Making the Most of Vacation Rental Home Ownership

By Lisa Loy

The majority of homes listed for sale on the Outer Banks are available to rent on a weekly basis. There are many advantages to a prospective buyer with this sort of arrangement, paramount among them is the income generated that offsets the cost of homeownership. Other benefits include the opportunity to “test drive” a home or neighborhood by renting the house first, and later, as a homeowner, to enjoy personally the investment with friends and family­­––you can't do that with a handful of stocks and bonds.

Rental income helps tremendously with the expenses related to vacation home ownership. Buyers not only want to spend time here on the Outer Banks, they want to comfortably afford it and enjoy the satisfaction of a good investment. This article focuses on the ways prospective homeowners can maximize rental income potential through careful assessment of the location and features of the home as well maintaining and marketing it to potential renters.

Location plays a key role in generating rental income and proximity to the ocean is the foremost consideration. Although oceanfront homes cost more to buy, they also command a higher weekly rental rate. Moreover, they are in greatest demand by the vacationing public. Consequently, an oceanfront home will garner more weeks rented, as many as 30 weeks in a year here on the Outer Banks.

Buyers may wish to compare supply and demand with other resort areas along the eastern seaboard. What are the related factors? Accessibility certainly­­––the number of hours it takes to drive from the northern states where the majority of our vacationing families live. The distance from Manhattan is manageable by car with an average drive time of 8 hours. For a family from Toledo, the difference between a 12-hour car ride to the Outer Banks verses a 19-hour drive to West Palm Beach is considerable, not only in fuel cost, but time lost on the beach. Even water temperature comes into the mix. The average ocean temperature in West Palm Beach may be 80 degrees, but the Outer Banks enjoys a Gulf Stream influence too with an average October water temperature at a refreshing 70 degrees. Just last month on August 7th, The Today Show cited the Outer Banks Town of Kill Devil Hills as one of 13 “Beach Buddies” nationwide for its clean water.

Lifestyle and location come into play as well. For some buyers, eventual retirement to the Outer Banks is a goal. So in addition to finding a home with walk-in closets, those buyers may prefer a location with more year ‘round neighbors and conveniences. Although most vacationers think of the Oceanside when reserving a home, good weekly rentals can still be enjoyed from the shelter of the woods or the along the soundside as long as recreational facilities such as a private pool or access to a golf course or marina are present. Condominiums can also work well for future retires who won’t want the yard maintenance and who will appreciate the elevator most multi-family structures provide. On the oceanfront they rent very well because they not only cost less to buy, they cost less to rent than a single-family home, and condominiums often have a wide array of recreational features. This adds up to a cash flow that is very agreeable.

Assessing the lifestyle of the coming generation of Baby Boomer retirees coming to vacation here is worth a look. They will have the time and the money to vacation here. Typically, they are a physically active, health conscious bunch, and they are technology savvy. A homeowner would do well to appeal to this category of renter by providing high-speed Internet access as an amenity in addition to the televisions and entertainment centers most homes already feature.

Homeowners should “set the stage” for the type of renters they wish to attract.

First impressions carry a great deal of weight when one considers the high volume of vacation homes from which to select. The first photograph prospects generally see is an exterior view of the home in a printed catalog or on the Internet. Standout features such as roof pitch, gables, covered porches, artful window combinations, and landscaping can capture attention, tempting the prospective renter to learn more.

Many property management companies now provide online reservation services. This is not only convenient for would-be tenants because they can access information 24/7, online reservations also give management companies the ability to share tremendous amounts of information. Now, instead of one or two photographs with a paragraph of text in a printed catalog, the renter can enjoy dozens of photographs depicting each room in the house, the pool, the view from the deck, floor plans, and area maps are becoming the standard marketing tool.

For a buyer interested in rental performance, it’s now an easy matter to check availability online and confirm the number of weeks rented. A little time spent researching confirmed reservations is well worth the effort because one can begin to see the trends in rental income as it relates to location and amenities. Additionally, the buyer can see which rental companies are able to deliver the most reservations. It will help the buyer set his weekly rates.

This leads into another point. Many homes are already up and running with a property management company and the buyer will assume the existing agreement at closing and the pro-rata share of rental income will be delivered as well. These agreements are generally renewed annually in the late summer or early fall and should not escape perusal. Compare the percentage of gross rents charged for management and the services provided for that amount. Rental management companies vary in cost not just with competing companies, but in-house too depending on gross projected rents and the ease with which they can handle the property. A property manager might charge a lower commission, perhaps 18 percent, to handle a large upscale oceanfront home bringing in more than $100-thousand a year than it would for a basic beach box located 100 yards from the ocean grossing $17,000-thousand. A newer home will likely have fewer maintenance issues than an older one. Experienced managers feel perfectly justified charging 22 percent or more for the older, smaller home that is harder to rent and more prone to maintenance.

