How we got started in the Vacation Rental Business
One very cold day in January, 1997, with the snow piled high outside, I walked in to a travel agent who’s offices were close to mine to make a general inquiry about taking my kids to Disneyland… at some point… in the future… something I had experienced with my parents when I was ten years old.
I’m on the West side of the continent, so Disneyland is much closer to me, which is why I asked about it. I had no idea at the time just how my life would eventually be turned upside down by my simple inquiry.
“Gee, it’s too bad you don’t want to go to Disney World in Florida” said the smiling travel agent, “because I can get you there for $197 per person, return, including accommodations!”
“Wow! What a deal that is!” I exclaimed. “I saw that on your whiteboard out front, but assumed somebody erased the top of the 7! There has to be a catch…”
“Only one…” she replied. “You have to be at the airport, ready to go at 5:00 AM tomorrow morning!”
The story of that first trip to Florida with my wife and three kids is another complete story, but the very next morning, we were at the airport and then on our way south for a week. It would be our first significant family trip, our first out of the country (passports weren’t needed to go to the states back then), and our first experience of Florida.
We had the time of our lives, literally. Many tears of joy were shed in the next six days, and we were so sad to leave on the last day, we vowed to return some day, with more time and ‘do things right’.
Being relatively young and broke, it took six full years before we would be able to return. But knowing what I now knew, we were going to make it a full two weeks in order to have enough time to fully enjoy the theme parks of Orlando, plus hopefully relax a little bit. My wife had won a promotional contest through her work, and the prize was three nights in a swanky resort in the Orlando area; I just needed to come up with accommodations for us for the other eleven.
Our first Vacation Rental Experience
I had stumbled across the idea of vacation rentals while searching for hotel deals on (of all places) ebay. That was where the majority of vacation rentals were found back in 2003, and I came up with one and its manager… that seemed like a good choice in location, quality, and price. I booked the property for the first 11 nights of our trip, figuring we would cap the whole trip off with our stay at the fancy resort prior to going home, hopefully happy and exhausted.
When we arrived in Florida, it was very late in the evening. We called the manager to pick up the key to our vacation rental, and he gave us one to a home other than the one we booked, which I found a bit strange, but it was physically the same house (just at a different address) so off we went. Imagine our shock when we unlocked the door and walked in, only to find that there was another family occupying it – all asleep! We quietly backed out of the front door and went back to the manager’s home a few blocks away. He apologized and gave us a key to a different property and off we went again. This house was vacant, thankfully, but the phone wasn’t working. We returned to the manager’s office and he promised us that he would get the phone hooked up soon.
Aside from all of these glitches, we had arrived at what would be our Florida home for the next eleven days, and we were absolutely thrilled. We loved having enough space to all spread out. My children, who were now all teenagers, each had their own bedroom. (And TV!) We could enjoy our time together, and retreat to our own bedrooms when we needed some down time alone. With our three kids at their ages then, that was a huge bonus.
We had a full living room to stretch out in… and a complete and full kitchen, which my wife wanted and loved having on vacation, as preparing food is a source of joy and relaxation for her. She loves to go grocery shopping in new locations and discover all of the different and interesting things the local stores provide that we don’t have back home, and experiment with our meals. (I realize that for many folks, cooking is the last thing they want to do on vacation, but not everyone hates to be in a kitchen. For foodies, a great vacation rental is a dream come true!)
And we had our own swimming pool! A pool! It was such a luxury to be able to come home from a long day enjoying the theme parks and get into our very own private pool for a quick swim, no matter how late it was. The area was quiet, safe and relaxing, and we felt like we were experiencing unparalleled luxury.
We saved a lot of money on food because we weren’t dependent upon restaurants or theme park meals to eat. We would get up in the morning, have a huge breakfast in our full kitchen, and prepare lunches and snacks for the day, which we took with us to the parks. This not only saved us money, but time, as we didn’t waste hours searching out meals, deciding on what and where to eat. We could eat while waiting in lines at rides or during other quiet moments, and always had drinks and snacks at hand. Spread amongst a few backpacks, it wasn’t too much to carry, and of course they got lighter as the day wore on.
