Weighing your Retirement and Vacation Options? Consider the “Vacation Home.”
In this economy families are looking for cost saving ideas for family vacations. Combine this with the “overly-stressed” lifestyles many Mom’s and Dad’s have due to work schedules and it’s clear why “vacation rentals” are surging in popularity.
What is a “Vacation Rental?”
It’s a rental home, or condo, generally rented by the day (usually a 3-4 day minimum), week or month, and equipped with all the comforts of home. Staying in a “real home” with kitchens, washer-dryers, TV’s with DVD players for movie nights... are the FAVORITE way to travel for many families... especially Europeans and Canadians.
Having a kitchen available is not only a great way to save hundreds, or thousands, in restaurant tabs, with more and more people watching their health, it’s also a way to vacation without blowing your families nutritional “rules.” Some vacation homes or condos might even have BBQ grills and there is something really special about enjoying a home-cooked meal with your toes dug into the sand, while watching the waves crash on the beach.
Vacation homes are a favorite for family reunions too. My Mother’s side of the family rents a 3-bedroom vacation home on the beach every summer for themselves and the Grandparents. When more family members (two cousins and their brood) are coming also... they rent out 3 Condos in a high-rise instead, letting the teenagers have their own, while the Grandparents bunk together as well. The cost for renting these multi-room homes and apartments means more square footage, often at less cost, than many hotels can provide. Add in the cost savings on food too and you make this a very smart budget choice.
So... Do you want a vacation home or a vacation apartment or condo?
Probably depends on what your family enjoys doing and the location you are looking at. Obviously if you have a noisy bunch, you won’t worry about disturbing the neighbors if you get a home. Also, if you like backyard activities, that is a consideration as well. If you’re looking at homes, ask what they come equipped with (bib grills, horseshoes or other yard games, bicycles, etc).
Apartments and condos have their appeal as well. If they are located on a good piece of land, or right on the beach, you’ve still got room for outside endeavors, and you might have a lot more activities and perks.
Veronica Patterson is the "concierge" at Moontide vacation rentals on New Smyrna Beach Florida, (just South of Daytona Beach) and points out their advantages; such as other amenities that are very much like a hotel...
“At Moontide we have the comfort of home, with the fun of a hotel. Guests can use the 'catering kitchen' in our Community Room to assemble a feast for a family reunion (or wedding reception) while the kids play the board games or watch movies. We also have tennis courts, shuffle-board and, during busy season, organized activities for the guests and residents.”
Keep the location of your vacation rental in mind. If you are staying a week or more, it’s important it’s located close to sightseeing spots so you can make it your “base of operations” for exploring the area.
Veronica is somewhat of a Florida history buff, so some of the perks Moontide guests get are great ideas for fun things to see and do that are off the “tourist radar.” New Smyrna is the closest Florida beach to Orlando as well as being just South of historic St. Augustine, and North of NASA and Cape Canaveral, so for a Florida vacation, it’s a prime destination and one that keeps their guests coming back again and again.
But what if you are looking to vacation a LOT? Perhaps you’ve even thought about buying a second, vacation home?
That’s a great idea... as owning your own vacation home, or apartment, and renting out when you aren’t using it, is a great way to subsidize your own get-always and can potentially produce an additional revenue stream for you.
Al Brooke is a tax consultant in New Smyrna Beach, Florida, and an owner of a vacation apartment himself. He points out that... "Financially speaking, advantages of ownership flow to appreciation and leverage as they always have in real estate. There can be some tax benefits as well, using either a "second home" position, or treating the property as a vacation rental property. As always, consult a professional on your individual situation."
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Years ago, I had a friend who’s parents bought a vacation type condo for him to stay in while he was attending school at Embry Riddle. After he graduated, his parents kept the condo for their own vacations and rented it out when not using it. Their “end game” was to make it their retirement home.
If you go that route, you also have a choice to make... home, or condo?
Some of the same considerations apply that we already covered, plus an additional one. With a vacation home you will want to research a real estate management company (and their rates), as well as lining up a cleaning company, and perhaps a pool company, to take care of prepping it for the next group of guests. You also need to insure that the home is being purchased in an area that allows short term rentals, and one were there is not a danger the rules will change in the future.
With a condo type apartment, in a building that has regular rentals, you have a management and maintenance staff on premises, something that could be very important if you have a busy lifestyle at home and aren’t available on short notice to deal with emergencies that might come up.
Real estate professional, Renee Stimson, often works with buyers who are looking for a vacation home, or vacation rental property, and says that... "You want to do your “homework” on your overall costs to maintain the property, insurance needed, tax advantages and rules, and rental income possibilities. If there is onsite management, ask if they can show you prior occupancy rates."
Other tips from Forbes magazine includes that while, “You can make a tidy income owning second homes and renting them out.” Homework is key and the amount of effort you put in can make all the difference in the world in whether you break even or make a profit.
For instance, many people find that positive cash flow is very easy in some areas, and more challenging in others, but in either case, there are lots of ways YOU can assist in “marketing” your rental. For instance, social media and the internet allows you to reach out to people all over the world and, if your rental is an area that is more “seasonal” for the US market, you can market it in countries that have a different vacation schedule than ours.
How the rental income is "split" will vary. Again, Al Brooke weighs in... "With the units at Moontide in New Smyrna Beach, the rental income is divided between a commission (rates vary significantly) and an owner's share. Moontide owners pay a commission of 12% or 7% depending on how the vacationer was "acquired". The owner keeps the lion's share of the income."
"Owners can find their own tenants through many rental sites, the largest of which is VRBO and Moontide charges a commission of only 7% if an owner finds the renter, negotiates a final price, and then refers the renter to Moontide only for the booking, not further negotiation."
Depending on the management company you’re utilizing, they may have some marketing tools already in place. This is something to add to your “checklist” of questions to ask.
70% of all buyers at Moontide have been former vacationers and we would guess that is true of many types of vacation ownership destinations around the country. Of course, it's recommended that you try out any destination you are thinking of "investing" your time and money in, to be sure it's a good fit for your own use.
Whether you are looking for a cost effective way to vacation ... or have a strategy to subsidize vacations or retirement plans, Vacation Rentals are surely an option to consider.
For more info: Moontide Vacation Rentals
Renee Stimson, NSB Real Estate
New Smyrna Beach, FL
