Vacation Rentals

steppingup

New member
I was browsing vacation rentals in Paso Robles and was surprised to see several properties that were for sale at the time that we purchased our home there have been turned into vacation rentals
This one was purchased in '07 for $380,000
http://pasoroblesvacationrentals.com/pasoVineHouse/

The Olive Street house was purchased for $372,000

http://pasoroblesvacationrentals.com/dosRobles/


Click on Max and Velma's from the link below. It was purchased for $360,000

http://www.pasovacationhouse.com/

This one here isn't even really "walking" distance to the square and was a total 2005 bubble purchase for $500K

http://pasoroblesvacationrentals.com/serendipity/


Does anyone think these places are cash flowing? Any idea on how much income they average per month? Ours is a charming 3/2 built in '41 and a 7 minute walk to the square. After the property manager, we net $1,274/mo.

I'm not sure how much the utilities are and it looks like you need to include Wi-fi, so that's another $40/mo up there. We'd also have to furnish the place. But, if we could average somewhere near what we get now, it would be so much more preferable because we would then be able to use the house when it's not booked. The month of the mid state fair it would bring $3K. Outside of that, it doesn't seem like you would be able to average more than $1K/mo.

I kind of suspect that from what I've seen, there is more supply of these vacation rentals than there is demand right now. Maybe the owners of these properties bought them as second homes and are just using the income to offset some of their costs for the usage? They all paid more than we did, which is why I suspect that these weren't purchased to make money. I know we would love to be able to use the house every few months for a few days. And, if we had it furnished with no tenant, we could refi and lower our monthly payment about $200.

Am I just dreaming that we could do this and have it about the same income or a bit less than the $1,274 we get from it now?
 
Funny, was just talking about renting a place in Paso instead of a hotel with another couple. I will have to look into it some more and give you my ?2. I like the idea, but I don't like losing money even more, so I will look at it from an unbiased perspective.
 
[quote author="steppingup"]Am I just dreaming that we could do this and have it about the same income or a bit less than the $1,274 we get from it now?
[/quote]

On first brush, yeah, I think so. I have visions of that moron on the other board who wanted to do the Fullerton vacation rental in the gated community, but I know you aren't trolling and are legitimately asking the question looking for a legitimate response. I grew up and lived 50 minutes away from Paso for 31 years of my life (and will be moving back there soon), so take my opinions with a grain of salt.

IMO there is no reason housing prices are as high there as they are. In 1980, you could buy a home in Paso at a 30% discount to Fresno because there is virtually no local job market on the central coast (but you already know that by what regular rents go for). Now it's a 30% premium for local job market that is worse than in 1980. The Central Coast housing market is driven by Norcal and Socal expats and the "fast money" they bring to town looking for property. When people switch from old fashioned rentals to vacation rentals, to me, it smacks of desperation for return on an ill-timed investment. I don't think that applies in your case (that's not why you bought the place), but that's who you're up against when competing for rentals, so keep that in mind. At a minimum, you can expect your maintenance costs are going to skyrocket compared to a conventional rental, and that's outside of whatever management fees the property management company charges. I know a couple of families who rent homes in Pismo for a week once a year, and those sort of places are just BEAT.

Plus, I wouldn't discount the 5 hours distance between yourself and the property. I think you will find yourself spending most weekends "away" cleaning and doing work on your property rather than enjoying it. This was the biggest reason my mom and dad didn't buy a weekend home in SLO, my dad figured my mom would go over there and just work the whole time, defeating the point of going over there in the first place. I don't know how to quantify your heartbreak when you find your 'guests' weren't nice to your place, but that too has a cost.

That said, it might not be a bad idea. Do you have a property management company who does vacation rentals in mind? Who's going to do the housekeeping? What do they charge? Do they handle maintenance? Do they pay for damage from a "bad guest"?

Was this helpful?
 
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Your input would be greatly appreciated. I know you would give me the full straight talk on the idea fully loaded with reality. Just hearing you say that you initially like the idea gave me some hope that perhaps it isn't a hair brained thought.

No_Vas.

Your thoughts are helpful. RE has come down quite a bit up there, but it is still overpriced based on incomes. I wouldn't even considering buying our house today to do this. In hindsight, buying the house was a bad decision, but we have it and hubby isn't going to give it up. So, if we can bleed a little less from it, I'm all for it.

Funny you should bring up the disappointment and working on the property... already been through that. We had one weekend between tenants so our property manager invited us to camp out in the house. She trashed my landscape that I had put so much sweat and thought into, so I was livid and spent most of the weekend replanting.

As far as maintenance, what would increase the maintenance over having a tenant 365 days/yr? I would almost think it would be less since the majority of the time it will not be getting used.

If I take the ugly route and leave at the right time, it's 4 hrs 15 mins and hubby and I have said numerous times, "geez, I wish it were 3." That being said he goes up there for work a few times a year and with wi-fi in the house, I could go even on the middle of the week days and bring mom. Although, the big weekends that we really would go up for, the house would be booked. However, there are events at Tablas that we would attend if we could avoid the cost of a hotel and eating out the whole time.