We would sometimes eat in a restaurant in or outside a park, or have a pizza or other entree and a salad when we got ‘home’ at night, and then fall asleep exhausted… and anxious to get up the next morning and hit the parks again. And boy, did we ever! We loved the rides and entertainment, and having timed the trip to be during the quietest time of the year, we rode every ride we could (multiple times – sometimes we didn’t even have to get off, they would just let us go again) and saw everything we could. Disney World’s four theme parks, Universal’s two, plus Sea World… we had multi-day, multi-park passes, and we used up every moment they made available. We were thrilled, happy and dead tired!
One thing we did do, which I advise all of my guests to do now, was plan a ‘down’ day. The kids had been eyeing that beautiful pool at our vacation rental for almost a week, but only been in it briefly at night, so on the Sunday in the middle of our two week adventure, we gave them a day which they spent doing nothing… but simply hanging out at the vacation rental – around and in the pool, soaking up the sun. My eldest got a coconut at the grocery store, and we managed to get it open, and he drank a drink from half of it with a straw – satisfying a goal of something to do that had formed in his mind six years earlier during our first time in Florida. Our teens were old enough, so my wife and I left them alone for the first part of the day, and we went off to explore Celebration (the city built by Disney on part of the resort property) and its weekly farmer’s market. It was quite a change from our days in the theme parks, but one that has since always been greatly cherished in our memories as the years have worn on.
As business people, and constant entrepreneurs, my wife and I couldn’t help but notice the business aspects of our stay in that lovely home; considering the value we were receiving as customers, analyzing in our heads what the stay would be costing the owner, and imagining how wonderful it would be to own a home like the one we were staying in. I kept playing with the numbers in my brain, over and over. No matter how I looked at it, it made financial sense… just as long as the owner could afford to get the house. We even visited the show home down the block that Sunday, which was having an open house because the neighbourhood was finished being built, and it was the builder’s demonstrator model that hadn’t yet been sold. “Ahhh… some day!” we thought to ourselves as we explored the show home, but not really believing it because we doubted we could ever afford it.
Still… I had been bitten, and my entrepreneurial senses had been lit up. A goal was forming in my mind, even though I didn’t dare admit it or share it with anyone (besides my wife) at the time.
A Resort Stay to Compare it to…
As often happens on vacation, the time went flying by, and soon we were packing up to leave ‘our’ now beloved vacation rental home, and go off to the swanky, luxury resort we would be enjoying for the last three days of our trip. With a tear in our eye, we closed and locked the door to the property, took a photo of all of us standing in front of it, returned the key to the manager, and headed off on our day’s adventure, with our rental van packed with our belongings so we could move into the resort that evening.
When we got to the resort, we had to check in, and waited a very long time in the lobby for all of the processes and procedures of that to be completed. When you are staying at a hotel/resort and they have a long cue line area in front of the front desk, watch out. You are about to discover that you are cattle… just one of the herd to be handled and processed.
After that ordeal was complete (“No we don’t want to buy any tickets!”), we drove over to our room, parked in front of it, and suitcases and bags in hand, opened up the door to our ‘suite’ and all walked in. Or rather, piled ourselves in. As we stood there in the entrance to what would be our room for the next three nights, our hearts sunk, and I immediately realized that I had done everything backwards. The resort wasn’t to be the luxury part of our vacation… Our vacation rental was! I should have started with our stay at the resort, so we could move up to the quality, luxury, comfort and amenities of the vacation rental home we had just stayed in. Instead we were moving down in the world for the last three nights of our holiday.
Well… we decided this was it (it was a free reward, after all) so we may as well make the best of it. I decided to take a quick dip in the beautiful resort pool, so I put on my bathing suit and headed over to it with my youngest son, only to be greeted by a locked gate and a big sign saying POOL HOURS, which we had just missed. (No more refreshing late night swims for me!) We returned to our room, where all five of us would be sharing two beds, one bathroom, and a cot. You practically couldn’t move in there. The nightly rate for our single room ‘suite’ was 50% higher than what I had just spent on the entire house we had just stayed in. After our vacation rental, what a shock to the system that hotel room was!
The next morning, we had breakfast in the resort dining room. $8 for two pieces of toast with jam. Multiplied times five for our family. It certainly wasn’t the huge breakfasts we had previously enjoyed, fueling us completely for the upcoming day. Plus we would have to buy lunch, snacks and dinner.
