Reemerged vacation property investment market paying dividends

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“Even owners with properties in destinations where summer is typically an off-season have reported a good season in terms of occupancy.”

If you capitalized on news about the recovering vacation home market earlier this year and invested in a vacation rental, there’s a good chance your return is shaping up to be larger than you expected.

The summer peak season was a blast, vacation rental occupancy rates are up and many owners expect a banner year-end holiday season, according to a survey from Austin, TX-based Home Away Inc.

“Even owners with properties in destinations where summer is typically an off-season have reported a good season in terms of occupancy,” says Brian Sharples, Home Away CEO.

The recent “HomeAway Vacation Rental Marketplace Report” reveals 72 percent of those who consider summer to be their peak season said occupancy rates were 76 percent or higher, up from 68 percent last summer.

Also, 87 percent of vacation rental owners said 2012 summer business was the same or better than last summer, up from 84 percent last year.

Managing the investment
It’s not enough to purchase a vacation rental property without a marketing and management plan, if you expect a return on your investment.

Doing it yourself or hiring a property manager for marketing, reservations, booking, housekeeping, maintenance, guest services and more is crucial to an investor’s bottom line.

“Purchasing the home is just the beginning. Making sure it’s updated and marketable is vital to compete in today’s travel marketplace, and to drive revenue,” explains Steve Trover, president of the Vacation Rental Managers Association (VRMA).

Some investors handle their own property management to save money. Others go the paid property management route, full bore. Still others find a middle ground and hire only those property management services they need.VRMA says here are the top reasons vacation rental property owners choose to hire professional management.

• Income
– Vacation rental professionals can help advise owners on local market conditions, travel trends, and how to expect and plan for seasonal occupancy demands and earn homeowners money when a property would normally sit empty.

• Accounting, record keeping – Managers can also keep the books for revenues, repairs, utility bill payments, 1099s and other financial accounting to keep you apprised of where the money is coming and where its going.

• Zoning and legal issues – Managers know if a property is legally zoned for vacation rental business and ensure the property is operating legally under tax codes, licensing requirements and inspection requirements.

• Around-the-clock attention – A distant homeowner is often unable, or unwilling, to quickly handle after-hour questions or emergencies. Fully-staffed property managers are always on the job.

• Guest services – Likewise, a property manager can handled day-to-day guest service needs, including questions, bookings, check-in and check-out, etc. Some companies also offer the marketing plus of concierge services – exclusive perks, including a private chef, in-home spa treatments, free movie and video game rentals, grocery delivery options, discounts on activities, and others.

• Marketing – Managers can be hired to use direct marketing and other in-depth marketing programs from brochures to guest surveys. They can also handle search engine optimized (SEO) electronic marketing that includes email campaigns, social media, online listing sites and other digital services.

• Reservations – In person, over the phone or online, by check or credit card, vacation rental managers book vacation rentals in a secure, professional environment. They also help devise clear rental agreements and rental and refund policies. To save money, look for companies that absorb credit card fees.

• Housekeeping – Trained housekeepers keep properties in tip top shape to professional hospitality industry standards and inspectors regularly check the property to ensure consistency and quality.

• Property maintenance – Someone has to change the light bulbs. Managers oversee lawn care, pest control, pool care, HVAC service, repairs and other maintenance. Professionals also provide security as on-site “eyes and ears.” Without a manager, properties can sit empty, unchecked, uninspected and less secure.

• Interior design
– Management companies can also offer staging, set-up, upgrades and other forms of interior design that help “sell” the vacation rental. Repurposing spaces into, say, game rooms and movie theaters with the latest amenities and extras helps drives traffic.

Among 900 responses in the Aug. 30 to Sept. 3 survey, 30 percent of owners also say “it’s going to be a jolly holiday” for their year-end holiday vacation rental business – up from 22 percent in 2011.

Lower rents may be driving some of the demand. Nationwide, owners reported an average weekly rental rate came at $1,493, down from $1,685 last year, according to Home Away, an online marketplace for 735,000 vacation rentals in 168 countries.

The good news shouldn’t come as a surprise. Research commissioned by Home Away as part of the National Association of Realtors’ (NAR) “2012 Investment and Vacation Home Buyers Survey,” released earlier this year, reported the re-emergence of vacation property investments.

Watching the market

Nationwide, vacation home sales rose 7.0 percent to 502,000 in 2011 from 469,000 in 2010 as owner-occupied home purchases fell 15.5 percent to 2.78 million.

Mortgages are tight, but low prices and low interest rates boosted sales. NAR reported the median sales price for a vacation property was $121,300 in 2011, down 19 percent from 2010.

Timing also has been a favorable factor for those who recently took the vacation property investment plunge.

After 2009′s dismal, recessionary 9.4 percent drop in total travel expenditures in the U.S., the travel industry roared back with a 6.8 percent increase in expenditures in 2010 and 8.8 percent in 2011.

Another 5.2 percent year-over-year increase is expected this year, according to the U.S. Travel Association.

“It’s clear that owners…can generate valuable income.”

In another recent report by Navis Research LLC for Vacation Rental Managers Association (VRMA), travelers’ bookings with professional property managers have risen more than 18 percent nationwide in the past year and are expected to rise up seven percent over the next six months.

Maximizing returns

According to the Home Away report, vacation rental owners spend an average of 8.6 hours per week marketing and managing their vacation rental properties, and that time is well spent, considering owners generate an average of about $26,000 per year in rental income, down from $28,000.

“That’s about $58 Home Away vacation rental owners are making an hour, which is a nice supplemental salary. It’s clear that owners who invest just a minimal amount of time marketing their vacation rental can generate valuable income,” said Sharples.

About 43 percent of owners use the income generated from vacation rentals just as they would use a salary – for everyday living expenses, discretionary spending, and savings for the future.

The report says 47 percent of owners also use rental income to help pay the mortgage on the property and, among owners who have a mortgage on their vacation rental home, 49 percent generate enough income to cover at least three quarters of their mortgage payment.

Also 59 percent use the income to maintain or make upgrades to their rental property. New linens, furniture, electronics, exterior maintenance, and interior painting/wallpapering were among the most common improvements owners made in the past 12 months.

About the author

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