Profitable Vacation Home Rentals

by Broderick Perkins
Realty Times

Rents on vacation homes typically are cheap enough to be more attractive to travelers than traditional travel accommodations, but high enough to bring in more than enough cash to pay the mortgage and upkeep costs.

Because vacation home rents for travelers are higher than long-term rents paid by conventional tenants, you'll need rent your property only about 20 weeks each year, creating less wear and tear on the property than with full-time tenants. That leaves the property open more often for vacation property trades with other vacation property owners in far-off places.

When it's time to sell a successful vacation rental property it can sell for a premium because you aren't just selling a property, you are also selling an established business.

"None of this works if you are renting through a property management company," says Christine Karpinski, a self-taught Atlanta, GA vacation property owner and expert with properties and a growing vacation rental business in the Florida panhandle.

Karpinski, also a website publisher, instructor and author of How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, $26), provides other tools for vacation property owners who want to rent for a profit.

The title is a mouthful; the book is concise and to the point.

Karpinski says renting vacation property for a profit isn't a cinch, but if you begin by removing the middleman, you've already saved as much as half your rental income.

"In the areas where I am, they charge anywhere from 40 to 60 percent (of your vacation rent). Along the coast it's 30 to 45 percent. They are going to nickel and dime you and it's insane," she says.

The growing vacation property market was one of few sectors in the travel market to get a boost from 9/11 when a fearful nation of travelers didn't want to curtail vacations and decided to stick closer to home and take more domestic vacations.

"After 2001 was my best year. Before 2001 renters were coming from Georgia, Alabama, Kentucky, Tennessee. After 2001, they were also coming from Minnesota, Illinois, and Michigan and they were driving because they were afraid of flying," Karpinski said.

The growing baby-boomer market of well-off, aging Americans were already buying up second-home properties, turning some resort areas into high-end enclaves where more and more often working stiffs found it difficult to afford homes near their jobs.

The last recession also encouraged more investors to move into real estate, just as more travelers were driven to bargain vacation home accommodations.

"We just got back from Tuscany. We had three families that went and we paid $2,000 a week for a 25,000-square-foot home. It was stupid. It was ridiculous. We could have fit 25 more people in there. You can't go to Disneyland or New York City for that kind of money," said Karpinski.

Changes in the capital gains tax laws have also made it more lucrative to own a second home.

The National Association of Realtors (NAR) says 2003 was likely a record year for second-home sales with a projected estimate of 445,000 transactions, compared to 359,000 second homes sold in 2001, and 264,000 in 1991. The median price now stands at about $200,000 nationwide, NAR says.

NAR also says although most buyers buy second and vacation homes as play houses for recreational use, a benchmark survey of existing owners in 2002 demonstrated the growing interest in investment properties, rising steadily from 20 percent of second-home buyers in 1999 to 37 percent of buyers in 2002.

To make the most of a second-home investment, owners get vacationers to pay for them, without using costly property management companies.

"Here's my slant: The For-Rent-By-Owner (FRBO) market is untapped. The Florida Department of Revenue told me the FRBO occupancy is higher than those with management companies," she said.

While cutting out the middleman is a great beginning, there's more work vacation property owners must do to be sure to reach profitability.

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