How to Get a Good Deal in this Market
The best way to get a good deal in this market is to purchase a property that is underperforming. Of course, you must understand and analyze correctly why it has a lackluster performance. But once you analyze that, you will be able to troubleshoot the issues and correct them after you purchase the property.
An underperforming property should have a reduced price. Often times with an underperforming property, the seller will be motivated as they do not have a handsome income due to the poor rental income performance. These such sellers are often frustrated and do not understand why their investment cabins perform poorly.
So what are the reasons why a cabin under performs? Here are the top 5 most common reasons:
1.
The cabin is on a rental program that isn’t competing in the local overnight rental market. The easiest issue to fix is that the rental company is not an aggressive, high producing company. Even when that company may have a good reputation for high incomes, it has too many of the same size with the same amenities in a particular location, so these cabins are all competing with one another, which negatively affects the amount of rentals that can be attracted. Just by changing the rental company or doing VRBO yourself, you will correct this problem.
2.
The cabins furniture and décor is outdated. You will need to do an estimate on what has to be replaced and what your budget needs to be in order to make those corrections, but you can definitely change the performance of a cabin by refreshing furnishings to give it the latest look. We even have a rental company in our area that is willing to help provide updated furniture towards this refreshing and coordinate it if you commit to its program, so ask us about this creative approach.
3.
The photographs are horrible. You won’t believe how many properties actually would perform nicely on a rental program if they spent the money on photography. This is always a really nice and easy fix. However, you do need to analyze what’s wrong with the photographs. Sometimes a cabin’s front sits in such a way that it’s not very photogenic, so you may need to invest in drone shots to get the best photograph. You also may need to invest in some touching up of your cabin photographs to get the ambience needed or to show it in its best light.
4.
The cabin doesn’t have rental history. The cabin is new or one that was used more as a vacation home so it has no rental history, or a rental history that is incredibly low. When you purchase a new cabin that has no decor and/or no furniture, or one that is filled with “second home” furnishings that are outdated, this is another easy fix to bring the revenue up. It is possible with the decor and furniture to increase the value such that it will perform in such a manner that in the case of a new construction, the original builder did not expect. Therefore, he underpriced it. For a cabin that was used more as a vacation home or one that isn’t on a rental program at all, the lack of rental history will often mean a lower price point. Look for one and two bedroom cabins that have lofts or large game rooms that you can turn into bunk rooms. These changes will allow your cabin to now really compete with three and four bedroom cabins (but remember you paid for a 1-2 bedroom).
5.
Evaluate how the cabin is arranged. A cabin can also underperform because it’s awkwardly laid out. If it’s outfitted incorrectly for the bedrooms or game rooms, or perhaps even has unfinished space, this is something you can alter. By correcting the configuration or by completing unfinished space, you can up the gross income. You should always attempt to place king size beds in bedrooms, making them king suites. You also might be able to add a bathroom or two, thus converting each room into its own private suite. Unfinished space can be used to either add a bedroom or something that’s missing like a game room or a theater room. You might even be able to add an indoor swimming pool!
By doing an analysis of the performance, working with a trusted rental company for gross projections, and budgeting for the changes that are needed – whether you should remodel or refresh the décor – you will be in the best position possible to purchase an excellent investment.
Let the adventure continue!
