Hi, Thank you for this opportunity to ask questions!
My birth family (6 siblings and myself) own an old two story house in a vacation area. The downstairs is rented out to a tenant using the space as a restaurant. The tenant approached us and asked to have the upstairs renovated to be used as a vacation rental. I believe the tenant has done all the design and contracting work and at this point the family has spent something between 60k to 100k on the rental.
I’m wondering….how do you estimate fair rent in this situation? What I’ve heard they are planning is for the tenant to pay 10% of the cost of renovation as their rent for the vacation rental space. This is and area where a vacation rental is seasonal w/more and more shoulder business each year. I’m guessing the rental will bring in maybe 1800 per week for the three summer months plus a couple weeks in May and September as well as holidays etc. That alone would mean income of $27000 (that’s figured conservatively at $1500/wk) not counting the additional holidays and weekend stays which could be pretty solid except for January thru March.
Does that deal sound fair to the landlords?
Thank you! Deborah
Happy holidays and thank you so much for your question. It sounds like you have a great property. The fair rent does depend on a variety of factors including the local market, size of the space, proximity to attractions etc. I would speak to a local Realtor who specializes in vacation property rentals and get an idea of how to price the rental. It’s also important to get everything in writing even though they are already your tenant. A commercial real estate attorney should be able to help you draw up contracts.
Best of luck.