Thankfully, it was only three nights of torture being crammed in that hotel room with three teenagers and only one bathroom, but the contrast between the quality of our accommodations experience, and the value provided by each, just completely overwhelmed us. On the flight home, my wife and I vowed that from that moment on we would always stay in a vacation home whenever and where ever possible.
The truth comes out about our vacation rental stay…
After we returned home, a rather strange odyssey began… in trying to get our security deposit back from the ‘manager’ we had rented the home from.
As the weeks, and then months wore on, I came to realize that the person we had rented from had no intention of returning the security deposit, which then was almost half of our entire rental charges. Not only that, but my investigations revealed that he actually didn’t own or manage any of the homes he ‘rented’. He simply bought unsold nights at a huge discount from real VR managers in the area at the last minute, and put the guests he had booked into whatever was available when they arrived.
This fellow actually would take bookings without any idea if he would be able to accommodate them when the time came! He routinely failed to refund guests anything (whether charges for a rental he failed to provide, or security deposits after their departure) and had no licensing, nor met any regulatory requirements at all. I eventually did manage to get my security deposit back from him (I won’t say how, it but it took some doing) but in the process I met online many other guests of his who lost money dealing with him in one way or another. There were hundreds of people that had lost funds, and although I didn’t know it at the time, he had already come to the attention of the local authorities due to the sheer volume of complaints made against him.
It was with no small amount of satisfaction that I learned four or five years later that he had been sent to prison, for fraudulently collecting thousands of dollars in accommodations sales taxes, but reporting and remitting none of it. He plea-bargained his sentence to keep his wife from going to jail with him. She was deported, as was he after he got out roughly five years later. Unlike me, the vast majority of his ‘guests’ never got their money back.
Getting my large security deposit back was a long and stressful ordeal. I should have realized that something wasn’t right when our property was switched three times before we finally had a place to stay, and the utilities weren’t working when we finally arrived where we were accommodated, but we so thoroughly enjoyed our actual vacation rental stay itself, that the seedy manager I had dealt with still couldn’t put me off of loving the whole concept!
The search begins
I soon began a habit of checking the MLS listings in Florida, and exploring vacation rental properties that were available for sale. And I looked back over the years to see historically how property prices had risen (and fallen) and realized that in a resort area there was definitely a time to buy, and definitely a time when not to. It was obvious to me that I might have a long wait on my hands to ever be able to buy a vacation home anywhere in any event. That idea would just have to wait.
Jump forward another six years with me, and our lives had now changed. Some huge differences in our financial situation, and resources, meant we weren’t as limited in our options as we had been previously. I was now working for a different company, a rising star in that organization, as was my wife in hers, and we were making money and times were booming in our local economy, unlike the rest of much of the world. It would be a good time for us to buy a vacation rental, if ever, as we could possibly afford to do so, and prices had been depressed in the US as the great real estate crash of 2008 had extended into 2009.
One evening, my wife walked into my office, and said “Show me the vacation rental properties for sale online that you’ve been tracking.” I opened up my MLS search, and the list of Florida properties in the Disney area flashed across the screen. There was a new one in the list. It was the home that we had stayed in, and loved so much, over six years earlier! Well… almost. It was actually the exact same home and floor plan, just two doors down, on the exact same cul-de-sac. Except this one had been recently re-decorated, and it was well done. So just from the listing we knew the house, we knew the area, and we knew we had an opportunity on our hands.
Taking the plunge
With excitement, I called the real estate agent who had listed the property and asked him about it. “I’m sorry, but that house has sold,” he told me, and my heart sunk. “A couple from the UK just bought it for $10K below asking. They’re heading back home right now and I expect to have the sales documents in my hands in the next few days.”
I got off the phone, told my wife who had been excitedly waiting to hear the results of my inquiry what he had said and she too was crestfallen. My sadness turned to frustration, and then even anger. “Just a minute!” I thought, “He said it was sold, but he actually didn’t have the sales papers signed in his hand? Anyone with any business experience knows that nothing is done until the ink is dry. Why would he tell me the property is sold?” I knew that given the current market, the price would likely change before the deal was done… the important thing was just to have my foot in the door.
I called him back. “You said the property is sold…” I began “well, that’s really too bad, because I was going to offer full asking price. I can have a large deposit with a bank draft in your hands in 24 hours.”
