What to expect when you have your vacation home in a rental program

Feb 6, 2007 | No Responses

What can I expect to make in rental income?

It all depends.  How much is it rented and when, and how much will you use it yourself?    Additionally, the company that manages it takes a percentage of the rentals, ranging from 35% to 50% plus some expenses.  The more business you can help to create for them the more money you will make.  We have average and projected figures from several management companies we will be happy to supply to you.

Do I need a clubhouse if I want to put the property on a rental program?

You do not need a fully equipped clubhouse, but most people ask for hot tubs at least.  Having access to a hot tub and/or clubhouse will improve your rental income by 20% to 50%, depending on which management company you talk to and if the hot tub is communal or private.  If rental income is important to you I would not buy a property without access to a hot tub.

What are the tax consequences if I use my home as a rental?

The IRS has specific rules regarding what expenses are deductible and how many days a year you can rent your property without having to declare the income. (It is not many!) Please check with your financial advisor as your situation is unique to you and will be different from mine and your friends and neighbors.

Management companies and what they charge

In our area, management companies charge anywhere from 35% to 50% for short term rental services.  For that fee they will advertise and book the property, clean and stock it and track the inventory.  There are often extra charges for various things, so check with the companies to find out what extras they charge for.  If you use the condo yourself they will usually charge you for cleaning it.  You may be able to help book it by putting it on the internet and referring the customers to the management company.  Many people today don’t use a management company.  They book it themselves using the internet and arrange for a cleaning company to clean it.  That may be difficult to do if you are very far away, but if you are relatively close and have a good network to draw from for rentals, you may be able to do it.  There is an excellent book on the subject named “Road Map to your Vacation Property Dream” by Christopher Cain.  There are quotes from his book on my website and a link to his website.  If you are buying through us and let us know you are planning to rent, we will give you a copy of it.

Long term rentals (6 months or more)  are less expensive, but then you lose the opportunity to use the unit yourself.  Management companies typically charge 15-20% to manage a long term rental. The wear and tear on the property may be significantly higher.