The Challenge Of A New Venture
It’s always intimidating the first time.
In decades of buying and selling homes, I had never purchased a vacation rental. I never considered it a safe bet with monthly maintenance fees often higher than affordable rent. And vacation rentals require an incredible amount of hands-on service and attention.
At the urging of a friend, however, I found a wonderful little studio in a wonderful resort in a wonderful town on wonderful Kauai. Did I say it was wonderful? It was also affordable and financially well-managed with a successful rental history. Starry-eyed, I simply believed in its obvious merits. Life is short, and it is as good a time as any to learn something new. I would study up, hire a property management company and ka-ching.
Sold to the lucky bidder who offered full price.
Well, after I got down to brass tacks — something that should’ve been done during escrow’s due diligence — I didn’t feel so lucky. In fact, I felt a lump in my throat when I found that a conservative calculation of predictable income and estimated expenses was alarmingly at break-even. Oh no … I’d be fortunate if I can just pay my monthly expenses!
Slowly, as arrangements for insurance, utilities and advertising fees were solidified, and I realized the general excise and transient accommodations taxes were already passed on to the guest, the bottom line didn’t look so scary. At the same time, I reduced some expenses by taking on some minor tasks performed by my management company, which I refused to do completely without.
One minor task was filing the GE and TA taxes at the end of my calendar period and for the year. And minor it wasn’t. The forest of forms would be enough to chase anyone away from the vacation rental business. Thanks to guidance by the management company’s patient accountant, I made it to the “make checks payable to the Hawaii State Tax Collector” stage unscathed.
After taking on as much as I could without feeling overburdened or underutilizing the management company, I struggled to maximize a rental price structure with competitive rates and minimum night requirements, which still confuses me to no end, so don’t ever ask me for advice. The final leap was subscribing to a globally recognized vacation rental listing company, which meant posting the rates and putting together descriptive narratives and photos of the rental unit to advertise my unit.
The learning curve is still long, but as the devils put away their masks and the dust settles, this lucky bidder is once again beginning to see the merits of her new investment.
Intimidating as it is, the value is in — at the least — the challenge of a new venture.