Saturday, September 10, 2011

Are Vacation Rentals "Businesses"?

Those who are unfamiliar with Vacation Rentals often describe them as unlicensed businesses that operate in Residential areas.  But businesses are operated primarily to make a profit, and that fact dominates much of the behavior of the business.

Vacation Rental operations are far more similar to Long Term Rental Homes than they are to Businesses.  In fact they are often referred to as "Short Term Rental Homes".

They also are similar to in-house cottage industries.

Short term profits are usually not a primary goals, and its rare that a vacation rental owner sees a net profit from their rental home.

Here are some ways that Vacation Rentals are different than businesses, and more similar to in-house businesses or long term rentals.

Putting the chart aside for a moment --  lets be frank.

There are many types of vacation rental owners.

  • There are vacation rental owners that have invested in a lot of properties, operate them like businesses, act like real estate investors, and have occupancy ratios that meet or exceed those of hotels.
  • There are vacation rental owners that rent their homes much more informally, rarely see a profit and have moderate occupancy ratios.
  • There are vacation rental owners who only rent out a few weekends a year, only rent out to friends and associates, and the revenue that they make from rentals doesn't even pay the mortgage, and never covers the expenses associated with renting.
There are rental owners: 
  • that use their rental income to pay for their house until they can afford to retire and live in the house full time.
  • that have owned their house for generations, and in this economy can only hold on to their home with the help of the money they get from renting it out.
One of the biggest problems with attempts to regulate vacation rentals is that they attempt to apply one set of rules to a wide variety of situations, and this doesn't work.  This results in people losing their rental homes even if they have done everything right and caused no harm or disruption to anyone.

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