How Valuable is Adding a Rental Property to Your Program?
Why all vacation rental property managers should know the true value of new inventory.
One of the first things I realized when I started out in the vacation rental industry is that if you don’t grow your inventory – you won’t go very far. I also realized quickly that for most property management companies, keeping up with day-to-day operations is a full-time job. This often means that owner acquisition strategies fall to the side.
Many of us happily stumbled into the vacation rental business, and there’s no formal training on strategies like “what’s the lifetime value of acquiring a property?” or, “what’s the most effective way to get more properties to sign-up?” But, the most successful business owners know their opportunity costs and they focus on making decisions that generate the greatest long-term value. I strongly believe that as an owner, you need to focus on making investments in your company to grow, and this belief took me from 0 to 500 properties in just 5 years.
Beyond The Rental Income
Forward thinking property management companies know that adding properties to their program is vital to staying competitive – and there’s a lot of quality properties and great owners out there. While people often ask what a property will do in annual rental income – it’s more important to focus on what the property will do over it’s lifetime in your program. Think about the long-term value – not just the annual returns.
How to Calculate the Value of a New Property
Before you consider how to acquire a new property, know the value of adding a property to your portfolio:
- Look at how much gross booking revenue it will make per year
- Know your margins (this is usually 8-10% of the gross booking revenue)
- Consider how long you will keep the property in your portfolio
- Realize the value of the property to your portfolio if you were to sell your company
- Or you can do all this using our handy online calculator
Let me take you through an example. Let’s say you have a property that is grossing $36,000 in gross booking revenue, which means your margins are going to be about $3,600 (10%). So, if you were to add this one property to your program, it’s going to net you about $3,600 in year one.
Now, let’s say you keep that property and you retain it for about ten years. Let’s do that math:
$3,600 x 10 (years) = $36,000
Now, you’re at $36,000, and this example is just one property. Let’s amplify that up to $50,000 or $100,000 – think about the value in those numbers.
The example above is just for one property – consider if you were to bring on 10 to 20 properties a year. And remember, there’s not only the value you are gaining through the lifetime of this property in your program, but if you decide you want to exit your business, you’re going to get a check for each one of those properties. Now let’s say you added an extra 30 properties to your portfolio – you’re looking at your dream retirement home.
Identify The Properties You Want
The value of adding a property to your program will go up exponentially if you target the right kinds of properties and owners to acquire. While it may be challenging to compete with larger companies, I’ve seen it proven time and time again that the more you strategically focus on specializing – finding specific buildings, homes and communities that align with your unique selling propositions – the easier it will be to attract more guests. You want to deliver an experience that is meaningful to customers and aligns with your brand offering.
So, How Do You Get More Properties Signed Up?
This is the part that I enjoy doing the most and it’s why I created Vintory – the only sales and marketing agency in the vacation rental industry dedicated entirely to helping professional property managers add new homes to their programs. It’s absolutely critical to create marketing materials that are targeted towards property acquisition, and this is how I was able to grow my business to 500 properties.
These marketing efforts should include strategies like:
- Competitive messaging – what sets you apart?
- A landing page dedicated entirely to owners
- Interactive content marketing targeted to owners
- Downloads that generate leads
- Personalized sales tools, such as customized postcards
At Vintory, we are dedicated to helping you create these marketing tools and apply the proper strategies so that you can grow your vacation rental inventory with half the effort. In addition to marketing, we’ll help you generate leads, streamline your sales process and supercharge your growth. We’re ready to help you grow your inventory – book a demo to learn more about our process.