Nightly Rental Homes in St George Utah
Vacation Rentals are popular and sought after here in St George, Utah. This article aims to answer frequently asked questions about short-term rentals (STR), also known as vacation rentals or nightly rentals. First things first….STRs in St George and surrounding areas are not sold within single-family residential homes—they are always within an approved "nightly rental zoned" community. Hurricane is a little different, but they have a wait list that can run into a year or more; I will highlight their rules in a future post.
Here is another article highlighting requirements for STR in St George: www.stgeorgeutrealestate.com/blog/purchasing-st-george-vacation-home-rental/
What are your investment goals?
I want to buy a STR and earn positive cash flow.
--or--
I want to buy a second home where I can enjoy and rent it while I'm not around to offset the costs of owning it. No positive cash flow is required.
The Question:
Are you obtaining a loan?
With real estate market values at all-time highs, it's virtually impossible for positive cash flow if you're obtaining a loan. If you are obtaining a loan and would like to own a second home in the area (because you plan to visit) and would like to OFFSET the cost of owning a second home--then purchasing a STR is a great option.
Cash buyers receive a decent return (some receive phenomenal returns), but it takes a specific formula of a well-appointed home, marketing, and a superior and reliable cleaning crew. With this formula, you will achieve great reviews and reoccurring and referral bookings, increasing occupancy rates and producing positive cash flow.
Here is a breakdown as an example of a nightly rental in the area.
KEEP IN MIND….
EVERY community is different. Some communities require total onsite management control (Desert Color, Sand Hollow, Acadia). Onsite management means owners are "hands off." The community manager will advertise, rent, clean, maintain, and manage all aspects of the property (it's similar to a hotel setting). As an owner, you can call and block off any dates to use the home if you plan to visit, and typically all you will pay is the cleaning fee.
Each STR community will have its own specific rules. Some communities will allow you to select one of their approved managers, while other communities will allow you to use any property manager you'd like. Local Property Manager Required: All short-term residential rental properties shall designate a local property manager. The owner, or a local property manager, shall be available to respond 24 hours a day, 365 days a year by telephone and, when necessary, in person, within two (2) hours to respond to an issue raised by a guest, County official, law enforcement officer, or neighbor. If the County or law enforcement cannot reach the owner or property manager, it is considered a violation, and a violation notice may be issued. https://stgeorge.municipal.codes/Code/3-2V
The desired management options may dictate or contribute to which nightly rental community you'd prefer to own.
Onsite management companies tend to have higher costs; however, the rental occupancy may be higher, with most having more amenities that draw bookings. Communities where the owner has more control may allow for slightly increased profits since you'll be able to have property management compete for your business. Their accountability will be higher, yielding better service. Again, this can be profit preference, or owner preference, where the owner may want to avoid dealing with any short-term rental aspects, and other owners may want complete control.
If you plan to "save big" by hiring a significantly reduced cleaning crew or a property caretaker, remember that low ratings will drastically reduce your bookings. Not to mention county violations will add up quickly. The attention to detail must be on point. I do not suggest finding a "deal" with a cleaner. While it may cost more upfront, the profit will typically be higher with a reputable property manager.
Pre-Covid occupancy was around 25-35% on average per year. POST covid, occupancy has been around 70-80% (it's a moving target as each property will vary based on size, location, and amenities). These generalized assessments should not be applied to "any" one property, as each property is unique and will be on a case-by-case basis. Also, more communities are available post-covid than pre-covid--so the comparison may be skewed.
You must consider costs.
Property Management will typically run around 35% (onsite management can be closer to 40-45%)--property managers commonly advertise, take bookings, help guests, monitor the home, clean, and prepare for the next guest. Some will provide their own linens for guests. They will follow up and try to achieve positive reviews and feedback. It's important to interview a few Short Term Rental familiar property management companies and find out what they offer as part of their service. Ask exactly what is covered and what additional fees the owner may be liable to pay.
The owner will pay:
- Property Management/cleaning
- HOA dues
- Annual property tax (approximately 1% of the purchase price)
- Utilities (figure an average of about $600/mo with electric, gas, internet, etc...)
- Pest control (figure 400/year)
- Miscellaneous maintenance (replace broken items, fresh lines, or towels) figure $1000/year
- If the home has a private pool or hot tub, the owner must have it checked and cleaned after each guest, so that will add around $2500/year.
I typically suggest prospective buyers look at nightly rental host sites and get an idea of how much the homes can rent for. These sites will also show if the unit is rented often or not at all. Also, you'll be able to see reviews of homes in the community you may be researching. I send this information to my buyers to make informed decisions. If you have other questions or would like additional information, do not hesitate to reach out.
I am Paula Smith, Associate Broker with RealtyPath of St George. I have been a licensed, full-time real estate agent in Southern Utah since 2006. I have been selling residential real estate during all of the changes in the market and witnessing our St George area become one of the fastest-growing cities in America. I keep my finger on the pulse, paying attention to market conditions. If you're ready to buy or sell, I'm ready to make it happen.
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