Why You Should Consider Renting Your Vacation Home


by Kristin Dorsett - Date: 2007-01-03 - Word Count: 405 Share This!

A survey from the National Association of Realtors found that the majority of vacation homes are only used two weeks a year-- meaning that most are sitting totally vacant for 50 weeks!

And why should you consider renting out your second home to vacation travelers? Simple economics.

If you decide rent out your vacation home, it could potentially not cost a dime after your down payment.

Christine Karpinski, author of How to Rent Vacation Properties by Owner and Profit From Your Vacation Home Dream, has come up with a simple break-even formula for vacation rental properties. "It's not a high level formula that accountants use to factor in tax advantages or other complicated formulas," she says. "I just want to know how many greenbacks it is going to cost me out of my pocket each month." She explains her simple formula, "If your mortgage payment is less than or equal to one peak week that you can rent your property for and you can rent that property for 17 weeks a year then that property will break even."

She goes on to give an example, "Let's take a property that's mortgage payment is say $2000 a month. If you can rent that property for $2000 a week and can rent it for 12 weeks, which regardless of where you own (on the beach, in the mountains, on a lake, or in the middle of a prairie), there's typically 12 peak weeks. And most properties are rented fully those 12 weeks. So if you can rent your property those 12 weeks you can pay your 12 mortgage payments. And then the extra costs associated with ownership like phone bills, insurance, cable, and power can usually be paid for by five extra weeks rentals. So if you rent your vacation home for 17 weeks, it's paid for itself."

Another reason to rent your home is that "It's better to have a property be rented than to sit empty because insurance companies hate properties that are unoccupied," Christine says. "They would much rather see a property that's unoccupied more often, which is contrary to what most people believe. Many second homeowners think 'if I'm going to switch my vacation home into a rental home, the insurance ramifications are going to be much greater.' Well that's not necessarily true. Yes, you'll have to take out some extra liability, but really your property is going to be occupied, which the insurance companies like to see."


Related Tags: real estate, second home, vacation rental

For more tips and advice for vacation rental owners and those thinking about renting their second home, visit the Owner Community at HomeAway.com, a great resource featuring educational articles, vacation rental news, owner polls, monthly newsletters, and a weekly internet radio show by bestselling author Christine Karpinski.

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