Intro to Bozeman

Is it a Good Idea to Own a Vacation Rental?

by Liz Nitz

I suppose the answer to this is complicated and really depends on one’s goals with the vacation rental, how much work one wants to put into the rental process and the cost/benefit analysis of purchase price and rental income.

I will use my vacation rental as an example.  We own a vacation rental on the Big Island of Hawaii at the upscale Mauna Lani resort.  We purchased it in 2014 when prices were still somewhat depressed from the great recession.  We put down 30% and have a second home mortgage with rate less than 4% for the rest.  We have large HOA (about 1400 per month) due to the fact that in Hawaii the HOA takes care of all exterior elements including landscaping, exterior paint, roofing, common areas such as fitness center, pool, beach club etc.  But considering we are not on the island for 10 months of the year, we are happy to pay someone to manage all of that for us.

We advertise our home on Vrbo and Airbnb.  Those websites have changed a lot over the years and charge the renter more than they used to but people are still using them.  I have seen a huge shift in the past few years away from Vrbo and much more to Airbnb.  A general rule of thumb is that foreigners will use Airbnb as will younger (millennials and younger) Americans but baby boomers and some genX will use Vrbo.    It has been fascinating to watch this evolution.  We also do have quite a few return renters that will just contact me directly after their first year.

The big question that one has to answer which will directly affect if you lose money on the vacation rental itself or break even (assuming you have a mortgage), is how involved do you want to be with the management of your rental?  First thing you need to look at is the IRS code – and then discuss with your accountant.  You must take the rules of this very seriously.  There are a few more issues to discuss with your accountant as enumerated here:  How much you can write off on your taxes and the passive activity loss is directly affected by your activity.

So what that means is that for the best tax benefit, you need to actively manage your vacation rental – that means taking the bookings, communicating with guests, keeping a maintenance log, and doing as much of the work yourself at least to get up to the 750 hours per year.  If you have a booking agency deal with your guests, you are not actively managing your property and while you may have some tax advantage, it is nowhere near where it would be if you did it yourself.

Another large factor is just income vs expenses.   Before purchasing a vacation rental, I would check occupancy rates pretty carefully.  Can the home be rented all year long?   Are there seasonal adjustments in rates and what are the rates?  Does the number of nights rented per year times rate cover your expected expenses? What about the weather?  We picked our location on the Big Island partly because of its very strong rental history and the consistent weather.  It is always in demand as there is no rainy season, no mud season, etc.  We are also rarely affected by flight delays as there is no snow coming this way.  As a result, we enjoy high rates of occupancy.

But to be in demand as a vacation rental, one has to maintain your home carefully.  Things cannot be broken, everything should be sparkling clean, it should be well equipped.  We regularly upgrade and repair elements in our home so it is pristine.  As someone who manages her own rental, I watch the reviews carefully and strive for perfect reviews every time.  The only way to achieve that is to pay attention and make sure you visit your place.  In my opinion, anyone who is self-managing needs to visit once a quarter at least.

Let’s take money out of the equation though.  What do you get for a vacation rental?  For us, we are happy to meet up with our family members who live apart from us in a place that has years of happy memories.  Even though we enjoy traveling to new places too, there is something special about everyone knowing we are going to a favorite place that is stress-free – knowing what to expect has a lot to do with the lack of stress.

In the end, everyone needs to take a look at the cost-benefit analysis and weigh the work against financial impact versus your happiness that you get from enjoying your second home.

Check out this website for more vacation rental purchase information!



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Rental Investment Property in Bozeman

Vacation Rental Investment Property in Bozeman

A few years ago, Bozeman redid the city zoning map. In an attempt to control and steer growth, and to keep home prices affordable, Vacation Rental Investment Property were curtailed and limited to very specific areas.  Any grandfathered vacation rentals could not keep that status

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Bozeman’s Growth Plan for the Future

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Bozeman in the summer of 2020 saw an influx of out-of-town buyers who helped the median home price jump more than $88,000 from July to August. And the Gallatin Association of Realtors Market Watch is predicting the market to stay hot during the typically slower winter months. All this

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The following homes listed below were just listed in the last 7 days. This seller’s market is hot so we keep a close eye on the latest inventory. Subscribe below for instant updates of your ideal criteria.

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104 Albrey Trail A, Bozeman, Montana 59718

104 Albrey Trail A, Bozeman, Montana 59718

The Pines at Middle Creek is a premier condo community with patio-style homes. The Pines will have a total of 42 residences; all featuring single level living with 3 bedrooms, 2 bathrooms, and a 2-car garage. Air conditioning will be included in this phase as well. The floor plans were custom designed to have private patios between each of the units and only share a wall with the garage.

885 Cottonwood Road, Bozeman, Montana 59718

885 Cottonwood Road, Bozeman, Montana 59718

Amazing investment opportunity in a prime Bozeman location! Almost-new construction duplex situated across from the new Gallatin High School with incredible mountain views. Property consists of two units: one 2 bedroom/2 bathroom unit with two car attached garage, and one 1 bedroom/1 bathroom unit with dedicated parking space.

1503 Wildflower Road, Bozeman, Montana 59715

1503 Wildflower Road, Bozeman, Montana 59715

Home has Travertine rock accents on the exterior of the home. Also Travertine fireplace in the living room. Large back yard for lots of activities and large deck for barbarques and family gatherings. Open space in front of the home which is a park and common area for the residence. Master bedroom is on upper level with walk in closet and bathroom.

960 Abigail Lane B, Bozeman, Montana 59715

960 Abigail Lane B, Bozeman, Montana 59715

Beautiful and immediate views of Steven's Pond await you at this contemporary condo that lives like a single family home.

9439 Haggerty Lane, Bozeman, Montana 59715

9439 Haggerty Lane, Bozeman, Montana 59715

This 2,616 sqft tri-level home, boasts 3 beds, 2 baths, two rock surround fireplaces, a sauna, an office/studio space & a custom dry bar perfect for entertaining! An abundance of natural lighting from all of the windows create beautiful views from each room. There's also plenty of storage and a partially finished basement ready for the next owner to leave their lasting mark.

98 Sage Bloom D, Bozeman, Montana 59718

98 Sage Bloom D, Bozeman, Montana 59718

Beautifully upgraded condo in 4 Corners! Hardwood floors continue throughout the first level including the master bedroom. New white and grey quartz countertops in the kitchen. Two extra bedrooms upstairs that share a bathroom. The bedrooms upstairs have amazing mountain views! Private fenced in patio to enjoy warmer nights and to let your dog roam! End unit with open space to the south.

144 Higain Trail, Bozeman, Montana 59718

144 Higain Trail, Bozeman, Montana 59718

Beautiful Middle Creek Parklands home backing to MSU agriculture land! This home is built by Mountain High Homes and has an open concept living room and kitchen. Five bedrooms or 4 bedrooms and an office. Second floor master suite with large family room across the hall.

161 Meadowland Drive, Bozeman, Montana 59718

161 Meadowland Drive, Bozeman, Montana 59718

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1220 Green Valley Way, Bozeman, Montana 59715

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Windermere Downtown Bozeman

135 E Main St.

Bozeman, MT 59715

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