|Vacation homes: Not just for the
rich and famous
It may hit you every year about this time as you schedule
your annual family trip to the coast or other favorite vacation
spot. "Wouldn't it be great if we owned our own beach home
(or condo or ski chalet)? Instead of paying rent to someone else,
we'd be paying ourselves."
Then you sigh, write out a deposit check and envy
those wealthy tycoons who can afford to own vacation homes.
resident Paul Boulanger would challenge you to think again. This self-described
"old-fashioned tightwad" saved money for years and now owns a time share
in The Bahamas, a vacation condo in Florida and a traditional saltbox home on
a secluded peninsula in Maine.
He's not fond of mortgages,
so Boulanger scrimped and paid cash for the properties. And because he rents out
and maintains his rentals directly, rather than paying exorbitant fees to a property-management
company, Boulanger is making good money with this less-than-part-time venture.
(His "real" job is with a printing company.)
fact, Boulanger says he needs to rent out his Maine home for less than eight weeks
each year to cover the property's annual expenses. Any additional rental weeks
-- and he gets a lot of them -- are pure profit.
homes for love and profit
Boulanger is very happy that his rentals
make money, but that wasn't the sole reason he bought them. "I bought homes
in places I personally love -- places I like to visit every year -- with the idea
that they might even become my retirement homes," he says. "Renting
them out was simply a way to make them affordable."
Karpinksi, author of "How
to Rent Vacation Properties By Owner," says she teaches seminars around
the country "to help regular people learn how to buy and rent out their own
vacation homes in places they love." She's more interested in long-term investments
than in showing people how to buy cheap properties, fix them up and sell them
The 17-week formula
How do you know if you can afford a vacation home -- even with the help of renters?
Karpinksi has developed a simple profitability formula. She estimates that one
peak-week rental fee should be enough -- and hopefully more than enough -- to
pay the home's monthly mortgage if you finance your purchase.
example, if you borrow $300,000 at 6.5 percent for 30 years on your beach cottage,
your monthly house payment would be $1,896.20. That should be your minimum weekly
peak-rate rental fee, Karpinski advises. If you don't think you can charge that
much for rent, don't buy, she says.
However, if you can be
reasonably sure of renting your home for at least 17 weeks a year, you should
break even. Most owners can count on 12 peak rental weeks each year. Those 12
weeks each year should pay the annual mortgage. Five additional weeks of non-peak
rental income usually enable owners to cover taxes, cleaning and maintenance expenses,
and other incidentals.
The crucial key to the vacation home dream, says Karpinski,
is to manage the properties yourself, rather than give anywhere from 40 percent
to 60 percent of the rental profits to a property-management middleman.
says managing your own rentals is much easier and less time-consuming than most
people might think. She encourages homeowners to start by listing their vacation
homes using online services such as CyberRentals.com,
and Vacation Rentals By Owner.
Sites such as these typically charge flat fees to advertise the properties and
can help you reach hundreds of thousands of potential renters.
which currently lists some 10,000 vacation properties throughout the world, charges
as little as $60 for a three-month listing -- about the same price some owners
would pay for a single day's ad in the classified section of a major newspaper.
include a generous text description and four photos of the property. Owners can
opt to include more photos for a slightly higher fee. They also can choose to
have renters contact them directly by phone or e-mail.
A major advantage of online listings is that the homeowner
maintains control of who stays in their home. "What holds many people back
from buying and renting out their own vacation home -- what they most fear --
is that a bad renter will trash the place," says Karpinski. "That rarely
happens, especially when you screen potential renters yourself rather than going
through an agent."