What to Expect from Your St. John Rental Property
Many of our Buyers are off island customers who intend to put their St. John home on a rental program. The income and occupancy levels of a property are influenced by lots of factors including location, design, amenities and price. Most managers now prefer that all new homes they acquire have a pool and equal sized private bedrooms with adjoining baths. It’s all right to buy a house without those features, but possibly plan to add them at some future date. Air conditioning, which most residents don’t find necessary for everyday life here is also considered to be desirable by guests and managers. Views, breezes (bug deterrents) and an accessible location are really more important.
If you buy a home that is already on a rental program you will have the advantage of repeat guests that return to the same home every year and guarantee revenue immediately. Otherwise, if new to the rental market, a picturesque and descriptive brochure is vital. This will cost a thousand dollars or so but will be well worthwhile over time. You may wish to offer a lower price to build up rental occupancy the first season. However with the right management and amenities you should expect a home to consistently achieve annual occupancy levels of 65% or higher. Everything rents well throughout the winter season. The high season months of December to April are great, and then expect May and June to be spotty. Houses with pools and a/c are more popular during the summer than those without. July and August are good for families and longer stays. Then September & October are light, so that is a good time to schedule improvements and maintenance. November picks up again and is an excellent time for you to come down and prepare for season. Rental income will be enhanced if you do not personally use the property during prime weeks (i.e. Thanksgiving, Chanukah/Christmas/New Year, Presidents’ birthday week in February, Easter).
It is generally the same cost to maintain a four-bedroom home as a one-bedroom home, but you get more income if you can house more guests. Rates are often based on 2, 4, or up to 10 guests. Logic dictates that a multi bedroom home although initially more expensive to purchase, will bring in better revenue. However, a smaller house has the potential to be expanded and enhanced as time goes by and will most likely bring in more income than a condo.
Rental managers’ commissions begin at 20% but depending on the scope of marketing and management you want, 25-30% is more common. This usually includes advertising and booking the property, handling the deposits and payments, arranging for taxis from the airport in St. Thomas to the ferryboat, reserving car rentals here on island, meeting guests at the ferry, taking them to the property and explaining the idiosyncrasies of island life and your home in particular. Their fees also usually include routine maintenance, accounting, paying utility bills, marketing, etc. Additional expenses are incurred at local hourly rates for cleaning and housekeeping, pool maintenance, gardening, and hurricane prep before & unprep after storms. Some managers charge up to 40% “all inclusive” without those additional charges. Water, electric, cable TV, telephone, propane (stove/grill), insurance, exterminating, homeowners’ association fees, taxes (see below), etc. are extra. Overall, no matter which way expenses are taken care of, owners can generally expect to net between 50-60% of their gross rental income after commissions and expenses are paid (not including any mortgage payments for the property).
Most rental managers open a joint account for each Owner at a local bank. The manager then maintains that account and provides a monthly report of income and expenses to Owner including an up to date schedule of projected rentals when requested. Excess funds are distributed to Owner regularly as warranted and the manager, for Owner’s tax purposes, prepares annual income statements.
- Gross receipts- paid monthly 5% of any income in excess of $9,000.00.
- VI Hotel tax- paid by guests
- Income taxes- paid by Owners to VI government on net annual; income tax
at same rate as their US income tax
- Property taxes- paid annually based on 60% of assessed value.
- By law, reassessed every two years, rate is
.0125 x 60% valuation
Travel agent commission (10%), when applicable, is generally deducted from gross income before management commission is computed.
WHAT ARE THE BENEFITS OF BUYING RENTAL PROPERTY ON ST. JOHN COMPARED TO OTHER USVI ISLANDS OR OTHER CARIBBEAN ISLANDS?
St. John is considered the “crown jewel” of the US Virgin Islands and was protected by Congress when they established the U. S. National Park here in 1950’s and later when an additional 13,000 submerged acres were added as “Virgin Islands Coral Reef National Monument”. The full time population of St. John numbers about 4500 while St. Thomas and St. Croix each have over 50,000 citizens. This difference alone makes St. John a peaceful island with the feel of a village. The US Virgin Islands are under the American flag and this means that property owners have the protections of the US Constitution, legal and banking systems which other Caribbean islands cannot offer because they are foreign governments. Many of the other islands mandate Americans to pay additional taxes and acquire special permission as “non-belongers” to own property.
HOW EASY IS IT TO RENT HOMES/VILLAS AND HOW MUCH RENTAL INCOME CAN I EXPECT?
With only 2 hotels and a few small inns on island, demand for rental homes on St. John is consistently great. Depending on the time of year, every home on island could be rented out! Most homes on the short term rental market are managed by one of the dozen or so excellent rental management companies on island.
The income and occupancy levels of a home are influenced by a variety of factors including accessible location, number of bedrooms, view, and amenities such as pool or hot tub, air conditioning or beach access. The price charged can vary from $1,200 to $20,000 per week with prices decreasing slightly in off-season. On average, you can expect a successful rental home to stay rented 36 weeks or more per year.
WHAT DO RENTAL MANAGEMENT COMPANIES DO AND HOW MUCH DO THEY CHARGE?
For the off-island owner, a good rental management company is a must. Their fees are generally between 20 to 30% of rates and can include advertising and booking, handling the deposits and payments, arranging for a rental car and an island tour to the villa. Water, cable TV, telephone, propane, insurance, exterminating, homeowner’s association fees, and taxes are usually extra. Overall a home owner might expect to net between 40-60% of their gross rental income after commissions and expenses are paid.
All of the rental management companies on island do quality, responsible work. You can and should shop around to find the one that is right for your house. Here is a list of the companies that Holiday Homes is proud to be associated with:
Since most managers are very busy they are usually unwilling to devote a lot of time to potential buyers questions until they are familiar with the island and have looked at properties with a realtor. To assure their attention your real estate sales agent will be happy to provide personal introductions to them or you can mention that we referred you on our website.
Recommended St. John Property Management Companies
There are more than a dozen excellent rental management companies here that provide a valuable service to our island that only has two hotels. They give you the security of knowing that your island home is being maintained by caring professionals who take personal pride in your home as if it were their own. They each specialize in certain areas and they encompass both sides of the island with a variety of price ranges.
- Holiday Homes of St. John | 340-776-6776
- Scenic Properties | 340-693-7777
- Artistic Villas by Donald Schnell | 800-253-7107 | www.artisticvillas.com
- Caribbean Villas | 800-338-0987 | www.caribbeanvilla.com
- Catered To, Inc | 800-424-6641 | www.cateredto.com
- Seaview Vacation Homes | 888-625-2963 | www.seaviewhomes.com