Own a vacation home? Here’s how to rent it out successfully
By Erik J. Martin
CTW Features
It’s been said that the key to happiness is to live each day like you’re on vacation. Many accomplish this goal by owning a vacation home or second residence, which not only can serve as an ideal getaway spot for personal relaxation and recreation, but also as a serious income generator that can make every day feel like a holiday.
Surprisingly, vacation home owners don’t pursue the latter option as often as you’d think. According to a National Association of Realtors survey released earlier this year, only 24 percent of vacation home buyers rented or tried to rent out their properties in 2015 and plan to rent their residences in 2016, and merely 7 percent purchased the vacation home for the purpose of generating income via renting out the property. That adds up to a lot of missed opportunities for cash, say the experts.
“It’s not uncommon for vacation rental properties to generate $40,000 a year or more,” says John Banczak, co-founder/executive chairman of TurnKey Vacation Rentals in Austin, Texas.
Consider this: the average price charged for a vacation rental through vacation rental listing service HomeAway is $1,540 weekly or $220 nightly — about the same rate as a quality hotel — and it’s easy to see why many choose to rent out their vacation properties.
“The financial benefits can be tangible,” says Adam Annen, PR manager for Austin, Texas-based HomeAway. “Our owners rent their homes an average of 18 weeks a year, grossing around $28,000 in rental revenue annually. Fifty-four percent of them are able to cover 75 percent or more of their mortgage through renting.”
Beckie Weinheimer purchased a South Beach condo 10 years ago as a second home to vacation at and rent out and hasn’t looked back.
“It’s a great way to pay off a mortgage, and we can book a stay whenever we want,” says Weinheimer.
Lauren Fritsch, meanwhile, rents out a cottage in Clinton Corners, New York, via Airbnb and VRBO — two of the most popular online vacation rental listing sites — for up to $300 a night with a three-night minimum booking.
“Taxes are quite high in this part of the state, so short-term rentals cover some of the mortgage, taxes and upkeep, but not likely all,” says Fritsch, who pays at least $1,000 monthly in various fees for the property, not including the mortgage.
The biggest downside to renting, of course, is the expense, time and effort involved.
“You have to market your property, communicate with potential guests, handle the reservation, and manage services like housekeeping and repairs,” Banczak says. Do-it-yourselfers can accomplish these tasks or hire a property management company to shoulder the burden.
“There are certainly some risks to be considered anytime you have a fixed payment in the form of the mortgage versus a variable income stream in the form of rental transactions,” Brian Egan, CEO of Evolve Vacation Rental Network, says.
Additionally, the homeowners insurance coverage required for a vacation rental home can be up to 20 percent more costly than traditional coverage, owners may be required to pay the municipality, county and/or state special registration/licensing fees and taxes earned from rental income, and a vacation home that’s part of a homeowner’s association (HOA) may be subject to special rules and restrictions.
“If you’re going to manage it on your own, the best way to market your property is to list it on as many of the large vacation rental websites as you can to reach most of the potential guests,” Banczak says. “Then, you want to rank as high as possible in their search results to reach more customers.”
This is best accomplished, he says, by creating a professional listing that includes an accurate, well-written description and professional photos, keeping your rates competitive and your availability calendars updated, getting back to rental prospects quickly via quality email and phone call responses, and providing renters with a high-quality experience that will generate positive guest reviews.
You can also generate rentals via healthy word of mouth.
“Allow your family and friends to spend some time at the home at a discount, and utilize their network of extended friends and relatives to create a sizeable network of return renters,” Annen says.
As for determining a fair rental rate, “compare rates charged by like-sized and outfitted rental homes in your area or consult with a local property manager,” Annen says.
© CTW Features