“Stunning and Luxurious Large Oceanfront Home.”
“Everything You Need, and Nothing More. Keep it Simple at the Simple Life Cabin.”
And it goes on. As sales of vacation homes surge, so too do rentals of the newly purchased properties. On HomeAway, the vacation-listing site Expedia bought for $3.9 billion in 2015, there are more than 5,600 listings in Washington state. A poll of HomeAway customers who own second homes found that they rent them out 18 weeks a year, generating an average of more than $27,000 in income.
“Owners of vacation homes should absolutely consider renting to travelers,” said Bill Furlong, HomeAway’s vice president of North American operations. “There is still plenty of time left on the calendar for them to enjoy (their home) with family and friends.”
Since the typical vacation property is more than 200 miles from the buyer’s primary residence, according to a 2015 survey by the National Association of Realtors, it’s imperative for most owners to find a reliable property manager to help with advertising, setting prices, screening renters, cleaning, and repairs.
Those who own homes in a vacation community, such as The Lookout at Lake Chelan, Suncadia near Cle Elum, or Seabrook on the Washington coast, can leave property management to the staff, but there’s a cost. The Lookout’s Cottage Rental Program handles all advertising, reservation, and guest needs for a 37 percent fee.
The number of days the home needs to be rented for an owner to break even, or turn a profit, depends on property size and price, and on how much the owner plans to use it.
In 2015, the first full year of its cottage-rental program, Lookout homes averaged 139 days of occupancy, said Laura Harris, lead sales agent. At 10-year-old Seabrook, the average was 178 days.
If owners prefer to manage their own property, the most important step is setting the right price, say several industry experts. This requires a careful assessment of home costs and comparative online shopping, both in the immediate vicinity and in similar markets state- or nationwide. Take note of price fluctuations in high and low seasons, and determine price points for midweek, holiday, and volume discounts.
Online pricing services such as Beyond Pricing can help, as can consultations with property managers, Realtors, and renters.
It also pays to know about vacation-rental regulations. If you spend 14 days in the home, or more than 10 percent of the days in which it would normally be available for rental, then the IRS considers it a personal residence, which limits the expenses you can deduct.
For renters, vacation homes are attractive because they are generally priced lower than hotels and offer more space, privacy, and amenities. The average price to rent a two- or three-bedroom vacation home in Washington is $210 a night, according to HomeAway. That is slightly less than the $220 national average.
For owners, renting offers the chance to offset at least some home costs. About 60 percent of vacation-home owners recoup 75 percent or more of their annual mortgage payment by renting 18 weeks a year, according to HomeAway.
“More owners are listing their homes with the goal to cover all of their expenses — 73 percent in 2014 versus 46 percent in 2008,” HomeAway’s Furlong said.
And why not? If tenants can pay the entire mortgage, owners can enjoy their home-away-from-home for a few weeks each year for no added cost. Now that’s a relaxing vacation.
This article originally appeared in the April 2016 issue of 425 Business.