The buyer should find a rental management company with the best fit. Are the staff members good communicators? What are the company’s payment practices, its charges for extra services such as spring cleaning and maintenance calls, the ease with which the owner can access activity records online, the convenience of office locations, and its marketing techniques? Some companies give owners a password to view their rental activity online––deposits paid, owner disbursements made, an opportunity to reserve “owner weeks” or make edits to the home’s inventory.

Once rented, a fresh and clean, well-maintained home is as important as the interior décor, Attracting repeat renters is much easier if the home is spotless. Paint should be touched up annually, and new linens, upholstery and carpet should be considered. Corroded fixtures, worn-out beach toys and chairs should be replaced.

There is a lot to be said about small, thoughtful amenities such as newspaper delivery, toiletries, board games and books for rainy days. Some homeowners have postcards printed up with a photograph of the house so that their renters can send them off to friends and family. It’s a nice touch and promotes the home at the same time.

The seating, the housewares, and appliances should be sufficient to handle the number of occupants. One coffee pot might not do for a group of 16. Some homeowners have more than one refrigerator now, choosing to install one in the sports bar on the ground level with the pool or ping pong table or put another out-of-doors in the summer kitchen or Tiki bar out by the swimming pool. These features improve the social, hospitable ambience.

Interior colors and furnishings can be brighter and fun than “back home” where more conservative décor may be preferable. Art is vital to complete the scene. There’s nothing to be gained by spending more for a beautiful house in a great location without providing those thoughtful, finishing works of art and photography. It will personalize a rental, reminding its visitors that this building isn’t a house so much as it is a home.

Buyers should focus as much attention on the finer points of rental management as they do negotiating the purchase price of the home. Like any business, being mindful of operational matters will affect the bottom line.

Does all of this sound like work? There’s good news to go along with every suggestion and task in this article––buyers can count on their realty agents to prepare cash flow analyses and rental comparisons. And rental managers not only oversee reservations, housekeeping and dispatch maintenance calls, they are even prepared to handle the purchase of replacement items and upgrades to ensure that a home stays in demand. The beautiful truth about owning a home on the Outer Banks is that homeowners can be as involved, or not, in its care as they wish.

Getting in the Rental Game: A Guide for Property Owners

Renting is a great way to offset the cost of owning an Outer Banks vacation home. But renting your second home to vacationers is not as simple as installing a pool and putting up a “For Rent” sign in the yard. If you want to generate a reasonable amount of income, you’ve got to be a serious player in the rental game. Renting is a competitive business on the Outer Banks, and if you want to play, knowing the rules will give you a competetive edge.

When you’re ready to rent your property, the two main issues you will face are 1) attracting as many renters as possible, and 2) retention, in other words, getting those same people to come back AND pass the word to their friends and family.

Step 1: Attracting Renters

The best way to attract new renters is to start with a stellar property. Then you’ll need a top-notch management company with a highly visible marketing plan and professional service.

Renters initially look for the basics: location on the Outer Banks, proximity to the ocean, price and number of bedrooms. A wide range of rental properties is available on the Outer Banks, so every renter can find an option to suit. The homeowner’s responsibility is to offer the best possible property for the price range, location and number of bedrooms.

Beyond these basics, property managers say that plenty of amenities and a comfortable atmosphere are the two most important elements in attracting renters and keeping them as repeat customers.

Today’s renters want entertainment, and they want it on site. They’re paying a lot for the house, and they want to feel like they’re getting their money’s worth. They want amenities galore. Pools and hot tubs are the top renter-attraction devices. Homes with pools typically rent for more weeks for more money than those without pools.

Recreational space and equipment is a big draw as well, especially separate recreation rooms where the kids can play while the adults relax, or the adults can play while the kids sleep. Popular recreational equipment includes game tables such as pool, Ping Pong, Foosball and air hockey. DVD players and a DVD library, big-screen TVs, video games, board games, computers with high-speed Internet access, stereos and bars with mini-refrigerators are also sought-after amenities. Some homes offer a room entirely devoted as a home theater, with comfy seating, a huge flat-screen TV and a diverse DVD selection. Also attractive to renters is fitness and exercise equipment. This can be as simple as a treadmill and some free weights or as elaborate as a full-blown home gym with cardio equipment, weight machines, stereo and TV and a sauna.

Outdoor recreational equipment is a big plus. Anything extra you can offer, such as kayaks, bicycles, volleyball equipment, a basketball goal, horseshoe pits and swing sets, will add to your home’s rental potential. Beach chairs, umbrellas and a beach cart are definite recreational pluses because otherwise your renters will have to spend extra money to rent these items.

Another way to make your home stand out is to try to fit into a niche rental market. For instance, you can target families by offering baby equipment (gates, highchairs, cribs), plenty of recreational amenities and playground equipment onsite. You can attract corporate retreaters with high-speed wireless Internet access, fax machines, audio-visual equipment and conference space. You can attract wedding parties and functions with open interior spaces, outdoor gathering areas, large kitchens separate from the party space, and special decor. Fully handicapped accessible homes, with an elevator, wide doorways and other special features, and pet-friendly homes also stand out on the rental market.

