Estimated reading time: 14 minutes
A vacation rental is more than just a residential home or vacation home. It is a business asset, something on which you’ve probably dedicated a lot of time and energy! So, when you decide to sell your vacation rental property there is much to consider.
Before you move ahead, read through our ultimate, how-to guide for the steps to take to sell your vacation rental property. And, to ensure you’ve got all the details in order, we’ve included several checklists to walk you through step-by-step. Let’s dive in.
Table of contents
- Determine the best time to sell
- Prepare your vacation rental home for sale
- Tax implications: prepare yourself for the sale
- Listing your vacation rental home on the market
- Go live with your listing!
- Under contract and beyond
Determine the best time to sell
When is it time to sell your vacation rental property
Several factors play into your decision on when to sell your vacation rental home.
- Has the maintenance become too burdensome?
- Is there a large capital expense on the horizon?
- Do you want the sale proceeds to invest in a new endeavor?
- Do you want to take advantage of a strong sellers market in your area?
- Do you no longer wish or have the ability to dedicate the time to managing it?
These are all reasons to consider putting your property up for sale. Carefully consider your options and make sure to speak with your tax advisor about any tax implications before you decide to move forward.
The real estate market: timing your sale
This is the million dollar question! When should I sell my home to make the most money? Well, we’re here to tell you that, no matter what you do, you’ll never be able to time it perfectly. So, evaluate your personal choices, consult with a local real estate agent and determine what makes the most sense for you.
Prepare your vacation rental home for sale
Prepping your vacation home to get top dollar
Most likely your vacation rental home already gets high marks in the “curb appeal” department if it has been a successful rental. However, with the constant stream of rental guests, it probably shows some wear and tear. Take a step back and walk through the rental property, evaluating it through the critical lens of a potential buyer.
As you do, take note of any details around the house that may need attention. Are there areas in the walls that need patching? Where do you need to touch up paint? Have any baseboards been dinged by luggage? Are the doors and windows in good working order?
Just as in any other normal real estate transaction, take the time to make little fixes and updates to help your vacation home look great. Does that mean renovating a bathroom? No, but, you’ll want it to be in tip top shape.
Here is a list of common items to address that will greatly improve your vacation rental property’s curb appeal.
- Touch up interior paint, including walls, doors and baseboard
- Clean up any clutter (do you have a storage closet with all of your stuff? Clean that out)
- Get the yard in shape: rake, weed, trim overgrown trees
- Fix any doors or windows
- Make sure the appliances are in good working condition
- Get a deep cleaning with a focus on items that aren’t usually cleaned during a rental turn (i.e. baseboards, window sills, thresholds etc.)
Interview Real Estate Agents
While many homeowners may think it’s a good idea to sell their home on their own in a For Sale by Owner (FSBO) transaction, we recommend you work with a licensed real estate agent. Most real estate agents charge a commission fee of 5-6%. That may seem like a lot of money but we think it is well worth it. Why? Several reasons:
- Real estate agents bring expertise and experience
Chances are your vacation rental property is an important asset in your portfolio. Even if you are familiar with real estate sales protocol in your area, a licensed agent can make sure you get the maximum amount in the sale with the least amount of hassle.
- They come armed with data
Most real estate brokerages have dedicated staff researching current trends in your area. So, they know the ins and outs of the market. They may also know about current vacation rental trends which bring even more value to your transaction.
- They are YOUR advocate during the sales process
When you list your property with a real estate agent, they contract to act on your behalf during the transaction. That means that they will advise you, negotiate for you and handle the nitty gritty.
- Agents help weed out unqualified buyers
Real Estate Agents work with buyers and sellers on a full time basis. They have training and experience to ask questions that help assess a potential buyer’s qualifications and intentions. Don’t waste your time with buyers who aren’t serious.
So, while there is a cost to listing your property with a real estate agent, there are many advantages. When you factor in the expertise, experience and tools real estate agents bring to the table, the fee is a small price to pay for a successful sale.
Vacation Rental Furnishings
As a vacation rental owner you probably invested quite heavily in furniture, fixtures and soft goods. Those expenditures can add up, especially if you have a large vacation home. However, many investors and vacation rental buyers want to purchase a turnkey property.
