RENTING YOUR RECREATIONALPROPERTY FOR PROFIT

Heather Bayer

Self-Counsel Press(a division of)International Self-Counsel Press Ltd.USA Canada

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CONTENTS

INTRODUCTION 1Why Should You Read This Book? 1

1 IS RENTING FOR YOU? 3The Costs of Recreational Home Ownership 4Is Renting for You or Not? 5

2 THE BIG QUESTIONS 11What Do I Want to Get Out of It? 12How Much Time Do I Want to Spend Doing This? 12Do I Want to Market the Rentals Myself or

Use a Rental Agency? 12Who Will Look After the Property When I’m

Not There? 13How Will I Take Bookings? 13

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Can the Cottage Be Rented Year-Round and If So, What Are the Implications? 13

How Much Am I Willing to Spend to Increase the Rental Opportunities? 14

What Are the Tax and Insurance Implications of Renting? 14

How Will This Affect My Family? 14

3 SETTING GOALS 16Your Vision 17Financial Goals 18Forecasting Expenses 19

Capital expenditures 19Electrical costs 20Telephone 21Satellite TV 22Property management and maintenance costs 23Insurance 24Marketing, promotion, and advertising 24Contingency funds 24

How Many Rental Weeks Will You Have Available? 25

4 WHAT IS MY RECREATIONAL PROPERTY WORTH? 28Location 29Size 30Amenities 31Will It Rent as It Is? 34Making Changes 34Calculating the Bottom Line 36

5 GETTING READY FOR RENTING 38Getting It Right from the Start 39Property Audit 41

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Furnishings and Appliances 41Bedding 44

Personal Items 46What to Supply? 47Toys, Books, and Games 49

Guidebooks and maps 52Adding Value 53Special Occasions 54

Christmas, New Year’s, and other festive occasions 54Theme weekends 55

6 EMERGENCIES AND CONTINGENCIES 56The Emergency Section of Your Guest Guide 58

Medical/fire emergencies 59System breakdowns 60Power outage kit 61

7 BOOKING SYSTEMS 63Frequently Asked Questions 65Holding Period 66Rental Periods 67Booking Form and Rental Agreement 68

Party members 72Rental Period: Dates and Times 73Payments and Deposits 73Cancellations 74Damage/Security Deposit 75Additional Clauses 76

8 SEASONAL RENTALS 78The Market for Seasonal Rentals 79Research the Competition 79

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How to Price Your Seasonal Rental 80Security/Damage Deposit 81Screening Renters 82The Contract 82Payment Schedules 83

Overholding 84What Is the Downside of Seasonal Rentals? 84

9 MARKETING YOUR VACATION HOME 85What Is Marketing? 86The Power of the Internet 88Your Own Website 88

Your web address 90Working with a web designer 92Site content 94Site structure 94Writing for your website 95Photographs 97Testimonials 99Getting your site seen 100Search engines and directories 100Online advertising 101Rental listing sites 104Link popularity 105Ease of navigation 105Availability calendar 106Cost 106

Print Advertising 107Creating Your Own Literature 108

What to put in a leaflet 108Printing your brochure 110Distribution and mailing lists 111

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Privacy of Information 111Monitor Your Marketing 112Frequent Guest Incentive 112Newsletter 113Open-House Weekend 114

10 RENTAL MANAGEMENT AGENCIES 117Types of Agencies and Services 117

Booking agencies 118Full-service agencies 118Agency rates 120Viewing 121Additional services 121Smaller agencies 121

Choosing an Agency 122The Contract 123

Duration of agreement 124Responsibilities 124Exclusivity 126Agent’s fees 126

11 MANAGING YOUR PROPERTY YOURSELF 127Pros and Cons of Self-Management 128Management Options 130General Maintenance 134Meeting and Greeting 136Cleaning 138Cottage Security and Key Issues 139

12 GENERATING RETURN VISITS 142Exceed Expectations 143

Accurate description of all aspects of the property 144

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Up-to-date photos 144Clean, clean, clean, then clean again! 144WOW your guests from the moment they arrive 144

Stay in Contact — With Their Permission 144Birthdays and anniversaries 145Activity breaks 145

Ask for Their Feedback — Then Thank Them for It 145What to Put in a Questionnaire 146

Ask for testimonials 147Keeping in Touch 147

13 HANDLING COMPLAINTS 149Serious Complaints 151

14 THE GUEST GUIDE 152Contents of the Guide 154

Index 154Welcome and introduction 154Phone numbers 154The local area 155Arriving 155Systems 156Appliances and operating instructions 157Outside the cottage 157Fire pits 158Keeping the critters at bay 159Bugs and other flying creatures 160Garbage disposal 161Places to eat, and things to do and see 161Departure 162

15 WRAPPING UP 163

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SAMPLES1 Creating a Vision 182 SWOT Analysis 353 Rental Calculator 374 Cost of Furnishings 425 List of Supplies 506 Vacation Rental Agreement 69

TABLE1 Pros and Cons of Management Options 131

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IS RENTING FOR YOU?

