Recently, someone came to me and asked whether they should turn their investment property into an annual rental or a seasonal rental. Generally speaking, unless you are planning to use the property yourself at some point during the year, it makes more financial sense to always go with annual rentals. There are several reasons why.
The general rule is that the monthly rent for a seasonal rental will earn three times the amount of monthly rent earned by an annual rental. So, if you charge $1,000 per month on an annual rental, that cost will be $3,000 per month for a seasonal rental. If you want to make the same amount of money on a seasonal rental as you would on an annual rental, you would have to make sure that property is rented for more than four months of the year.
Why more than four? First of all, the taxes are much higher on seasonal rentals. In southwest Florida, depending on the county your property is in, you will have to pay a county tax as well as a state tax on your seasonal rental. Conversely, there are no taxes to pay on your annual rental.
Seasonal rentals are also more expensive than annuals because the management fees are higher on seasonal. The fees combined with the taxes means that you would have to make sure that property stays rented as often as possible throughout the year.
Some people find themselves with a property that they may have inherited or bought with furniture. They want to know what to do with the furniture if they do not plan to make it a seasonal rental. This is very simple. If you want to keep the furniture and it’s feasible, simply store it. If you don’t want to store it, or you don’t really care about the furniture, consider donating it to charity.
For financial reasons, we always recommend that you turn your investment property into an annual rental unless you plan you live in the home yourself at different points throughout the year. If you have any questions on this topic or anything related to property management, please contact us at Realty Services Property Management, and we’d be happy to talk with you.