What gave me the idea was looking through the Paso Robles Vacation Rental website http://www.pasoroblesvacationrentals.com/

I stumbled across it Friday afternoon and left them a message to inquire about their services, but haven't spoken to them yet. I'm assuming that they are going to handle everything, but damage from a bad guest I think would be charged to the guest, the same as our tenant was responsible for her damage. I could be wrong.

It looks like there are some LA yuppies that do theirs on their own and I think even the ones that Paso Vacation Rentals handles are owned by people who live out of the area. Like I mentioned in the original post, the prices they paid do not make business sense.

The other thing we have to consider is that we would have to fully furnish, decorate and supply the place. I know we'd have to paint the interior, buy a grill and deal with the second half of the backyard that is just dirt. 3 bdrms and 1,841 sq/ft isn't going to be a drop in the bucket. That being said, I have seen pieces that I was dying to buy because they were perfect for the Paso house, so when I come across those, I could buy them knowing that they would be put to good use.

We have it leased until June, so we wouldn't be able to do anything before then. We would have just enough time to get it furnished for the mid state fair.

It's riskier than doing the year lease with a well screened tenant, but in the long run occupancy could grow if we keep the place nice and add some special touches. I would have a basket waiting for all guests that had a bottle of Paso Livo, some crackers, cheese and a bottle of Tobin James bubbles with two champagne glasses next to it welcoming all guests. I could probably even get Tablas Creek to give us a two for one tasting coupon that we could inlcude. There are countless little touches you can provide that make people feel special/welcome, which means they would return and/or tell their friends.
 
I don't know the specifics for Paso, but the beach communities, and Cambria, all have zoning restrictions on how many properties can legally be short term (vacation) rentals in a given area. There are legal fights in Cambria all the time about neighbors complaining that someone has turned their house into a vacation rental when the neighborhood is already max'd out per zoning laws.

There have also been a number of people applying to the respective city councils of Pismo, Oceano, even Nipomo, because they didn't do enough research, bought a property with the intent of using it for a vacation rental, and then find out they can't because of zoning requirements. From what I can see, the councils have not been very interested in giving permits out in these cases, mostly because the neighbors have been very vocal in objecting.
 
Also, when figuring expenses, the legal short term rentals have to pay the local "bed tax" like hotels/motels. I don't know what percentage that is, but it's probably about 1.5% of lodging costs.

The Mid-State fair lasts for 2 weeks, so that period of time is probably just about guaranteed to be booked, but I would think the rest of the year would mostly be long weekends, rather that whole weeks at a time. I don't know that many people vacation in Paso for long blocks of time.
 
Thanks for the in put Central. I have heard that there is a tax and I believe that is just added on to the rate. I have also heard that you do need a permit, which I don't think would be a problem. The city is encouraging of things like this and the house is zoned R2 residential and commercial.

I also agree that unlike beach rentals, people will not be looking to stay for a week or two. It's mostly going to be the wine crowd with the occasional wedding party. In fact, I think it being a 3bd is a drawback as I would expect a 2bd to be more popular with this crowd, so I believe we would be wiser to price it closer to a 2bd.

Guesstimating from what it looks like a typical 2bd rents for, we'd need to average 10 days a month occupancy. Straight out of the gate, I think that's pretty unlikely. However, it's also a business where you build a good reputatation and people come back and tell others, write nice reviews, etc... The burning question in my mind is how long would it take to get to 10 day/mo occupancy, especially in this economy? People are coming from all over the country as Paso is now on the wine destination map and if you want to stay downtown, there aren't many options hotel wise.

Cheval is small and pricey, PR Inn isn't exactly cheap and even it is sold out often (at least it used to be). Then you have the string of no tell motels or you go further out where you need to drive and have Quality Inn, Adelaide, Hampton, etc... The festival weekends sell out everywhere.

I think the house has some charm and a ton of potential with decor. One of the first things that drew us to it is Oak St is very wide and smack dab in the middle of the street in front of our house is one of the largest Oak trees I've ever seen. There also a good sized one in the front yard, enclosed by a white picket fence.

There is this bonus room that we were not keen on because we just don't have a need for something like that, but it has a built in bar and a huge picture window that looks out to the majestic Oak in the middle of the road. The bar is horribly dated, but it wouldn't take much to give it some style. There are original wood floors in the foyer, hallways and bedrooms and who can resist a breakfast nook?
 
The house and location sound great. Maybe the Paso Chamber of Commerce can give you some idea of "bed occupancy" for the last few months. I know the local cities have been concerned because the bed tax revenue has been down the last few quarters. The last stat I saw posted in the paper was that county wide, hotel/motel occupancy was just under 70% on average. I don't know if that number includes vacation home rentals or not.
 
off the cuff---

it sounds like a great idea if you lived close-by to put in those nice 'touches', but if you are relying on a management co to do that, it never works that well. and those high functioning mgt cos tend to charge *a lot* for the services. for some rentals i've done, i think the mgt fees for booking and coordinating the visit is ~25-40%. and then they charge a cleaning fee of $150-$300. (this is for larger high end rentals, and was passed on to us, the renters).

but i think you will be lucky to take away 50% of the rental rate after expenses.
 
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