“Uhmm….” he stammered. “Well… of course, nothing is set in stone yet… you know… uhm… perhaps… IF you could get an offer here… the seller MIGHT want to take a look at it… FULL asking you say? Hmmm… perhaps we might be able to do something with that…” The only thing missing from watching him back up so fast was a loud ‘beep-beep-beep’ from a back-up alarm!
True to my word, I had the deposit and signed papers in front of him in less than 24 hours, even before the other couple had returned home. It didn’t matter however, as they had decided on the trip back that they weren’t interested after all. The home would be ours, but only after six months of paper work, over 300 pages of documentation, huge courier bills, three banks, and uncountable stress. Being a foreign national and trying to secure a mortgage in the midst of the greatest financial and property crisis since the great depression was certainly no easy task. And eventually, the buyer had to take a $10K price reduction (to what the other couple had offered) because as I expected our mortgage bank wouldn’t approve the deal otherwise, as property prices were still in free-fall. So ultimately I didn’t pay anything extra at all.
It’s not really a business after all
As part of the purchase process, I received the financial statements on the property from the previous owner, and quickly realized that even though he had one of the largest management companies in the area running the house, he had been losing money on its rental for years. I would come to learn that this was the norm for the Orlando area.
Over the next 24 months, we learned the business, and completely charted our own course for how our vacation rental would be run. Using our own experience as guests, we set about doing things a bit differently, and focusing on what made our particular property unique and special amongst thousands of others in the area. Within a year, I had doubled the revenue the house was bringing in, and the next year, increased it again by the same amount. We were on our way!
Over the years, we continued to develop and improve the property, especially the exterior and yard areas, because we understand that so many of our guests come to Florida to experience it outdoors. Our pool area is the most relaxing spot imaginable, private and surrounded by tropical forest and only the sounds of birds in the trees.
Three years later, while on a trip for maintenance and upkeep, we found another similar property just a few blocks away that was for sale. I called the real estate agent… “I’m sorry, but that house just sold!” she began. That home would become our second vacation rental in the area, and we eventually ended up nearly gutting the house and rebuilding it to our taste and design sensibilities, to make it a truly great vacation rental as well.
We’re now working towards when the time will be right for our third.
In what I like to call the biggest, baddest vacation rental market in the world, we have managed to carve out a tiny little niche for ourselves, offering our well-loved and well-cared-for vacation homes at rates that allow us to maintain and improve them, and show a small profit. That is no simple task in a market where homes are built and sold to tourists by the plane load (who come by the millions) specifically so they can be operated as vacation rentals, by people with little idea of what they are doing, and no understanding or time to operate their homes as a business.
With tens of thousands of rental homes within twenty miles of us, the vast majority of which are subsidized by their owners and offered at prices below costs just to try to minimize their losses, operating in a sustainable way that makes the endeavour worthwhile is challenging every day. For us, it is a lifestyle choice, and we love it. We enjoy interacting online with guests from around the world, and having them share with us the joy that they get to experience staying in our homes, just like we first did around seventeen years ago.
Many people get into vacation rentals thinking its ‘an investment’ or a means to dabble in real estate. We understand it differently… that it is an accommodations business, and the home is really a facility to enable us to provide others with hospitality. That’s what this business is really all about.
We have hosted around 500 groups in total by now, with a number of repeat guests, including a few that have stayed with us now five times. The daughters of one of those families think of our home as ‘their’ house in Florida. We love that. Our son eventually went on to work at Disney World for a time, and our now adult children continue to visit and enjoy the area. In fact, this fall, we will visit our vacation rental and welcome our grand daughter (the first of a new generation) to our Florida home for the first time. We can’t wait.
I have built upon my experiences and business background, and now assist other owners in maximizing their profitability with their own vacation rentals, marketing them, and remotely managing them through technology. It is an outlet for my creativity, and desire to share my abilities with others.
We don’t know what the future holds, but hope to continue to operate and rent out our homes long into our retirement, and regularly spend our winters in Florida. You have to experience our actual -35º winters at home to truly understand how important that goal is! By doing so; we’ll continue to be able to enjoy our own little piece of paradise in central Florida… what my wife calls her Happy Place – an area that has brought our family much joy, excitement, and through our vacation homes; even opportunity.