Real Estate
Join Tom Kelly every Sunday at 9am on KIRO Radio to talk Puget Sound real estate.Conversation starters
Most popular
Bonneville Seattle is raising funds for the construction of a second Fisher House at Joint Base Lewis-McChord in Tacoma and we need your help.
Tom Kelly: Rental option drawing second-home owners
on May 16, 2012 @ 8:27 am (Updated: 10:49 am - 5/17/12 )
Not only is the number of vacation home sales on the uptick, but the percentage of those purchasers who intend to rent out that vacation home to friends, family and travelers also is climbing like never before.
Perhaps it's the sluggish economy, coupled with the chance to buy a bargain getaway, but 70 percent of vacation homebuyers say they plan to rent out their home in the next year, according to a survey from the National Association of Realtors. Recreation home sales were up 7 percent in 2001 yet the median sales price dropped 19 percent to its lowest point in four years.
Of the 70 percent who said they intended to rent out their properties, 39 percent said they planned to use the rental income to help cover mortgage, taxes, insurance and other costs while 14 percent stated they purchased the property to make a profit.
These statistics probably do not surprise the 3.3 million vacation property owners in the U.S. who choose to rent out their homes, condos and apartments. According to Radius Global Market Research, the vocational rental industry generated more than $85 billion in 2010 in the U.S. and Europe
"Families and groups have just begun to discover the value proposition that renting a home holds over renting a hotel room," said Jeff Mosler, a former group manager at Microsoft and Amazon and now vice president, global customer experience, at HomeAway. "People not only appreciate the space but also the ability to use a kitchen and laundry services plus the privacy of their own patio and pool."
HomeAway, the parent company of VRBO and dozens of other international websites that allow owners to display and rent out their properties, showed a revenue increase of 37.1 percent to $330.2 million last year, up from $167.9 million in 2010. The company has become the major player in the vacation rental space and charges owners an annual average of $300 to list their homes with pictures, description and reviews.
HomeAway had 640,000 paid listings in 2011, up from 324,933 in 2008. The Austin-based company went public last year and now employs 1010, 642 in the U.S. and 368 abroad.
According to NAR, there are approximately 7.7 million
recreational properties in the U.S. Of the second home
owners who bought in 2011, approximately 33 percent of
owners surveyed said that they purchased solely for
personal use, less than half of the number found a decade
ago.
That stat is mostly likely a reflection of a "luxury-
adverse" economy plus the addition of online tools making
it easier to locate and bill travelers and vacationers.
For example, HomeAway has negotiated deep discounts for credit cards, rental guarantees and insurance while streamlining reservations and providing customer profiles.
"There's no way a person in the vacation rental business could go into a bank and get a merchant credit card rate of lower than 3.5 or 5 percent," said Brent Bellm, HomeAway's chief operating officer. "All of our owners can take credit card charges at 2.5 percent with no additional fees which is a relationship you could not receive as a single individual or small-business owner."
Potential owners considering another purchase have also been viewing online results in making their decisions to get into the vacation rental business. For example, HomeAway reported that 51 percent of its owners who financed their vacation home were able to cover more than 75 percent of their mortgage by renting it to travelers. In addition, owners averaged 19 rental weeks a year, generating more than $28,000 in annual rental income.
Michael Smith, a vacation homeowner owner who specializes in large groups who want to visit Disneyland, said not only are his bookings on the rise, but so is his competition.
"Two years ago, we were probably the only people with homes that could accommodate 18-25 people," Smith. "Now, there are at least four other competitors just in the immediate Anaheim area. Consumers now have more option where we used to be their only call."
Bellm said that HomeAway's target market is groups of at least 3-plus people, not individual couples headed out for a romantic weekend or vacation.
"Those people often don't require the size of a vacation rental home," Bellm said. "Often, they are looking for specific services that a certain hotel offers. We see that changing, however, as more vacation property owners expand the creative services in their homes."
Tom Kelly's new E-book "Bargains Beyond the Border: Get Past the
Blood and Drugs: Mexico's Lower Cost of Living Can Avert a
Tearful Retirement" is available online at Apple's
iBookstore, Amazon.com, Sony's Reader Store, Barnes &
Noble, Kobo, Borders Books, Diesel eBook Store, and Google
Editions. It mirrors a recent article by CNN on the
benefits of the country, including increased rental
possibilities.
Tom Tangney is co-host of KIRO Radio's Seattle's Morning News and resident enthusiast of...everything. He loves books, movies, TV, art, pop culture, politic, sports, and Husky football.
Bonneville Media encourages site users to express their opinions by posting comments. Our goal is to maintain a civil dialogue in which readers feel comfortable. At times, the comments can descend to personal attacks. Please do not engage in such behavior. We encourage your thoughtful comments which: have a positive and constructive tone, are on topic, are respectful toward others and their opinions. Bonneville reserves the right to remove comments which do not conform to these criteria.