As you may be aware, I bought my Vacation Rental in October 2021. Since then, I re-did the flooring and made minor improvements to the property. Additionally, I decided to manage the unit myself remotely. Crazy huh! Well, I still wanted to do things right from the beginning. I hired a consultant to help me set up my management system. I’m sure I could have figured it out on my own, but with my busy schedule at work, this was very valuable to me. I had done a lot of research ahead of time and so I knew exactly what system I wanted to use. Additionally, I decided to use excel spreadsheets to track my income and Expenses. Now, I have some very exciting news. For the first time since I’ve tracked my income and expenses, I’ve officially recorded a profit from year-to-date. Let’s dive in!

Vacation Rental Profit/Loss

Let’s see how much profit/loss I made for the month:

A. Rental Income

During the month of May, I earned $9,119 in short-term rental income as shown below:

Wow! That’s nearly a 72% increase from the previous month and somewhat close to $10k for the month. So, May was incredible in terms of revenue generated for the month.

Even though I chose to compare May’s revenue to April, doing so is not really that useful going forward. That’s because my vacation rental is seasonal in nature. By that I mean that the busy season, which is usually late spring, summer and early fall months will likely generate more income that during the off season.

Take a look at my income during January and February during the off-season. That was low compared to the high income I am reporting for May. Granted, I had snowbird guests during January and February and so my income was capped at the $1800 per month mark. I am contemplating not having snow birds during those months next year to see how much income I can make during that time. But I digress.

May was impressive, but as a reminder, that is only one side of the equation. While comparing May to April is not useful, next year when I do my annual comparison (May 2022 compared to May 2023), that will be more impactful to how my condo is doing!

B. Rental Expenses

During the month of May, I incurred $5,492 in expenses as shown below:

My expenses in May were higher than usual. I don’t typically break down my expenses (or income for that matter), but I will highlight a couple of expenses that made this month higher than normal.

For starters, I paid $400 to install a new smart lock on my owner’s closet. That included the cost of the smart lock and tip for the locksmith. Part of the reason why I wanted a smart lock on the owner’s closet is because I am managing the unit remotely. I may want my cleaning crew or handyman (but not the guests) to be able to access my owner’s closet for various reasons (to get extra blanket, or battery, etc). So, it was important that I have this flexibility going forward as access to the closet requires a different code than access to the unit itself.

In addition, I paid $1100 to get access to Beach Chair Services for the season. This should last until October. So, basically, when a guest books the condo, they will get access to beach chairs and an umbrella at no extra cost to the guest! This adds value to the condo and will likely have the effect of boosting the chances that my condo gets booked over another owner who does not offer that service to their guest. Regardless, it improves the overall experience my guests receives and so it’s a win-win solution for both the guest and me.

Although I I will likely get beach chair services next year, I will do so earlier in the year (like in March). The point is, sometimes when I incur higher expenses in a month, those are, most of the time, one-time expenses (like installing a new lock), but sometimes they can be recurring (like purchasing beach chair services every year).

C. Profit / Loss

Based on the rental income and expenses for May, I incurred a profit for the month. The total profit was $3626. I’ll take it. However, what’s more impactful to me is that this is the first time I am reporting a profit year-to-date. Year-to-date, the total profit experienced so far is $591.

That’s a small amount! Got it. But it’s better than the alternative. What’s more is that the busy season is still yet to come. If I incur only the usual expenses, I expect the next few months to be profitable as well!

Of course, the year-to-date amount does not include things like ROI, cash-on-cash return or anything of the sort. Specifically, it doesn’t include the funds used to replace the floor, or to purchase the new couch. Re-doing the floor was around $6000. So, later on in the year, I might do an overall profit and loss with these expenses included. But for now, the report includes only a straight income and loss calculation starting in January.

Profit/Loss Commentary

So far, you might be saying that it’s not worth it. Afterall, we are talking about $600 in profit since January! I put down over $100,000 on this property and this is a dismal rate of return. To that argument, I say it’s too early to tell. The year isn’t over, and we are just getting into the heart of the busy season! I am also mindful that my expenses will be elevated the first year because I am taking my time to improve the property here and there. But, I am greatly encourage by my performance so far.

As a reminder, I am doing all of this by myself. Had I hired a property management company, they would have charged me 20% of the revenue and I certainly wouldn’t be profitable at this point – even if I assume (however falsely) that the management company would bring in a higher level of revenue because of their marketing and management expertise. The experience I am getting managing my own unit from a far is invaluable to me. I actually enjoy being in the hospitality industry and can see myself focusing on this during retirement. But, first I have to get there, and so far so good.

The experience I am getting managing my own unit from a far is invaluable to me.

Speaking of retirement, just imagine if I was generating this kind of revenue but without a mortgage payment every month!!! Some of my expenses will likely remain (HOA fees, taxes, insurance, certain management costs), but a major mortgage expense would be eliminated. It’s not hard to imagine that I might be able to retire with just one or maybe two of these properties paid off! At some point, I will be switching from the accumulation phase to paying off my debts, including mortgage debts, early. It’s both scary and exciting at the same time to think about.

Annual Income and Expenses

As this is my first year investing in a vacation rental, I don’t have any annual income to compare it to. However, for purposes of this section, here is a graphical representation of the revenues earned in May 2022 in relation to the revenues earned in previous years:

Here is a graphical representation of the expenses incurred in May 2022 in relation to the expenses incurred in previous years:

As you can see, the charts are exactly the same (except in style) as indicated above. This annual comparison section will make a lot more sense come 2023 when I am able to make a comparison. I will be able to see a trend not just from month-to-month, but also from year-to-year.

Finally, I am mindful that as we are possibly heading to a recession, the vacation rental market might be one of the first industries to be negatively affected. So, I am under no illusions that I may not be able to rely on these revenues forever. In fact, there is no guarantee that I will be able to post higher numbers next year. But thankfully, I am still in a position to be able to afford the expenses on my own, if push comes to shove. It will be tough and I may have to live on beans and rice, but it is one of the reason why I chose this particular unit as the first one to purchase.

Conclusion

May was a great month for the condo. The monthly income greatly exceeded the expenses incurred. For what it’s worth, I count income for the month if the first night of the guest’s stay occurs in that month. So, for example, if I tenant books the condo from May 29 to June 10, I still count all that revenue for May. It makes things easier and it all balances out at the end.

In any case, I am hopeful that the condo remains profitable in the next few months. The goal is to make enough money in the busy season to cover the expenses of the condo during the off season. I am still working on my revenue management strategy. So far, I haven’t taken any money out of the condo. All the expenses incurred have been paid for with the revenue generated from the condo. This excludes the initial capital to both acquire the unit, and do some of the early expenses to get the unit ready, like redoing the flooring.

Also, during my first year, I am incurring elevated costs because of a number of one-time expenses I am pursuing. These include things like buying furniture or appliances, and the like. At some point, I am going to switch from improving the unit to saving money as a down payment for another one. I also plan on using some of that income to purchase additional stocks to build my dividend portfolio. But, I don’t want to get ahead of myself. I will just end with that May is the first time I am able to report a profit year-to-date. I’ve had profitable months before (see example March), but the unit was always operating at a loss. Let’s hope this positive trend of profitability continues.

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