Hospitality term to know:
|What are soft goods?||“Soft goods” is a hospitality term referring to linens, carpeting, drapes, etc.|
Because you are selling a vacation rental and not your personal home, it’s unlikely you’ll want or need any of the furnishings. So, take some time to walk through the property and make a list of what you wish to keep and what you may wish to include in the sale.
We touched on this in depth in a blog post on selling with or without furniture. If you choose to sell the vacation home furnished you may consider having a separate furniture sales agreement. But, it depends on your area and price point.
The most recent trend in luxury homes is to sell fully furnished. Therefore, much of the luxury sales market already accommodates furnishings in the asking price. However, if you are not in a luxury market and you want a premium for furnishings, you take the risk that the home may not appraise.
We strongly recommend discussing this with a licensed real estate agent in your area prior to setting a listing price. They should be able to advise you on whether or not to use a separate sales agreement for furnishings.
Other vacation rental business assets
To run a successful vacation rental business, many operators take advantage of numerous SaaS (Software as a Service) tools. These vacation rental management tools may or may not offer seamless transfer to a new owner. If they are able to transfer your account in the event of a sale, these digital assets can be a plus to a potential buyer.
Alternatively, if you maintain any pricing spreadsheets or other information to run the vacation rental business, consider including this in the sale. Maybe you created a house guide with lots of great tips and details about the neighborhood? Do you have a detailed list for a housekeeper or cleaner to follow when they do a turn?
Pro Tip: Write a list of everything you’ve created for your vacation rental business.
Then, determine if these are items you wish to include in the sale. They could be quite valuable to certain buyers, especially if they are looking for a totally turnkey operation.
If you are selling a vacation rental in Florida or in Texas near the beach, perhaps you offer your guests the use of a golf cart or bicycles. Alternatively, you may have other unique items in your vacation home to attract renters. Pool tables, jukeboxes, and arcades are among some of the things owners offer in their vacation rentals to their guests.
Hospitality term to know:
|What is “FF&E”?||Furniture, Fixtures and Equipment. For a home hospitality business this might include washer/dryer, electronic locks, lighting.|
Normally, these physical items would not be included in a residential sale unless explicitly written into the contract. But, a vacation rental sale is different. Often, these items have become a part of the vacation rental business and it makes sense to sell them as part of a turnkey transaction. Consider making a separate bill of sale for these items to avoid any complications with appraisals.
Notify the right people
Once you’ve decided to sell your vacation rental property, you’ll want to notify the people and businesses involved in managing your rental. While this list is not comprehensive it should give you a good starting point.
- Property Manager
- Housekeeper/ Cleaner
- Yard/Lawn Maintenance or Landscaper
- Pool Maintenance
- Revenue or Rates Software
- Website provider
- Update your calendar
Get your vacation rental business financials in order
This is perhaps one of the most important steps you take to ensure that you get the most value from the sale. Buyers and investors want to see what you’ve achieved with the business. So, get your historical data organized so that a new buyer can evaluate. Use your listing platform, like Airbnb and Vrbo, and your tax returns as a resources to gather this information. If you use a property manager, they can provide you with the details you will need.
What should you share?
We listed several key items that buyers want to see when they are evaluating a vacation rental property. Ideally, you will provide the data over a 12 month period or longer. However, if you only rent part time or have limited historical data, consider including data from AirDNA or AllTheRooms as comps to your property.
Hover over any of the terms for a description.
- Gross Revenue
- Occupancy Rate
- Average Nightly Rate
- Cleaning expenses
- Maintenance expenses
- Cost of supplies
- Property Management Fees
Tax implications: prepare yourself for the sale
In order to avoid any unpleasant surprises come tax season, you must understand the tax implications of the vacation rental sale. If you’ve used the vacation property exclusively as an investment you may be eligible for a 1031 exchange. On the other hand, if the vacation property was used primarily as a second home, it may not qualify.
We strongly recommend consulting with a tax attorney to fully understand the tax implications you’ll face after the sale. In addition, if you intend to do a 1031 exchange, speak with a Qualified Intermediary prior to listing on the market to fully understand the process.
Listing your vacation rental home on the market
Determine Asking Price
The market for vacation rentals continues to grow and remain strong. If you have an active rental business, you are not just selling a vacation home, you are selling a business opportunity that has distinct value to certain buyers and investors.
As mentioned previously, we strongly recommend consulting with a real estate agent with knowledge of vacation rentals in your area to help with pricing and the sale. They have current data and can guide you in reviewing the specific details regarding your property and your business. In addition, they’ll advise you on selling your furnishings and other assets. For more on this, see our post on determining asking price.
