How to Rent Out a Vacation Home

sweetviscape:flickr.com

You've finally found the vacation home of your dreams. Whether it is a cabin in the woods or a condo on the beach, the economics of owning a vacation home can be daunting. With one-week rentals bringing in an average of more than $1,600, more homeowners are turning toward renting out their properties to offset their rising expenses. If you are thinking about renting out your little corner of paradise, here are some things to consider.

Instructions

Difficulty: Moderately Challenging

Step 1

Make a decision on whether to sign on with a property management company. If you do your homework and find a good management team, it can lead you through the following steps with minimal headaches. But be forewarned, management fees can eat up 20% to 50% of your rental income.

Step 2

Do your due diligence. Check with local authorities and any condo or homeowners' associations to make sure short-term rentals are allowed. Talk to your insurance agent and make sure both your hazard and liability policies are in place and allow for renters. You will also need to know if local and state sales taxes will apply to your rentals.

Step 3

Establish your rental rates and policies. Common thinking on rates is one month's mortgage payment equals one week's rental fee. Start there and then check other local rentals and adjust. While you're checking fees, pay close attention to your competitors' rental policies. You'll need to create a rental agreement that covers deposits, pets, smoking, modes of payment and maximum occupancy.

Step 4

Get the word out and find some renters. Luckily, help is plentiful and inexpensive. For a yearly fee of $200 to $400, web sites such as VRBO.com and homeaway.com can put your property's ad in front of thousands of vacation shoppers. VRBO claims to give its advertisers an average of 90 inquiries per year. In putting your ad together, mention your property's and the region's virtues, but don't exaggerate. Most of all, include as many pictures as you can. Provide clear contact information for prospective guests to reach you by e-mail or phone.

Step 5

Hire some "feet on the ground". Even if you are going to provide all the management you will need a local housekeeping crew for post-checkout cleaning and a maintenance person for odd repairs.

Tips & Warnings

Before your first rental, do a quick check of the property itself. Remove or lock up valuables and personal items. Make sure everything a typical guest will need is available (you may not drink coffee, but they might). Little extras, like beach chairs or bicycles, will go a long way in luring back return renters.

Generating rental income is getting easier than ever, but handling the income taxes on that income is not. Rent for 14 days or less and you don't have to declare the income; rent more than that and the IRS says you are officially a landlord. That means you must declare income and you can write off expenses. The tax laws are complex, so using a CPA (at least for your first year) makes good sense.

Resources

Article Written By Robert Leonardi

Robert Leonardi is a freelance writer specializing in eye care and general health-related articles. He is the president and CEO of a chain of eye care centers and has more than 30 years of experience as a licensed optician and administrator in the optical industry.

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