About Us – What makes us different
Market Knowledge – The difference between a vacation rental investment property and a home.
Pricing of a home listed for sale is generally done by and agent who compares the subject home against similar homes, in similar shape, nearby. An analysis is done by the agent, reviewed with their client and then the home gets listed for sale. A buyer will follow that same logic, perhaps looking for some intangible like home design, a view, setting, that might make one home more attractive. For those that are financing their purchase, a mortgage application causes an appraisal and that brings a licensed professional to the property to assess the condition and render an opinion on value – again based on comps (comparable home values).
When it comes to homes that have an added ability to earn income, the process becomes a bit more clouded. You may be justified in selling a home for more money if that home can produce high rental revenue. Short-term rentals typically bring twice the revenue as long-term rentals, so those homes see a price premium when listed for sale. If the home has a license that is limited supply, that adds value, if the home has an attractive rental listing, that adds value as does furniture, design and furnishings. These so-called turnkey STR properties can cost as much as 20-25% more than a nearby home just used as a primary residence.
If you are using a conventional loan, the appraiser will recognize this and adjust the price accordingly, looking for the house to house comparison, not including this STR premium in the opinion of value. This creates an appraisal gap, and that gap needs to be overcome if you want to be successful in bidding for turnkey STR properties.
Rarely are you going to get a house full of free furniture, a new hot tub and a successful rental history for free, it has to be accounted for. As the saying goes you can pay me now, or you can pay me later. If you buy a house that isn’t turnkey, you will have to pay after you own it, so it goes without saying, that if you buy a house that is turnkey, you will have to pay a similar fee, that money will not be included in a conventional mortgage. There may be other kinds of loans to help finance this and many STR-focused lenders can help you find a loan package that is right for you.
That brings us to the next challenge, predicting what a property will earn. As a realtor, we are licensed to sell homes, not businesses. Homes that are also used as investment properties are listed in our MLS systems, but there are not provisions to provide income projections. Like the appraisal discussion above, the goal in estimating value is apples to apples and when it comes to rental income, there are many intangibles, so caution should be advised.
Past performance is no guarantee of future earnings, so whatever numbers you see should be taken as an indicator, not fact. Data that reports earnings can be skewed and may come unaudited. Personal use and personal preferences in renting can affect the overall business performance of a property and as we often see, properties are not always maximized for earning potential. Future data estimates can be skewed by AirBnB’s market share, communities with high direct bookings will show as performing lower than they actually are (see Lake Harmony) and communities in which AirBnB has a larger market share will show as better than they actually are (see Penn Estates).
At Pocono Vacation Home Sales, our team knows real estate and thanks to the more than 150 deals we’ve been part of, we know the Vacation Rental Market as well. Our clients have a wealth of knowledge that we can also share, so when considering buying or selling your Short Term Rental property in the Poconos, we hope you will consider the Mark Shay team, we call Pocono Vacation Home Sales.