Second home ownership is booming across North America andyear on year, real estate companies are reporting rising interest inthe purchase of vacation homes with rental potential.

In the US, the National Association of Realtors (NAR), in areview of the 2003 census, found 43.8 million second homes, ofwhich 6.6 million were determined to be vacation homes. NARsays 23 percent of all homes purchased in 2004 were for invest-ment purposes, and another 13 percent were vacation homes.Sales of investment homes were up about 14 percent from 1.57million in 2003, with sales of vacation homes rising to 1.02 million,up almost 20 percent from the 850,000 sold in 2003.

The Canadian vacation home market continues to boom, with40 percent of prospective purchasers planning on renting out theirproperty to help cover some of the costs. Realtor Royal LePagereports, “Low interest rates, people redirecting their investmentdollars from the stock market into recreational real estate, and

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Americans buying slices of Canadian recreational paradise are thecompelling factors that are sustaining demand.”

The typical recreational or second home owner is a babyboomer, so there is a good likelihood that sales of these proper-ties will remain high over the next decade as this generationapproaches retirement age. There are also indications that morepeople in their thirties and forties are investing in recreationalhome real estate, not only to provide for their economic future but to support the growing trend to stay fairly close to home forvacation time and to bring family together in a safe and knownenvironment.

THE COSTS OF RECREATIONAL HOME OWNERSHIPThe rush to find the perfect waterfront property has forced manypeople to buy earlier than they anticipated just to be assured oftheir future retirement dream. For those who have chosen thispath, recreational property ownership comes at a price, as the ini-tial investment and furnishing costs are closely and relentlesslyfollowed by a welter of expenses. Some of these are expected andbudgeted for; others come as a surprise. A sheared water line; theneed for water softener or purification systems; winterizing; main-taining decking and sidings; prevention of water ingress in spring— these are just some of the challenges faced by owners I spoketo during the research for this book. In most cases, even whereowners had substantial contingency funds, the additional expensesof recreational property ownership — including spiraling electri-cal costs and property taxes — came as quite a shock.

So, as reality overshadows the initial enthusiasm for the pur-chase, many new owners and significant numbers of seasonedowners will consider renting their recreational property to offsetthese costs. Meanwhile, others have deliberately bought propertyto take advantage of the investment opportunity and the potentialfor rental income, which is clearly there for high-season weeks.

What can you realistically achieve from renting your property?The simple answer is that you will not make your fortune — unless,of course, you buy several properties, renovate them, rent themfor a time, and resell them — but that’s the subject of another book!

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Renting Your Recreational Property for Profit will explain how,by giving careful consideration to marketing, property manage-ment, guest services, and added value, you can make enough moneyto pay the bills, meet the mortgage payments, do the routine main-tenance and repairs, and have a surplus to make improvementsthat will ultimately increase the value of your property and thepleasure you get out of owning it. In short, this book is about max-imizing the investment you’ve made so the return amply coversthe expenses. Renting your recreational property requires work.It’s not enough to scour yard sales for bargain furniture, place asmall ad in a couple of newspapers, then sit back and wait for themoney to roll in. Making a profit from vacation rental requiressound planning and forward thinking, and of course adoptingsome of the tips from this book.

IS RENTING FOR YOU OR NOT?You have probably invested a lot in your recreational property.That investment is in money and time, and for many people it isalso an emotional investment. Maybe you’ve owned a cottage formany years, or it has been in the family for a long time. That prop-erty holds many happy and precious memories of fun, laughter,sunshine, and relaxation. Or perhaps you are a new owner, enjoy-ing the wonderful feeling of owning your own piece of paradisethat you can return to after a long week in the city. Perhaps you’vebought the property for your retirement and visit occasionally todream and imagine what it will be like when you can be up at thecottage full time.

