What You Should Know about Investing in Lake House Rentals

As the summer vacation season hits full swing in America, lake house rentals become a hot topic. In many areas where waterfront vacation rentals are common, the weekly rentals are fully booked from June to September by the end of January. Waterfront properties are easy vacation homes to rent. This Mashvisor guide will focus on how to find, evaluate, purchase, and rent out lakefront homes to vacationers.

Find Houses For Rent – Seasonal or Year-Round

Lake house rentals are different from many types of Airbnb and vacation house rentals. All waterfront properties are hot commodities for the three-month rental season. However, the off-season is a challenge for those who own lakeside cabin rentals. Before you begin your search, decide if your lakefront rental will be seasonal, meaning warm weather only, or full-year, meaning the property is really a house with insulation, heat, and the ability to keep plumbing from freezing.

This is not a small decision. If you plan to have a lake house for rent in winter your to-do list becomes weekly not monthly. If your lakefront property is winterized, you will need to have the ability to check on it after every power outage and every storm. Technology and local service providers can help, but you will find there is no substitute for being at the property yourself when it needs attention.

Finding Lake house Rentals – Heatmaps

Find lake house rentals with the real estate heatmap

Mashvisor can help you find lakefront rental homes for consideration. Mashvisor’s heatmaps can list important metrics that help you quickly sort through the available properties for sale. These can include filters for listing price, cash on cash return, rental income, and Airbnb occupancy rate. Check out how Mashvisor’s heatmaps work when you begin your search. They save you time.

Airbnb Regulations

Most real estate investors who purchase a lakefront property to rent want the option to use Airbnb to rent the property. Before you spend time carefully considering properties in a given area, check that Airbnb is allowed. Local regulations vary, and Airbnb rentals are not allowed in all communities. Similarly, if you are considering a condo, or a lakefront property that falls within the jurisdiction of a homeowners association (HOA), check the rules for rentals before you spend time vetting properties in that area.

Rental Property Access

In many parts of the country, lake house rentals are located on parcels that are accessed by private roads. Often dirt roads are not maintained by the town in which the lake house rentals are located. Before you purchase lake house rentals, ensure that you can control access to your property. Be certain you don’t need permission from any other property owner to access your property.

Next, determine how your access is maintained. It is common for a local community group to share the cost of maintaining roads to access the lakefront property. This group could be as few as a handful of neighbors who share the cost to maintain and keep a single short road open, to a large homeowners’ association with annual dues paid to a contractor who grades, repairs, and plows the community’s many roads.

Rental Property Utilities, Operation, Safety

Many lake houses in America began as seasonal cabins built on a very small budget. As time passes, these cabins designed to be warm-weather camps evolve toward being full-year homes. If the lake house rentals you are considering purchasing fall into this common category you need to know more about how it works than you would a home built to code.

Start with the foundation and work your way up. A house without a foundation north of the Mason Dixon line is very difficult to convert to a year-round residence. If your vacation property started as a seasonal cabin and was then converted by adding a foundation, you should have a close look at how that was done. Is it a professional job that allowed for proper year-round use, or was the intent simply to add more space below the first floor?

Following the foundation and structural inspection, find out how the plumbing works. Almost every lake house uses a private well or shared community well. Is this water supply potable, meaning drinkable? How do you know? Lake houses seem to be so close to available water, but drinking lake water is never an option. Particularly for renters. If you plan to rent your unit with linens included, you will also need a washer and dryer.

Once you know how the supply-side of water works, determine how the wastewater is handled. Private septic systems are the most common type of wastewater system around lakefront properties. If the rental you are considering for purchase uses a private septic system, pay for a licensed inspector to do a full inspection with a report. This will help you understand your upfront costs to make the unit ready for occupancy. Never assume that a lakefront property has drinkable water, or a legal, operational septic system without having independent tests conducted that you pay for (not the seller).

Finally, since many lakefront properties started as season cabins and were updated, you need to ensure that the space you plan to rent is rent ready. Things like basement egress windows, two points of egress in bedrooms, and smoke and carbon monoxide detectors need to be verified.

Plan Ahead For Opening, Closing, Maintenance, and Turnover Services

Owning a lake house for rent means that you as the owner/operator will be responsible for the start of season opening of the property in spring and closing and winter preparation in the fall. Unless you are a handyman-type of person, you should expect to be on-site managing at least one contractor each season to help you with this work. Possibly as many as a plumber, handyman, and landscaper. Doing all this remotely is possible, but very tricky. I’ve never met a lakefront property owner who didn’t live a drivable distance to their rental property, and I have been on both sides of this business for a half-century.

Similarly, if you plan to have your business operate on short-term rentals you will need a cleaning service for laundry and housekeeping and a landscaper and handyman for weekly upkeep. Once you have a trusted team in place, you will be able to have renters arrive and leave without your being onsite. However, this is touch and go. Many lakefront rental property owners learn that they are needed in person many times throughout a rental season.

Waterfront Insurance Policies

Since you are renting a waterfront property, find an insurance agent that will insure your property as a rental business established under a limited liability corporation (LLC). Swimming, boating, and simply vacationing around water have hazards that most typical rentals do not. You will need to insure yourself against liability differently than you would if the property was your personal vacation home to be used by your family.

Financing Lake House Rentals

Unlike your personal home which you occupy as a residence, buying vacation rental property comes with more scrutiny from lenders. You will need a large downpayment and you will pay a higher mortgage interest rate on financing. Expect to provide a rent roll overview for the bank to consider as part of the approval process. Many lakefront properties sell for cash. If you plan to finance, it will put you in a tougher negotiating position when you buy the property. Particularly if it is a seller’s market when you buy. Waterfront property is always a hot commodity in anything but the worst of economic times.

Improving and Maintaining a Waterfront Rental Property

If we could give anyone investing in lakefront rental property one piece of advice it would be to assume the home is not eligible for updating and expansion. Many lakefront communities have multiple state and local agencies that restrict or prohibit upgrades as simple as adding a deck to a property. Find out how far back from the high water mark a lake house needs to be in order to be exempt from these special restrictions before you buy. Otherwise, the home you buy may very well be ineligible for updating or expansion.

The Bottom Line

Lake house rentals can be a great investment for any rental property business owner. However lakefront homes have unique circumstances that should be carefully considered. Mashvisor can help you locate and evaluate lakefront rental properties. To get started, click here.

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