By Holly Dutton
Just because summer is over doesn’t mean you should stop thinking about selling vacation homes.
A new report from online vacation rental marketplace HomeAway.com shows more owners are making top dollar from their holiday homes.
“Vacation rentals change the math of real estate,” said Joel Rasmussen, vacation rental owner and author of Vacation Rental Success.
“The ROI from owning a vacation rental shows that second home owners should not let a home sit otherwise vacant when they could have travelers pay their mortgage and even turn a profit.”
The report found vacation rental properties in regions where summer is the peak season reported occupancy rates of 77 percent or higher this summer, with an average weekly rental rate of $1,778, or $254 per night.
By comparison, the average occupancy rate for the hotel industry this summer was only 70 percent.
Fifty-one percent of owners who have a mortgage on their vacation rental home are able to cover at least three quarters of their mortgage payment.
The top spots for vacation rentals, according to the survey, include Keystone, Colo., Outer Banks, N.C. and Florida.
Candace Friis, broker associate with Corcoran in South Florida, said the market in second homes certainly rebounded this year.
“South Florida, particularly Palm Beach County, has seen an incredible rise in sales in last year. Our inventory is depleted,” said Friss.
“I think a lot of buyers from around the world saw that there’s a great buying opportunity and we offer a great lifestyle
for second home owners.”
While a large number of Florida buyers are European, Friss said she has seen an uptick in business among Californians and New Englanders.
“Sales have been consistent throughout the year. We had some beautiful condos, and a penthouse in Highland Beach that just went into contract,” added the broker.
“People are seeking the ocean, waterfront, carefree lifestyle, that they can enjoy and then when they are not using it, it becomes an investment for them. They can turn it around and it becomes income producing.”
Brokers in New York were busy selling vacation homes this year, too.
Eric Hantman, CEO of Prime NYC, said, “A lot of our business comes from the financial sector and, with the economy is doing better, we’ve been seeing a lot of people getting large bonuses that they are spending on second homes out east — not only The Hamptons, but the North Fork area, just north of The Hamptons, which is less expensive and kind of quieter.ˮ
The Catskills and upstate New York have also seen brisk business. “It has easy access to city, and people can use sites like airbnb.com to rent them out for week at a time, or even a month,ˮ added Hantman.
“With the uptick in the vacation rental market, you can definitely rent it out, even for a month or two months of the year, and cover the mortgage on the property.ˮ
According to Hantman, the cost of renting a three-bedroom house in The Hamptons for the summer can be $60,000. Prices on the North Fork or The Catskills come in at around $20,000 for the summer.
“It is a good investment – you get use out of the property and use the rent to cover the mortgage.ˮ
One of the top concerns of vacation homeowners before opening their homes to travelers includes concern of losing money on the endeavor — 23 percent, according to the survey.
However, the Homeaway report showed that, among those owners who have a mortgage on their vacation rental home, more than half (51 percent) are able to cover at least three quarters of their mortgage payment — an increase of six percent year-over-year from summer 2012.
Nearly three-quarters (70 percent) cover at least half of their mortgage payment — an increase of six percent over last year.
Among worry owners have its the work involved in the process and whether they can balance managing the home as a rental with a full-time job or family obligations.
But they survey found that owners spend only an average of 8.4 hours per week marketing and managing their vacation rental properties. With an average weekly rate of $1,778, a vacation rental owner is grossing approximately $71 per hour of work.
“If the owner optimizes the time and effort put into managing their vacation rental, the return on investment is substantial,” said Brian Sharples, co-founder and chief executive officer of HomeAway.
Maureen Egan Chen, a senior vice president at Prime NYC, said worrying about all the work and effort involved put her clients off renting their Hamptons Bay home for years. “Then this summer, they rented it out for the first part of summer and were paid a premium — certainly enough to cover mortgage for a few months.ˮ
In fact, she was so impressed with the results, Egan decided to rent out her own place in The Catskills.
“I was amazed by the amount of interest,” she said. “People used to rent in Montauk and Sag Harbor, but it isn’t so mellow there any more. More and more people seem to be renting in different places, they just really want a place to get away. We rented out house out pretty easily.ˮ
For the second consecutive year, nearly nine in 10 vacation rental owners (86 percent) reported their summer business was about the same or better than last summer.
And 95 percent of vacation rental owners said they did not lower their rental rates from last summer — 23 percent even increased their rental rates.
“It’s clear from this year’s report our owners are utilizing their vacation homes as assets to help pay their expenses and even turn a profit,” said Sharples.
Thirty-nine percent of owners originally purchased their vacation home for personal use. Nearly two-thirds spent up to 28 days in their vacation rental in the past twelve months, with the majority (76 percent) of owners citing personal or work reasons for not being able to spend more time there.
Another 15 percent of owners classify their vacation rental as a future retirement home.
The average age in which owners purchased their vacation homes was 48 years old — six years younger than owners in 2012 — and the average age in which owners began renting their vacation homes was 50 years old — also six years less than owners in 2012.
“Consistent with what we have seen from the National Association of Realtors year after year, vacation home buyers are getting younger, realizing the benefits of purchasing their future retirement home early and paying down the mortgage by renting it,” said Sharples.