Opening your place in the country to strangers often raisesemotional issues. You imagine them inhabiting your preciousspace, using your bedrooms, watching your TV, and sitting on yourdeck enjoying your sunsets. For some people, the very thoughtmakes renting a nonstarter. If the weeks your vacation home isrented fill you with dread — if you worry that damage is beingdone, your watercraft are being wrecked, and candle wax will bespilled on your oak table, then renting is probably not for you.

In an ideal world, of course, you would rent your property onlyto lovely families who leave it in immaculate condition, come backyear after year, and tell their friends, who also look after your

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place as you would. If you really work at it, you can get as close aspossible to this ideal. Even so, it’s probably better to accept thatthere will always be the odd group who, on first vetting, seemedjust the right renters, but let you down all the same. This happensvery occasionally, and I’m not going to pretend it doesn’t. But byusing the checklists you’ll find in this book and on the CD-ROM,asking the right questions, and planning carefully, you will defi-nitely lessen the risk of attracting the renters from hell!

Renting your cottage should, and can be, a pleasurable andprofitable experience, allowing you to make the most of yourinvestment by having it earn money for you when you are notusing it. To ensure that your rental venture is a success, you’ll needto do some essential groundwork, careful research, and thoroughplanning. With the right systems in place, you can have peace ofmind knowing that your guests are respecting your piece of para-dise as if it were their own. They will want to come back year afteryear, so will make sure it is well looked after.

With good marketing, you should be able to rent your cottagethroughout the high-season weeks prevalent in your area. Formany this will be July and August, Spring break, all the long week-ends, and possibly Christmas and New Year’s. This makes for atleast 12 weeks of high-season income if you don’t use the propertyyourself during any of those times. If your property is in an areawith a longer high-season — perhaps with both great fall color anda long ski season, you will achieve a higher rate of occupancy.With ever-increasing demand for vacation properties to rent, thislevel of occupancy should pose no difficulty. The challenge lies infilling the low-season weeks and weekends and getting your prop-erty to work for you all year round. This book is designed help youto do that.

But before we get into the details that will lead you to a prof-itable rental business, just take a few minutes to reflect on the fol-lowing sad tale. Admittedly this is a worst-case scenario: Youwould never expect all the situations described here to happen inthe course of just one rental. However, every incident describedhere has actually been experienced by one or more of the vacationrental owners who contributed to this book. Consider this a cau-tionary tale about what can happen if you don’t pay sufficient

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attention to the details and rely on luck rather than sound judg-ment in planning your rentals.

This is the story of a new recreational property owner whodecided that renting his property for a few weekends and weeks inthe summer would provide him with enough income to pay somebills, and maybe have some money left over for improvements.Let’s for a moment imagine that person is you …

Nightmare rental weekendIt’s the first long weekend of the sum-mer and you arrive at your vacationhome to see your first guests in, excitedat the prospect and eager to meet themand show off your special place. You had received manyresponses to your ad in The Star, but had decided to rentto the first person who phoned because she sounded sonice — a real family person. She said they’d arrive by 4p.m. on Friday, so you’ve taken an afternoon off work to getthere in plenty of time to check that everything’s in place fortheir arrival. Six o’clock passes, seven, then eight, and stillthey don’t show up. There are no messages on your voicemail, and no answer at their home phone. Now you areworried. Have they had an accident? Are they lost? Shouldyou stay, although you need to get back home to the fam-ily? At least you got a deposit from them. But you had saidit would be OK for them to pay the balance on arrival —perhaps not such a good idea now. And … darn … you toldthem you’d wait, so didn’t let them know where the keywould be. So you’ll just have to sit it out.

Just a few more … and the dog!

Just as you are beginning to despair, the phone rings. Theguests stopped off to see friends on the way and are nowtotally lost, as they forgot to bring the directions you gavethem over the phone last week. They are over an hour awayand are not going to arrive much before 11 p.m. Irritatedand annoyed, you settle back to wait. A van finally pulls intothe driveway at 11:30 p.m., spilling out three more peoplethan you were expecting. On the phone, your contact had

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said it would be her and her husband and their three chil-dren, but on your doorstep, and piling into the house, arefive children and a third adult. Airily they tell you that therenter’s sister decided to join them at the last minute. Theydidn’t think you would mind, and the kids are all happy tobunk in together. You do mind, particularly when you see asmall dog being unloaded from the van along with the lug-gage. They hadn’t mentioned a dog. But neither had you!

