every month, all year long, so there is no guessing game for projected cash-flows.

Also, since the tenants are moving into what will be their home, they tend to take better care of the property than short-term, vacation renters do. Overall, you can expect less hassle and stress with annual rentals vs. short-term rentals.

But You Want to Use the Property Yourself

I’ve been in the real estate game for a long time—thirty years as of this writing—and one thing I can tell you with nearly 100% accuracy is that it is EXTREMELY RARE for people to get down to their property as much as they think they will when they purchase it.

Everybody thinks they will be down regularly, and their kids will use it, and their family and friends will be down, but then the reality of life sets in. They find themselves coming down less and less until they’re lucky if they make it down a couple of weeks out of the year—and then for most of the rest of the year it sits vacant. Costing them money. The thrill and the fun is now gone.

Many Smart People Do This

Many smart people recognize that well managed Florida rental real estate can be a great investment that significantly contributes to wealth creation over time. I have several clients who purchased annual rental properties and are doing quite well with them financially. They use some of their profits every year to take a luxury vacation—on the beach!

In Conclusion

Sometimes renting seasonally makes the most sense and sometimes annual rentals are the way to go. Much depends on your exact location and the likelihood of a property being rented for a significant portion of the year, or not. Smart investors make profits using both approaches. Just do your homework, select the game-plan most appropriate for the property you have chosen, and you are likely to do well with your Florida real estate investment.

About The Author

John Michailidis, JD, is the broker/owner of Real Property Management of Sarasota & Manatee, a Sarasota, FL based residential property management company providing both Full-service and Lease-Only services to local area landlords.  If you own residential investment real estate anywhere in Manatee or Sarasota counties, do feel free to reach out to our team at 941-216-0005, or through our website HERE.

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