How To Rent Vacation by Owner
  • Q & A

    Q: Can you tell me a little bit about your “rent by owner seminars”?

    A: I am a property owner that has, over the years, perfected a system on “renting by owner”. I teach owners all the aspects of self-management.  During my seminars, I discuss benefits/risks of self management; Pro’s and con’s of Management companies; Advertising; Payment schedules; Taking Reservations; Finding Ideal renters; organizing bookings; getting keys to renters; Rental rules/regulations/policies; Sales Tax collecting/filing; Maintenance; Damage/Theft; furnishings; networking with other owners… and much more. I also open the floor to questions. I do my best to never leave a seminar until all questions have been addressed.

    Q: Where should I advertise?

    A: Quite often people ask me to tell them the “best web sites to advertise on…..this is tough…because each property is unique, you have to find web sites that are directly related to your renter’s needs….  So you have to think like the renter, decided what unique things your property has to offer and advertise accordingly.

    When looking for sites to advertise on, put yourself in your renter’s shoes. Go to any search engine and type in what you think the renter would search on to find your property.  Look at the first few sites on the search results. I would venture to guess, nine times out of ten two particular web sites will come up.  VRBO.com and HomeAway.com. So what does that tell you?  You should probably place an ad on both of these web sites.  They are probably two of the most effective web sites for advertising your vacation rentals.

    Then in looking at the web sites that come up in your search results, ask questions like, are there other properties on this site in the same area as my property. Contrary to belief, it’s generally better to be listed on sites that have many properties in your area. Renters like to have choices and if you are the only property listed in your area, chances are that the renters will move on to the next web site that has more choices. Don’t be shy either. E-mail the owners of a few properties and ask them how that site works for them. Many owners are happy to share their positive experiences as well as horror stories.

    Q: When purchasing a second home, should I use a real estate agent?

    A: You may initially think that if you work directly with the seller, cutting out the middleman, you will save money.  Well, maybe.  Or maybe not.  Especially if you are buying in an area you are not familiar with, there are so many things a qualified professional real estate professional can help you with.  For example, if you are buying in a different state, often the laws governing real estate are different than the laws in your home state.

    You need someone who is thoroughly familiar with the area and its vacation scene, someone who can readily answer the dozens of questions you’re likely to have.  Of course, don’t become completely reliant on this person.  Make sure you do your own homework at each step of the way.  After all, you’re the one who will be signing all of those papers at the closing.

    Q: I have owned vacation properties for many years. I rent my properties through a management company and rarely have yearly break-even cash flow. I hear that when you rent by owner you can easily achieve positive cash flow. How?

    A: This is by far the most frequently asked question. Yes, it is true; most people that “rent by owner” do break even and most have positive cash flow. If your property falls inside this simple formula then you should be able to achieve positive cash flow. Note this formula only works if you rent by owner.

    If your monthly mortgage payment is equal to or less than one peak week rental rate, then you should be able to achieve positive cash flow.

    Here’s how: Take a property that rents for $1000 per week during the peak season with a monthly mortgage payment of $1000. There are at least 12 peak weeks (Memorial Day through Labor Day) for most properties regardless of where they are located.  And most, if not all of of the peak weeks are generally occupied.

    Under this formula, 12 weeks rented = 1 year’s mortgage payments. Then you’ll need to rent 5 other weeks to pay for incidentals such as power, phone, association dues, minor maintenance etc. Rent by owner and have 17 (33% occupancy) weeks booked and you have break-even cash flow. Rent more and you have positive cash flow.

    Now take the management company aspect of rental: Let’s just say, you rent the same amount of weeks, 12 peak season and 5 other weeks for the same amount. For every week you rent, management companies take 30% for commissions (usually more but I’ll be conservative) so now your $1000 becomes $700. Then the management company charges you (by-owners charge the renter) a cleaning fee of $50; now your $1000 becomes $650. Then if your renters use a credit card you get charged the 2% credit (Amex is more) card fee, another $20; now your $1000 becomes $630. With those charges alone you have just given away 37% of your money. Add that to other incidental charge s from the management companies then the fee becomes more like 50-60% of your gross is paid to the management companies. Given the 37% figure, under management companies, you would need to book 27 (52% occupancy) weeks to equal the same amount of net cash in your pocket as the person that rents by owner. So since the 33% occupancy rate is a much more achievable rate than the 52% owners that self-manage are generally more successful.