It’s late, though, you’ve got a long drive home, and youneed to explain some of the quirkier bits of cottage livingthey may not have encountered before. Eager to get thechildren settled, the moms go off, and you go through thelist you’ve prepared with dad. He assures you he’ll gothrough it in the morning and call you if he has any ques-tions. Feeling a little uneasy about the whole business, youset off back to the city wondering if renting really was sucha good idea after all.

Emergency calls

You are woken by the phone at 6 a.m. — you’ve only beenhome since three! The cottage toilet is blocked and over-flowing and they can’t find a plunger. What next? You needto call out a local plumber but it’s a holiday weekend, soyou spend the rest of the morning on the phone looking forsomeone willing to take an emergency call-out withoutcharging the earth. Having tracked down a plumber, youcall the cottage to let the guests know he’s on his way, onlyto be told that most of the family has gone to the localemergency room as one of the children slipped on the bro-ken deck step and may have broken an ankle. You hadmeant to mention the step last night — it will be fixed onMonday — but in the confusion over their late arrival youforgot to warn them. Your guests are very unhappy andsuggest they might pursue an insurance claim against youfor not making it clear the step was dangerous. Now, youranxiety levels are really rising!

Plumbing sucks!

At midday, the plumber calls; there had clearly been muchmore than human waste going down the toilet, despite youhaving explained what the consequences would be. Just

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for good measure, the plumber adds that the septic tankneeds emptying — it looks dangerously full and there is thebeginning of that telltale odor around the septic bed. You’veonly had the property a couple of months, and the previousowners had told you they emptied it every five years and itwas done about three years ago. Not being used to thefiner points of septic and plumbing systems, you hadn’tgiven it much thought, but now you need to. When you tellthe plumber to go ahead and make arrangements to emptythe septic tank, he advises that in the interim the toiletshould be flushed only when really required or the problemwill get worse. Now you’ll need to speak to your guestsagain.

How not to get to know the neighbors

Just as you are about to call your guests, the phone ringsagain. It’s your neighbors on the lake. You’ve met themonce or twice — a pleasant couple who run a small resortof five cottages. They have a lovely beach area for theirclients with a range of watercraft — canoes, pedal boats,kayaks, and rowboats, and are very proud of the new waterslide they have put in alongside their swimming raft. Unfor-tunately, they explain that your guests’ children have takenover the waterslide and raft, preventing their own guestsfrom using it. When they spoke to the parents, apparentlythey were met with complete indifference: “They are kidsand just having fun; we can’t keep at them all day long.”Your neighbors, although quite calm, are clearly upset andask you to talk with your renters and firmly tell them thatthe waterslide and raft are the property of the resort andshould not be used by their children. Just as you are aboutto end the call, your neighbor adds that one of the adults inyour party has just taken out one of the resort canoes;please can you act quickly!

Willing yourself to keep your cool, you phone the cot-tage. The line is busy, as it is when you call again — andagain. An hour later, you’ve still failed to get through, soyou phone the neighbors again to explain. This time theirannoyance is really apparent — the children are still occu-pying the swimming raft and using the boats. You reallyneed to do something. This is not how it was supposed to

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be. And as you worry about what to do next, you remem-ber that in your haste to get away last night, you forgot toask for the rest of the rental money and the damagedeposit. What a mess!

Fortunately, the next time you phone you reach some-one, but when you explain about your neighbors’ concerns,you find it’s too late — your renter is complaining becausethe neighbor has shouted at his children and told them tostay off the raft. Your renter says your advertisement men-tioned a swimming raft, and they had assumed it was ashared one. It’s clear this is getting out of hand, so youapologize for your neighbor’s anger and point out theswimming raft for your place has the cottage name clearlypainted on the side.

Finally able to calm everyone down, you go back toyour neighbor and assure him you’ve made it clear to yourguests what is available to them and what is not. He sug-gests that maybe you hire a caretaker to look after your cot-tage, someone who could be on hand to deal withproblems when they arise. You begin to realize this is justone of the things you’ll have to think seriously about if youare ever to rent your property again.

Of course, this is a worst-case scenario. It is very unlikely thatyou would have to face nearly that many problems during just oneguest weekend. However, each one of these problems could havebeen prevented with forethought and good planning. This bookwill deal with all of these and more, so your rental experience canrun smoothly and successfully. You will still encounter difficultclients and experience the occasional challenging situation, but ifyou follow the advice and tips contained in this book, you will befar better able to deal with any situation that may arise, and you’llhave contingency plans in place to cover almost any eventuality.

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