Investment Property – Turn Your Vacation Home Into One Right Now

One of the growing trends in the vacation market today is the renting of real homes by families and groups, who are tending to prefer this option to hotels. Vacationers are quickly discovering the intimacy that can be enjoyed by all sharing the same home, plus the economy of being able to prepare meals at home, over eating out for three meals a day, to be preferable to the traditional hotel vacation.For all of the reasons that you enjoy your second home, others would be happy to pay you a surprisingly large sum for the privilege of doing so as well.If you are fortunate enough to own a second home or are considering buying one, why not allow others to stay when you are not there? Even Prince Charles rents out many of his extra homes.It is surprisingly easy to have your home on the vacation rental market, after you have mastered the ability to market your home, sell to clients and run your home from a distance. You can even delegate to another member of your family, one of your personal staff or a friend, to run the business for you.The advantages of turning your home into an income producing property are:You can continue to enjoy your home for your own vacations,
You can have your advertising up and running in about 24 hours, if you jump on it, and be making sales and bringing in money in well less than a week from the beginning of your advertising campaign,
The income you make can cover some, most or all of your yearly expenses in running the home,
You are not tied to only going to your property during your time off, as you can profitably rent it out to another and then enjoy a completely different vacation,
Because the home has to be kept up for your paying clients, when you go on vacation, you will have relatively little catching up to do on the maintenance of the property, so can just enjoy your time off,
As the years go on, you will find yourself becoming better and better at managing your property and it will become more and more profitable and
When you eventually do sell your property, it will be worth more, as it is indeed a business.I personally find it very satisfying to have turned my own second home into a business that allows others to also enjoy it. Many of my clients find that once they get over the idea of not wanting strangers in their home (and it is not hard to arrange things so that the invasion is minimal) that they can better afford to keep their homes, which have now become an investment, instead of a financial drain.There are many tricks of the trade, like how to quickly screen your guests, how to ensure that the home is always perfectly cleaned, maintained and relatively inexpensively at that, as well as details like how to get paid, what to do about deposits and taxes and what to charge, but once learned, your home can be smoothly run, just like any other business.

Pricing Rental Homes – List Above, At, or Below Market Value?

I have to admit, pricing rental homes is an issue that I struggle with. As a property manager in Charlotte for the past 6 years, I really should have a good grip on the right approach; however, I’m still constantly debating myself over the correct way to do it. And my therapist says this self-banter does not mean that I’m crazy.So… it is safe to say that pricing is an inexact science. It is simply impossible to know what the optimal dollar figure is for any product or service. For example, let’s say you are a manager at The Gap (with the traditional logo intact). You put 5 sweaters on the rack for sale at $50 each. It takes 5 days and they all sell. Is this good? Was $50 the optimal price?You’ll never know! Maybe you could have priced them at $55 each and still sold them in 5 days. Then you would have really screwed up; retail has been a tough field to be in for the past few years and the extra $25 in profit would have really helped The Gap’s stock price! Or maybe the sweaters should have been priced at $45 and they would have sold in 1 day. In this scenario, the lower profit would have been offset by the larger saving in inventory costs. But then again, who knows? Maybe at $45 each, customers would have perceived the sweater’s quality to be less and they would’ve taken 10 days to sell. It’s tough to figure out!With rental homes, the confusion is similar. Below are the 3 pricing options available to every property owner:
Price Above Market Value: This is good if prospects will actually visit the rental; they may just look at the other rentals listed at or below market value. However, if the prospect visits and says they will take the place if the rent is knocked down a bit, that’s fine! The price can still be at or slightly above market value and the prospect is ecstatic they can tell their friends that they got a great deal.
Price at Market Value: An average amount of prospects will visit the rental and someone will take it in due time. The only issue is if the prospect says they will only rent the home if $100 is taken off of the monthly rent amount. Now the owner must decide if they want to lock into a below-market rate for a year, or roll the dice and wait for another qualified prospect. (Note: Rent negotiators usually turn out to be good renters. Unqualified or barely qualified prospects rarely try to negotiate the rental price. That takes chutzpah! It’s like getting into a bar at age 17 and arguing over the prices of shots.)
Price Below Market Value: Prospects will flock to the house and applications should roll in. Some people will still try to negotiate rent, but being that so many people are interested, these requests can be quickly (and justifiably) rebuffed. Locking into below market rates isn’t great in terms of ROI, but does provide the piece of mind of an occupied property with a good tenant (you can be choosy!).So what’s the right answer? It depends. I know that’s not an overly helpful answer, but I’m not trying to be evasive. There are many factors that need to be considered besides the obvious ones (risk tolerance and financial wherewithal of the owner). Here are a few to ponder:
If the property is 1 of 15 rentals in a neighborhood, pricing below market value could be a good point of differentiation. Conversely, if the rental is the only one in the neighborhood, it may be wise to price above market value.
If it is probable that a real estate agent will bring a tenant in on a property, the pricing should be above market value. The reason? They will probably look to negotiate the rent down. If the tenant will probably come in from an ad, pricing at or below market value is probably the best strategy because they will be focused on the list price.
If a downturn of activity is expected because of seasonality (like the Thanksgiving holiday through New Years), it would probably be smart to price below market value for the first few weeks of November. Having an empty house in November and December is going to kill the ROI; a rental reduction upfront in November will definitely have a better total net return than a month or two of extra vacancy.So the moral is that pricing rental homes ain’t easy. Different times and situations call for different strategies. One size rarely fits all!