Daniel Zia

Ty & Jon,

That's a great point that Jon made about the city technically having restrictions. In practice, as Jon mentioned, it is by a "complaint process", of which I've only heard of a single case of that happening. Obviously, there have been more occurrences than that, but they tend to be fairly rare if the properties are managed well. There are handful of excellent vacation rental management companies in town that for 18-22% of gross receipts will offer complete "hands-off" vacation rental management including marketing, rent collection, coordinating repairs & Cleaning, etc. In general, vacation rentals on a shorter term basis even with occupancy rates of 50%, and after property management fees, will yield significantly more income than a long term rental scenario. This situation also allows a second home owner to use the property whenever they would like and helps cover costs of property taxes, utilities, furnishings, etc. Target occupancy rates tend to be 50% for a first year vacation rental and then increase by 7-8% per year up to roughly a 85% occupancy rate for an established vacation rental with the right combination of size, location, and amenities.

As to what makes a good vacation rental, I would differ with Jon on his synopsis. Most vacation rental companies will stress the following for a successful vacation rental: 1) Proximity to the beach (doesn't always mean close to the train tracks, though there is a greater chance of that in Montecito than Santa Barbara), 2) Proximity to downtown and other amenities (walking friendly is very key), 3) Size of home to sleep a reasonable number of people (3+ bedrooms is preferred) and 4) Condition/amenities (vacation rentals are an alternative to luxury hotels and other options and so much of the clientele expects higher end amenities with a home that is in good condition with nice upgrades). While a view is a nice bonus, these other factors are weighed more heavily and properties no the Riviera simply do not meet the "walking friendly" and proximity to the beach criteria which are so important. They can still function reasonably well as vacation rentals, but you may not see the occupancy rates you would with other vacation rental companies and often times they work better as a monthly rental to executive types rather than to a weekend or weekly crowd.

This is a bit of a diversion from your original question Ty, but I hope you still found the conversation helpful. I would be happy to share some investment proformas I've worked up for other clients which include graduated occupancy rates, target rental rates, maintenance and other costs, etc to produce your cash flow figures.

If I can be of assistance, please don't hesitate to contact me.

Best regards,

Daniel Zia, Broker-Associate & Realtor®
Prudential California Realty
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