Waterfront vacation rentals are among the hottest Airbnb and short-term lease rentals in America today.
Those investors who purchased prior to the pandemic are enjoying record rental income and 100% bookings through the summer season and beyond. As an owner of a waterfront vacation property and a person who has also rented such properties for decades, I’ve learned a few lessons that those considering investing in waterfront vacation rental properties may find helpful.
Not only have I rented and owned waterfront property, but my grandmother and great-grandmother were also waterfront vacation rental property owners going back to the mid-1960s. I learned many of my lessons from watching them navigate the business successfully over a half-century.
Waterfront Vacation Property Rentals – Bookings Can Be A Snap
Let’s jump to the best part of modern-day vacation home rentals. Filling your available timeslots can be a snap. Many rental properties enjoy a 100% on-season occupancy rate. Here in the Northeast, it is common for summer-season rentals to be fully booked by mid-February.
During the period from early June to late August, most waterfront rental property owners rent their units by the week. This three-month period is normally fully booked prior to the start of June. In many cases, the same families will rent the same property year after year. Rental property owners have the habit of opening up bookings after New Years Day to repeat renters. This allows a property owner the opportunity to fill up much of the summer season with repeat renters that can be trusted to treat the property in the manner it deserves.
There are even many beachfront rentals and lakefront properties that enjoy multi-week or full-season renters. In fact, I have been a multi-week renter myself. Every waterfront property owner knows that the turnover between weeks is costly in terms of time and money. Thus, multi-week or full-season renters are very valuable clients.
Waterfront Rentals Enjoy A Very Long Season
In addition to the summer season that typically ends when the students return to school after Labor Day, the fall is also a very popular time for waterfront rentals. In fact, in areas where foliage is an attraction, waterfront rentals can rent at a premium in the weeks and weekends leading up to and just after Columbus day in mid-October.
If the lakefront rental or beach property is winterized, families will sometimes rent them for winter ski vacation weeks or weekends. By combining the summer, fall, and winter periods, one can make a waterfront property a year-round Airbnb or by-lease rental. The “slack” weeks in late fall and late spring serve a useful purpose as well. These weeks are ideal for maintenance and repair.
Waterfront Properties Sell Themselves
Although we are focused here on successfully turning a waterfront home into a rental property, when the time to sell does come, many owners have buyers lined up. These buyers come from prior renters and neighbors who would love to have another generation of their clan on the same lake or shore. It is not uncommon for owners of lakefront and beachfront property to receive standing offers of “If you ever decide to sell, call us first!”
Waterfront Property – Understanding Setbacks and Restrictions
Three of our lessons have been all positive. However, there is a dose of reality that comes with waterfront property management. The first is understanding that in America, waterfront property is managed and controlled by multiple state and local agencies.
If you want to build a garage or place a shed or carport on the property you own it typically requires just a building permit as long as you have space. With a waterfront property, that is not the case. 50-foot or 100-foot setbacks are commonplace. These setbacks limit what a homeowner can do to improve or maintain property within a set distance from the high-water mark of the shore.
Take New Hampshire for example. If the owner of a waterfront property wishes to build a deck or a dock, or a retaining wall, they must first have four separate agencies sign off on a work permit. The state department of environmental services is the top-most tier of this pyramid. Next, the river commission. Then the conservation commission for the town, and finally, the town’s building inspector. Each permit approval must be done in the correct order in order to then apply for the next level of approval. Each permit requires up to eight weeks for the committee to consider the permit application. Thus, improving or even maintaining your property can be a constant process of forms, permitting, and requests for permission. If your property is a true “waterfront,” expect to become an expert in cutting through red tape.
Waterfront Property – Water and Wastewater Management
In cities and suburbs, water is typically supplied by a municipal source. Your home is connected and you pay for water that the town or city manages and supplies. With a waterfront property, this is normally not the case. Most waterfront properties rely on either communal or private wells for water. Having just converted the property from lakewater to a private well, I can tell you first-hand it is not a small project. In total, it required that we employ eight separate vendors and contractors. The total price tag broke $20,000.
Wastewater is similar. There is normally no municipal sewage system. Each property relies on a private septic system or some other form of the semi-private system if the property is a condo. When our lakefront property failed its septic inspection it took six months to have the new system designed and installed. The permitting process is a significant burden, and in many locations, you must comply with the rules the municipality puts in place.
No rental business can survive reviews from tenants who complain of water problems or not being able to flush a toilet. Before you invest in a waterfront property, make certain you know exactly what the water and wastewater situation is.
Waterfront Property- Multi-month Off-Season Rentals
Unlike a property that is rented to a tenant as their primary residence, waterfront property is normally a short-term rental. With the summer season being the most desirable, it is tempting to rent the property for the entire off-season to a renter who plans to live there during that stretch and use it as a residence. Beware. Providing a rental of this nature (say nine months) grants that tenant many more rights than a short-term renter. Having seen how these off-season rentals go, I would not recommend them to any waterfront property owner.
Owning and renting waterfront property is an excellent way to profit from rent, earn equity, and enjoy yourself as a vacation property. Bookings are typically easy to fill, and many renters may end up repeat customers. However, waterfront properties have limits on expansion, renovation, and improvement, and basic utilities that can be a challenge.
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