    Q: I have looked in vacation properties and I find that many are very expensive. There is no way that I can afford them on my own. What’s your advice about going in with family members?

    A: Going in with family members can work but it can also make things very complicated. Many families do not speak today over mixing business with family. But I encourage you that if you do decide to go in with family or friends to purchase a vacation home, you should be sure to draw everything up with an attorney and be sure that either of you has the ability to get out at any time.

    I prefer to set goals and do things on my own. Everyone wants to start with the “ultimate”. Think of it as when you bought your first car…you probably dreamed of having a Corvette, Porche, or Lamborghini, but what did you buy? You bought what you could afford at the time. I would recommend that you do the same here. Start small (on your own) and work yourself up to that “ultimate” property. The risks are much lower.

    Note: there is an entire chapter of my second edition of my book that is written on buying property with friends, family or business partners.

     

    Q: I have thought of renting by owner, can you tell me some of the benefits and risks?

    A: Through my experience, there are 2 main reasons to rent by owner. The first is the more obvious. Yes, it’s money. You can net more money simply by saving the management company commissions. Then there are savings such as linen pools, credit card fees and cleaning fees (when you rent by owner, you charge the cleaning fee on top of the regular rental rate and taxes).

    Now the second reason; It will probably surprise you because it seems to be everyone’s biggest worry. I like having complete control of “who” rents my property! I like to talk to each renter. I am friendly and personable, and let the renters know that they are renting my second home.

    By establishing this relationship, the renters have now transcended from customer to “friend”. Friends will take care of your unit. If you stay in a hotel and spill coffee on the carpet, what do you do? But if you rent a “friend’s” place, how differently would you handle that spilled coffee? My renters take care of my unit. Now for risks: My biggest fear is that a renter will show up and the unit is not clean. My cleaning service is my lifeline. No ifs, ands or butts about it, you must find a reliable cleaning service. I wish I had a magical solution to this problem but it is by far the most difficult part of renting by owner.

    Q: I understand that finding a reliable cleaning service is the most difficult part of renting by owner. I will be looking for a cleaning service. Do you have any input of whether to hire a service or an individual?

    A: This is a difficult question to answer. There are definitely benefits and potential problems with both. Cleaning services do tend to be more reliable from the aspect that yes, they will show up show up consistently. Because they have multiple crews of employees, if/when someone is out there is another person to pick up the slack.

    But the downside is, often you’ll have different people cleaning your place each week. Also, large cleaning services work in volume and tend not to take as much time to your individual needs. They generally have a set list of duties they perform and they tend not to deviate from that list. An upside is cleaning services are easily found because they are listed in the phone books and other directories. And most times, cleaning services are less expensive than individuals. Individuals on the other hand, tend to take more time to clean and pay attention to details and your specific requests. Most will even do light maintenance such as change light bulbs, change furnace filters and add personal touches. They also tend to be better at communicating with you about your unit. I have tried both and have just had better luck with individuals.

    But, the right person can be hard to find. Regardless of which you choose, you should have names and contact information for a few services in case you get into a situation where your cleaning services does not show up.

    Be sure to have a list of “expectations” for your cleaning posted somewhere inside your unit (the back of a closet door works well), and don’t worry about hiding it from view of your renters, it’s OK for them to see that you have high expectations of your cleaning staff.

    Q: When I book a reservation, I have the renters send a damage deposit check. Should I cash that check or just hold onto it and send it back after checkout. And if I cash it does the money have to be held in an escrow account?

    A: A damage deposit check should be cashed. This is the first transfer of funds between the owner and renter. You would want to be sure that those funds are “good”. If by any chance there are damages to your unit, you would not want to allow the renter the opportunity to put a stop payment and that check. As for the escrow account; that is a question you should discuss with your accountant or tax attorney.

    Q: I live 600 miles away from my rental property. How do you handle maintenance long-distance?

    A: Maintenance is a definitely a hurdle of long-distance rental management.

    You have 2 options, you can hire a maintenance company (sign a contract and pay a monthly fee to have someone on-call for your unit), or you can choose to handle it yourself. I am a by-owner “purist”. I do it all. I don’t like to spend money on services that I don’t need. If you choose the latter, for the most part, you won’t get calls for little things.

