Real estate investors in Bend are fortunate to have a way to make money on their investment properties that isn’t available in many cities. Because Bend, Oregon is well known as a vacation destination, investors can turn the properties they plan on holding long term into vacation rentals. A good vacation rental in Central Oregon can make its owner a lot of money as nine resorts in Central Oregon and those who own vacation rentals here can attest.
However, vacation rentals in resorts like Sunriver, Black Butte, Caldera Springs and Tetherow aren’t the only properties making money. If the number of vacation rentals in the city of Bend is any indication, then one can infer that vacation rentals can do quite well outside of the resorts. According to Michele Halderman at Bend Vacation Rentals there are more than 600 properties used as vacation rentals in Bend and most of them are concentrated around downtown, Bend’s WestSide, and the Old Mill.
More than 600 vacation rentals in Bend?
There is no doubt that Bend is a great place to visit but can that many vacation rentals really compete with the resorts and all their amenities? Perhaps but real estate investors should be cautious about buying a vacation rental in town. Vacationers are a fickle bunch and according to Halderman, vacationers in Bend want a beautiful home with high-end finishes at a decent price and they want it close to the action. Add all those things up and the competition to be seen as THE house to rent in Bend could become all consuming.
On the other hand, many, especially renters, would say there is a shortage of long term rentals in Bend. They would be right. Preferred Residential had three vacancies in March. All three were rented as fast as we could process applications and the average rent increase was 6.5 percent. These homes were not new, had average finishes and two of them had floor plan issues like 3 beds and 1 bath or 3 beds, 2 baths but only 1000 sqft. working against them.
Show me the money!
It is tough to know how much money a vacation rental can make because no one really likes to talk about vacancy rates for vacation rentals unless they are trying to sell the home. If a house has no history as a vacation rental then it can really be a crap shoot. We recommend that investors be as conservative as possible in their estimates.
For comparison sake, here is a Bend vacation rental I found on VRBO.com. It is a 3 bedroom, 2 bath, 1246 square foot home in a very desirable location as a vacation rental or long term rental. As a long term rental this house should easily rent for $1500/month. As a vacation rental it fetches $185/night. Being conservative, lets say it rents three of the four weekends in an average month and for three nights each of those weekends. That is nine nights at $185 for a total of $1665 rent received. Not bad and the upside is that is only nine nights out of a possible 30 but here comes the fun part…
Who is going to manage this vacation rental? Who is going to run ads, create a website, process paperwork and payments, arrange for cleaning after each guest, file and pay monthly lodging taxes, and arrange for repairs when needed? Vacation rentals require a lot of attention and vacation rental property managers are at least two times more expensive than residential property managers.
If location is everything, where do I buy?
Vacationers are much more particular about where the home they rent is located than long term tenants. That is not to say that location isn’t important for residential rentals, just that vacationers want to be close to the action. They already came a long way and they don’t want to have to spend their whole vacation driving around.
In Bend, that means they want to be close to the Old Mill for shopping and the amphitheater, downtown for the incredible dining choices and festivals, or WestSide Bend for the vibe and easy access to Mt. Bachelor and downtown. All of those locations command a premium sales price which is great when it comes time to sell but can lead to sticker shock on the front end of the deal. Long term rentals can be in all of those places but they can be elsewhere too and that means thousands more homes to choose from.
The best long term play for investment property in Bend?
In real estate, investment success looks different for each investor. Yes, everyone wants to make money but some are happy with a place to vacation that just happens to make some money too. Others are more interested in setting up reliable cash flow for retirement. Both are reasonable goals that can be attained by investing in Bend, Oregon real estate.
Update 3/19/15: The rental market for both vacation homes and long term rentals is constantly changing. The Bend City Council is currently considering proposals that will place limits on where vacation homes can be located and how many can be located in each neighborhood. Demand for long term rentals is at or near an all time high resulting in rapidly rising rents and less than 1% vacancy rates. Be sure to work with a Realtor® who understands the Bend, OR residential investor market. That Realtor® is Preferred Residential’s Principal Broker, Becky Seim (541) 610-8003.