Whether youre a renter or an owner, vacation rentals can be a double-edged sword. Whereas the passive income generated by renting out a vacation property can be a welcome resource for owners, the costs of upkeep and risks associated with letting total strangers into your home can be prohibitive. Meanwhile, those looking to rent can typically get a lot more space per dollar than they would in a conventional hotel room – but how can they be certain theyll be getting what they paid for? For both sides, covering your bases is key. Whether youre renting a vacation property yourself or renting yours out this summer, here are eight tips for making the experience a total win-win.
TIPS FOR RENTERS
- Know what youre getting. The last thing you want is to be a victim of the old bait-and-switch. If the property isnt in another state or country, ask to see it in person before you make a decision. Theres no substitute for personally inspecting a unit and making sure its exactly what you want. If a visit is out of the question, try to authenticate the property to the best of your ability. Research the owner, read online reviews and get in touch with others who have rented the property in the past. If the owner refuses to provide references, you should probably move on.
- Use a third party. Renting through a third party like a curated rental agency, a management company or a rental listing website offers you varying degrees of protection, and can considerably minimize your chances of disappointment. Curated rental agencies generally offer a limited (and upscale) list of rentals that their representatives have personally vetted. They also act as true agencies in the sense that they have a contractual responsibility to you as the renter. Management companies – which often include well-known hotel chains – tend to rent out individual units in large condos or residential complexes. Typically, these units are well-maintained, and a resident manager is often onsite to handle problems that might occur during your visit. Meanwhile, rental listing websites like HomeAway and FlipKey post listings submitted by owners. They cover the entire world and, unlike most curated rental agencies, include a wide range of options for any budget. Although they provide some renter protections, rental listing websites are not actually party to any rental transactions.
- Stick to a budget. Certain amenities, such as a beachfront location or being within walking distance to the nearest town, may be important to you. Just realize youll probably pay more for them – a lot more. You dont want to blow your entire vacation budget on the property rental and have nothing left for groceries, gas or entertainment. By discerning your wants from your needs, you can decide where you can afford to be flexible and save some money.
- Read the rental agreement – then read it again. Dont make the mistake of skimming the contract you sign with the property owner, especially if its a long-term rental. Not only will it outline the payment schedule and terms for getting your deposit back, but also your liability in case of damages – or if extra cleaning is needed. Make sure the contract is crystal clear about how many people you can have on the premises, whether or not you can bring pets, and who pays for items like utilities, internet, cable, phone service, and housekeeping. Keep in mind that the costs involved in air conditioning or heating a vacation rental can be sizable, so be sure to factor those into your budget if the owner hasnt included them in the rent. If youre unclear about any aspects of the contract, consider having it looked over by a licensed attorney – preferably one who specializes in real estate.
TIPS FOR OWNERS
- Calculate your break-even point. Define what your financial goals are for renting out your vacation home. If your goal is to break even on your property costs, you need to calculate your break-even point. Lets say your monthly mortgage payment is less than or equal to one peak-week rental fee. If you rent your home for approximately 17 weeks a year, then your property should come close to breaking even. Most vacation rental markets have an average of 12 peak weeks, which means that your other costs – such as utilities or basic repairs – would be paid with your earnings from approximately five weeks of off-peak rentals. So if your monthly mortgage is $2,000 and you rent your home for $2,000 per week, youd only need to rent it out for 12 weeks to break even on your mortgage payments.
- Get paid up front. Once youve lined up your renter, its customary to ask for payment in two equal installments: one at 60 days prior to occupancy, and another 30 days prior to occupancy. Receiving the first payment 60 days out from the rental date gives you ample time to find another renter in case of cancellation or a default on payment. For last-minute reservations, however, you can – and should – ask for the full amount at the time of booking. When it comes to methods of payment, stick to whats safest: credit cards, PayPal, personal checks, and bank-to-bank wire transfers. Payment methods like money orders, cashiers checks and instant cash wire transfers are less convenient for your guests, and tend to be used by scammers and thieves.
- Decide how much you want to be involved. Renting your vacation home can feel like a full-time job. The many tasks involved include marketing your property, vetting prospective renters, inspecting the premises before and after each rental, and handling repairs, maintenance and housekeeping. If you have neither the time nor the interest in managing your rental yourself, consider hiring a property management company to handle everything for you. Most property management companies charge a commission in exchange for their services, which can range from 10 to 50 percent of your rental income. Regardless of how involved you choose to be in the rental process, youll want to hire an attorney familiar with the vacation rental market who can advise you on the laws in your area and make sure your rental contract is iron-clad.
- Protect yourself. Accidents will happen – especially when you have strangers coming in and out of your vacation home during peak rental season. For smaller problems, the traditional arrangement is to ask for a refundable security deposit. If you choose to allow pets in your home, youll probably want to pad that security deposit considerably – or ask for a separate pet deposit fee. For larger issues, youll want to make sure your homeowners insurance policy covers renters. If not, you may need to amend it or shop for a new one. Not sure whether you have sufficient coverage? Click here or call SelectQuote Auto and Home at 1-888-267-3282. One of our expert agents will assess your current policy and, if necessary, find you the coverage you need at your lowest price from the highly-rated insurance companies we represent.