Pro Tip: Listing your vacation rental property for sale at a realistic, achievable price will give it the best chance at a sale. More buyers may even encourage a bidding war!
Don’t make it too complicated
Buyers, especially those looking for investments, don’t want to deal with “hairy” transactions. What we mean is simple: avoid complicating the vacation rental sale. For example, don’t try to write in free or discounted vacation time for yourself in the future. Even though it may seem like a small ask, buyers will be wary of a seller who puts too many stipulations into the contract.
Go live with your listing!
Share your listing
You’ll want to generate the most buzz for your property as soon as you list. To that end, make sure you’re utilizing every tool in your toolbelt. HighFlyRE’s listing tools are totally FREE and can help you reach more buyers. We provide you with a property video, website, and flyers to promote on social media and to your network. Upload your details and share, share, share! All interested parties will contact you or your real estate agent directly.
Prepping the vacation rental business for sale
The vacation rental business itself brings another level of complication to the sale. But, this doesn’t mean it has to be difficult. By contacting the people involved with your vacation rental business prior to and when you list your vacation property you will ensure a smoother end.
Do you need to give notice to your property manager or cleaning service? Do you need to notify your vacation rental management platform and block off dates? Review the list we provided above.
Under contract and beyond
You’re almost at the finish line! But, you still need to address a few remaining items before you pop the champagne. Let’s take a look.
Understand the business transfer
If you decided earlier to include some of your vacation rental business assets as part of the sale, now it is time to prepare them to transfer. That can mean simply emailing copies to your real estate agent. Or, it can mean contacting the company, perhaps your revenue or rates management service, and walking through the process of closing the account to make way for a new owner.
Dealing with future bookings
Once you have a signed sales contract and know approximately when the property will change hands to the new owner, you need to address any future bookings. How you proceed with future bookings will depend largely on what you’ve agreed upon with the buyer.
As you may already know, Airbnb and Vrbo will not transfer existing bookings to a new owner. If the new owner wishes to maintain the future bookings you can explore a few options. Make sure that whatever procedure you decide to follow with the future buyer, you document it well. The specifics of any bookings transfers must be properly noted in a contract to avoid confusion. Let’s review some options below:
Add the new buyer as a co-host
You, as the main owner of the account, will still receive and be responsible for all of the correspondence and receive the payouts.Therefore, you need to determine who and how to handle any messaging and how to handle the payouts. In addition, you may want to consider how potential negative reviews during this time may affect your standing as host. Is it worth the risk?
Engage a Property Manager
Similarly to the scenario described above, you may consider adding a reputable property manager as co-host to manage those bookings.
Cancel the bookings but encourage them to rebook with new owner
If you communicate with your future guests about the change you can encourage them to rebook with the new owner. This may soften the blow for the guests. Also, in this scenario, you avoid having any ties to the actions that may occur when you no longer own the property.
Pro Tip: Contact your listing service for help cancelling future bookings.
Airbnb Cancellation Procedure
As of the publication time (September 2021), Airbnb will waive the cancellation fees and remove any host penalties if you can provide documentation that supports a sale. Additionally, you can provide documentation that indicates that you no longer own the property. This documentation can include:
- Purchase and sale agreements
- HUD statements & settlement statements
Get in touch with their support team and confirm the reservations you wish to cancel. Then, they will handle the cancellations and remove the penalties. Also, any negative reviews written about those specific cancellations will not be shown.
By following these steps your status as a host is not affected. Airbnb “superhost” status is tied to a specific time and qualified period. Earned 4 times per year, you can retain superhost status with your other properties or get it back once you have a new property.
Vrbo Cancellation Procedure
Vrbo is similar to Airbnb in that they do not allow reservations to transfer to a new owner. First, and easiest, you can cancel the bookings and encourage them to re-book with the new owner. Cancellation rate will increase for this rental. However, the new owner can contact Vrbo with sale documentation on the property and they can waive the cancellations to adjust the cancellation rate.
Second, you can consider adding the new owner as an authorized contact until those future bookings have stayed. If you add the new owner to your account as an authorized contact, you still have to determine how to handle the payments as they will go to your account.
Has this guide on selling a vacation rental property been helpful? If you have suggestions or comments on how to make this guide even better please get in touch. We’d love to hear from you!