    Remember, you’re renting to “friends” (defined in previous question). Your renters will do quick-solve maintenance themselves and you’ll most likely never hear about it. I’ve never gotten a call for a stopped-up toilet. No, I don’t have a special clog proof toilet, but I do have a plunger and I think that the renters just use it. They know I live 400 miles away so they don’t call me for the minor maintenance.

    Other issues such as a broken washing machine, electrical problems or leaks from the unit above (all which have happened to me), are the hurdles. I simply call a repairman. I keep a copy of the Destin phone book at my home in Atlanta. The renters, or my cleaning service let the repairmen into my unit and the work gets done.

    Yes, it is an inconvenience for your renters, but the renters are very understanding about these things. When the day is done, I compensate (either refund a portion of the rent, or percentage off their next stay) the renters for any inconveniences. Remember, preventive maintenance is the best way to avoid problems.

    Q: I have a family and work full time. If I decide to rent by owner, how much time will it take on a daily basis?

    A: This is a realistic question. You must have some extra time, because there is work involved. Realizing I’ve gotten a system developed, here’s how my time is spent.

    Throughout the year, I usually spend 5-15 minutes per day responding to e-mail and voice inquiries. The busiest time from is from January 1 to March 31 (when I may spend an hour or so e-mailing/calling). This is when I make 80% of the bookings for the whole season. After I’m booked (which is generally by April 1) I spend approximately one half hour per week sending directions and mailing deposit refunds. Four times per year, I spend 30 minutes filling out my sales tax forms. Oh, I almost forgot, you also have to factor in 1 to 2 trips per week to cash the rental checks.

    Q: HELP!  A new web site has taken my ad off from VRBO.com and copied it to their site without my permission.  They have old rates and old photos and I cannot get them to remove it.  Can you please give me advice on how to get it removed.

    A: First, contact VRBO.com and let them know about the problem.  They do NOT like people copying their ads more than you do.  Here’s some other information that may be helpful.

    What constitutes a copyright - http://www.copyright.gov/circs/circ1.html#hsc
    DMCA (Digital Millennium Copyright Act) - http://www.copyright.gov/legislation/dmca.pdf

    The major search engines will not tolerate copyright violations.  If in your search you find your text and photos copied on another site, you can contact the SE to have the url removed.

    Contacting the Search Engines
    DMCA Complaints – have specific requirements.  Read the requirements listed on each site.

    Google – (Must be sent by postal mail)
    http://www.google.com/dmca.html#notification
    Google, Inc.
    Attn: Customer Support, DMCA Complaints
    1600 Amphitheatre Parkway
    Mountain View, CA 94043

    Yahoo – can be emailed
    copyright@yahoo-inc.com
    http://docs.yahoo.com/info/copyright/copyright.html

    Each search engine basically requires the same info, some accept an email with an electronic signature, some do not.

    Copyright /DMCA issues are more easily addressed by the Property Owner.  We share copyright with the owner, but cannot control where the owner decides to copy his listing.

    Contacting the Host and Owner

    This is easier and usually more effective.  I use the same format as the Search Engines for a formal DMCA Complaint.  Each website is hosted by an ISP and email information for both the owner and the ISP is easily found at http://whois.sc .  Most ISP Hosts are cooperative and will contact the owner and pressure them to remove the infringing material or shut down the site until the copyrighted material is removed.

    For more Questions and answers join the yahoo group where Christine is a regular contributor:

    The web’s largest group dedicated to the discussion of Vacation Rentals. Topics include: where to advertise, where to go, deposit policies, leases, cancellations, Room and Sales Tax, early check-out, keeping renters happy, calendars, guest books, and much more. Open to all involved or interested in vacation rentals. Join now and view hundreds of past tips and suggestions. Got questions? Ask +4200 fellow vacation homeowners and vacationers for help and advice. Members include vacationers, rental website owners, suppliers, book authors and many other folk involved in making vacation rentals the best way to get away from it all. New members are requested to visit Answers to Frequently Asked Questions (under Links) before posting a new message which may ask a question that has previously been discussed.


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Christine photoFor nearly 15 years, Christine Karpinski has had one focus: the vacation rental industry. She’s an author, speaker, podcast host and expert in the field. Christine's full bio »

How to Rent by Owner

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