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Rent your way to retirement

By Jennie L. Phipps ·
Thursday, September 5, 2013
Posted: 6 pm ET

Home prices are rising steadily, but they are still below what they were before the real estate meltdown in 2008. If your retirement planning includes buying a retirement home in a resort area, think about buying now and renting the property to vacationers until you are ready to use it.

Jon Gray, senior vice president at HomeAway, an online rental service, says about 15 percent of the 775,000 properties advertised through his company are owned by what he calls, "rent your way to retirement" customers.

In a recent survey, HomeAway found that 51 percent of its owners earn enough from rents to pay 75 percent or more of their mortgage payments. At least 70 percent are able to halve their mortgage payment with rental returns. The average listing is booked 16 weeks a year and earns $28,000. Most people rent their properties during the busiest tourist season and use the property themselves no more than two weeks during this high season. But Gray says property owners in some places such as Colorado, Florida, Hawaii and Georgia have more flexibility because of year-round demand.

What should you look for in a property you intend to rent out? Remember that you plan to live there someday, so choose a property that pleases you. Beyond that, Gray says properties with at least three bedrooms and two baths rent better than smaller properties. Being close to a premier attraction is key -- on the beach or a golf course, in a ski-in, ski-out locale, or a nearby neighbor of Mickey Mouse. In many places, having a pool is important.

If your property is off the beaten track, don't give up on the idea. There are customers for practically every locale. "If there is less inventory, then your inventory will be more relevant for the people who are looking," Gray says.

Set a rental rate that is comparable to what similar competitors are charging. The average HomeAway weekly rental rate is $1,778.

Gray says it takes about eight hours a week to manage and market a property. Your costs will include additional insurance, cleaning, and replacing and repairing things that wear out. And you shouldn't skimp on amenities that most renters will demand -- comfortable beds, high-quality TVs, cable and Internet.

Here are the HomeAway's top 10 markets with the largest year-over-year increase in traveler demand.

  1. Sunriver, Ore.
  2. Park City, Utah
  3. Bryson City, N.C.
  4. Durango, Colo.
  5. Isle of Palms, S.C.
  6. Florida Panhandle.
  7. Gulf Shores & Orange Beach, Ala.
  8. Clearwater, Fla.
  9. Newport Beach & Balboa Island, Calif.
  10. Captiva Island & Sanibel Island, Fla.
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