Of course, if you have a great home but no one knows about it, what good is it? Enter the property-management company. Look for a top-notch management company with a highly visible marketing plan. Do your research before you sign on with a management company. Look for one that offers homes similar to yours. If possible, ask other homeowners about their experiences with certain companies. Try renting with the company you’re considering at least once, so that you can get a feel for the quality of service they offer from the perspective of a renter. Once you’ve chosen a company, listen to the advice they give you about setting the rental price.

If you’re thinking of renting the home on your own, you should know the amount of work it involves. Are you ready to deal with all the things the management company does — marketing, scheduling, contracts, trip insurance, deposits, service calls, renter complaints, house and pool cleaning, among many, many other things?

It is up to you to tell your property management company about your home’s amenities. If you add any amenities or upgrades to your home at any time, you must advertise them. Tell your property management company what you’re offering so they can advertise for you on their website and in their rental brochure.

Step 2: Retaining Renters

Those in the know say that the name of the game in the rental business is “Repeat Customers.” If your house is attractive on paper only, a customer might rent your house once and look for another property the next time they rent. But if your house is both easily marketable and exceedingly comfortable to stay in, renters will come back again and recommend your home to their friends.

As one property manager told us: “If a home is comfortable, well-equipped and obviously well taken care of by its owners, people will come back.”

Putting some thoughtfulness, attention and, yes, money, into your rental home will bring the renters back. Remember that renters are staying in your home because they want a home-like atmosphere (albeit usually nicer and cleaner than their real homes). They like the special touches that the owners provide. Personal things like artwork, a few well-placed knickknacks and comment books are nice. But property managers warn that you should not be too attached to the belongings you place in your rental home — so no sentimental or valuable objects. Renters do not place the same value on things as owners do, and owners who expect renters to do so are often disappointed.

Guests appreciate any extra amenities and will remember them when deciding whether to rent the home again. Extras like a DVD library, a varied selection of books, lots of local information and guidebooks, a few current magazines and beach equipment go a long way in the minds of renters.

They also appreciate comforts. Comfortable mattresses, pillows and furniture are some of the best ways to leave a lasting impression. Outdoor showers and well-placed foot washes, extra fans and blankets, plenty of clothing storage areas, hangers in the closets, and a nice selection of porch furniture are other amenities that will leave an impression in your renters’ minds. If your home sleeps more than six, large capacity washers, dryers and dishwashers will be very much appreciated. The renter may not consciously notice all of these extra touches, but they will remember that your home was comfortable.

A comfortable home is also a well-stocked home. More than any other room, the kitchen should be well-equipped. If you want return renters, go above and beyond the basics. Flatware is basic. Good-quality kitchen knives and a varied selection of cooking utensils and gadgets are above and beyond. A blender is basic. A Cuisinart and a hand-mixer are above and beyond. A random selection of pots and pans is basic. A quality set of pots and pans, various casserole and baking dishes and several sizes of mixing bowls and measuring cups is above and beyond. You get the idea. Having the proper number of table settings for the number of people the house sleeps is not optional, and it’s always a good idea to get extra settings of everything to account for breakage or loss. Be sure to offer matching flatware, plates and glassware, a simple touch that makes renters feel special.

The atmosphere of the home should be welcoming and friendly. Keep the decor simple, but let some of your personality shine through. Try to avoid lots of clutter.

Expect to spend money every year to keep your rental in top renting condition. Property managers and interior designers alike agree that owners need to constantly update their rental homes. The interior of the home should feel like the owner takes an interest in it. Any broken, stained or unsightly items should be replaced immediately. Interior designers say that often you can start updating a home with the simple, inexpensive things: Add new bedspreads, shower curtains, throw rugs and throw pillows. Slipcover or reupholster some of the furniture. Put a fresh coat of paint on the walls, replace broken blinds, add updated lamps and accessories. Of course, there will always be times when you have to do more major updates, such as replacing damaged furniture or worn carpet, replacing appliances or painting the exterior to make the home more inviting.

To reduce the wear and tear on your home, make sure your interior furnishings and décor are sturdy enough to hold up to renters. Check with local interior specialists; they know what works in rental homes. For instance, the upholstery you choose for your sofas must be fashionable but easy to clean and highly durable and resistant to sunscreen oils and salt. Carpets need to be tight-looped and flecked, not solid color pile. Appliances should be high quality but simple to use, without too many features. These are the types of invaluable tips local interior design and home-outfitting experts can offer.

Sometimes, to attract and keep renters returning to your home, you may just have to spring for some major construction. Adding a pool will bring in extra money and more renters, so it is, in most cases, worth the cost of installation. Adding an extra master bedroom or closing in the garage to make a game room may increase your home’s rentability as well.

Remember, in the end, your property management company is the expert on what attracts renters and what will keep them coming back to your property. It’s their business to know!