You must have the time and inclination to do it right...

by Lorraine Stuart Merrill

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ACATION PROPERTY OWNERS have more choices than ever for managing rentals, whether the goal is extra income to help defray expenses, or full-fledged business investment. The sizzling market in vacation homes, paired with growth of the internet, has led to an explosion in vacation home rentals.

     But demand has also rocketed, according to Lake Placid, New York, Mayor and real estate broker Roby Politi, because the hospitality industry has failed to respond to changing markets. Vacationers want places where family groups or couples can stay together.

     Options for owners range from doing just about everything yourself to paying a rental management agency to do it all. Bob and Mary Connolly of Tom’s River, New Jersey, brim with enthusiasm for managing their two Jersey Shore rental condos. They describe what has become a profitable retirement investment and hobby. “We do as much as possible ourselves,” Bob explains, “—except the electric and plumbing.”

     “We love it-we’ll do this to our last breath because we love it so much,” Bob asserts. “We love being down at the shore.” Bob and Mary are both 76, and live just 15-20 minutes away from their rental units, which they rent long-term for the season. Their tenants typically come from New York or Pennsylvania, and look for rentals in the local paper, the only place the Connollys advertise. Off-season tenants are usually families with homes under construction.

     “We always have nice tenants,” adds Mary, who likes doing their own screening. “I can tell over the telephone—often it’s the person who speaks of happy childhood memories of vacations at the shore.”

     Joan and Jeff Talmadge of Wellesley, Mass., turned their experience renting their Cape Cod vacation home into a business, All Seasons Rentals LLC, to help others rent their own properties. They started in 1997 serving Cape Cod and the islands, and added Florida in 2003. Their WeNeedaVacation.com website is an interactive advertising vehicle with advanced search and booking calendars. Renters find properties to meet their needs and schedule, then contact owners directly.

     Joan Talmadge says five to ten percent of their site’s owners handle all management themselves, but most find trusted locals to do cleaning and maintenance. Some list their property with a rental agency, too. Joan takes calls from homeowners with questions daily, and the website offers guidance on marketing and managing property for owners. They also host informational forums for owners on the Cape and in Florida.

     2nd home owner Pat Lauer turned her rental experience into a rent-it-yourself consulting business. “I advocate renting on your own,” says the Parker, Colorado-based founder of Vacation Property Services, “and the internet provides the means if an owner is interested.” Her VacationPropertyHelp.com website offers a range of marketing and management consulting services to owners. Lauer helps people create webpages with the right keywords and photos, and identify the most effective internet rental websites for their location and type of property. Lauer sells a kit to help owners through the process step-by-step, including the necessary records for a rental business. The kit offers checklists, sample letters and agreements, instructions for guests, etc.

     After using an agency one season to rent their Breckenridge three-bedroom town house, Frank and Carol Gibbs now manage rentals themselves from their residence two hours away in the Denver suburbs. Their goal is to use the home themselves two to four weeks a year, and generate enough from rentals to cover all annual expenses. “We got monthly reports of who rented, the number of days, and fees collected. The gross looked pretty good,” Frank Gibbs says. “But after the agency took 30 percent in fees, the net did not meet our financial goals.” And the agency’s commission increased to 40 percent after the first year.

     Gibbs negotiated an agreement with the agency keeping the commission at 30 percent, and allowing the Gibbses to rent the home on their own, too. Frank worked with Pat Lauer to create ad copy and select five websites. “I rented it out three times as much as the agency did,” noted the retired medical industry sales manager. By May, income had exceeded expected expenses for 2005, and many summer weeks were booked. The Gibbses will probably go totally on their own this winter, and narrow advertising to their three top-yielding websites. Gibbs found Lauer’s rental planning kit prepared them to do business from their first phone call, and “extremely helpful” in keeping them organized.

     A semi-retired real estate broker in La Jolla, California, with a four-bedroom ski condo in Park City, Utah, declined to be quoted by name, but says he was “ripped off” by the rental management agency he used. “They take control of your unit when you sign a contract making someone exclusive agent-you have no control.” He discovered the agency was renting his condo some weeks without telling or paying him. Now that he manages the property on his own, he says, “It’s a whole different ballgame—I’m actually enjoying it.” He used Lauer’s consulting service, and hires a local husband and wife cleaning and maintenance team to take care of the condo. “My only problem now is I have to take my computer everywhere when it gets busy in the fall and winter, or find some way to check my email.”

     Still, not every owner relishes answering rental inquiries and keeping track of deposits and agreements, let alone taking phone calls about overflowing toilets or broken appliances. Those who view rental management as more headache than fun, or who just don’t have the time, prefer to put the whole thing in the hands of a rental agency. Management fees or commissions and extra charges vary by firm, location, type of unit, and services provided. Typical rates range from 20 to 30 percent to as much as 50 percent of gross rent.

     Vaughn Steanaland, vice president and rentals manager for Century 21 Thomas Beach Vacations and Real Estate in North Myrtle Beach, South Carolina, will negotiate lower commissions on types of properties in high demand with renters, but short in the agency’s supply. Managing 700 units, his firm has been a “one-stop shop” for rentals owners for 40 years, providing 24/7/365 service to renters and owners. Some owners live nearby, while others live across the country or around the world. “Each state has different laws,” he notes, and his agency keeps owners informed, and takes care of compliance with all taxes and regulations that apply. They also provide education and support in marketing, renovation and redecorating, and selecting rental properties for purchase.

     Kate Surbaugh and her husband own the largest rental agency on Lake Superior’s north shore, Cascade Vacation Rentals LLC, and Cascade Property Sales LLC in Lutsen, Minnesota. Most of her owners live in the Twin Cities five hours away, and enjoy peace of mind knowing that Surbaugh’s staff is on call for renter problems or emergencies 24 hours a day, seven days a week.

     “The first question owners ask is how we screen guests,” Surbaugh says, “—but damage is actually our least common problem.” Vacationers are looking for cozy cabins on Minnesota’s northern lakes, and Surbaugh encourages owners to put out family photos and guest books. The Cascade Vacation Rentals website emphasizes all properties are family-owned homes.

     “I feel like we’re running a B&B without the breakfast,” Joan Talmadge of WeNeedaVacation.com says of renting their own high-end home in East Orleans on Cape Cod. “I always have conversations with our tenants, and leave a bottle of wine and basket of menus from local restaurants.” Owners need to do their homework if they want to manage their own rental business, she cautions. “If you can’t put in the time, then a realtor is the way to go.”