Wednesday, April 12, 2006

There’s nothing like a jaunt to the beach or mountains to release your stress, get your first seasonal sunburn and start thinking about buying a piece of vacation rental property.

Come on, we’ve all done it. Just when the sand is about completely shaken out of all the towels and swimsuits, you start drooling over the prospects of owning your own home near the water.

How difficult could it be? If it’s a rather affordable area, then it’s going to take care of itself as far as monthly payments are concerned, right? Twelve prime rental weeks from Memorial Day to Labor Day — just the right amount of time and income to cover the 12 months of the year, right?

Bear in mind that a vacation rental property has some unique expenses that you’ll not face in your primary residence.

m Furnishings. Your cost of housing isn’t just the purchase of the land and lot, but also everything that’s in it. If you want repeat renters, then it’s got to be nice every time. At least check out auctions/sales from used hotel furniture before heading to the store for new furnishings. Some investment sales include all the furnishings so you don’t have to go shopping.

But remember that you’re renting out a property as a place for people to relax and think about nothing — especially about the frayed couch coverings, bad springs in the master bedroom and leaky faucet in the bath or kitchen. Your house has to compete with the likes of at least a nicely furnished and operated local hotel.

• Cleaning services. In between each rental, you’re going to have to have the dwelling cleaned out. Through the summer, unless you’ve had 12 groups of very conscientious vacationers, you’re going to have to have the place shoveled out at least a dozen times.

The cleaning is more than just what you would do to prepare for dinner guests. These guests are paying you $150 to $300 per day for a week of vacation. It better be as clean as a brand new home. This means a gleaming kitchen and bath, fuzz-free carpeting, crystal-clear windows and a fresh smell throughout.

• Wear and tear repair. After these folks have paid you to live on a weekly basis in your home, then you have to come in and repair what they have broken. What you’re used to seeing at your home now may not cut it in your vacation property. They expect to see near-new carpeting or flooring. If it’s getting worn, it’s time to replace it. Peeling paint? Repaint it. Mildew in the bath? Re-caulk it. Sun-burned or algae-covered decking? Blast and stain it. These are not necessarily inexpensive repairs, but this property is now a commodity, a commodity that you want your customers to be banging on the door each year to rent.

• Utilities and management fees. You are going to have to keep up the property. Hopefully, you’ve charged enough weekly rent to carry not only your mortgage payment, but also the costs of carrying association dues, water, trash, electric and other utility costs through the whole year, not just for the prime rental season. You’ll need to keep up the exterior as well, so you may need funds for a landscaping crew.

Many of these services may be included with the contract you’ll have with your property management company. And if you’re thinking of managing the property yourself, think again. Managing vacation rental property is a totally different ballgame than residential rentals. In a residential rental, the tenant joins you, the landlord, in keeping up the property. Remember, the vacationing renter is there to be treated like royalty, or at least close to it.

m Giving up prime rental periods. Another aspect of owning vacation property is to actually to be able to enjoy the property yourself a couple weeks a year. The challenge is letting go of the prime renting season to assure that you have enough weeks rented out during prime time to completely pay the mortgage through the rest of the year. So, kiss the Independence Day getaway bye-bye. That’s one of the highest-rent, most-desirable rent weeks of the year.

m Personal time to open and close the property. Finally, remember that week you wanted to take to enjoy your vacation rental property? Well, this is probably going to be the same week you’re either getting the property ready to rent out the first week (de-winterizing the property) or getting it ready for the cooler months (winterizing).

Vacation properties can be a great way to buy a house now, at today’s prices, for future enjoyment as retirement or actual vacation housing, but the smart investor will remember that with income and wealth building come expenses and upkeep.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions at his Web log (

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