How Vacation Rentals are Improving our Economy

 

WELLS FARGO AND BROTHERS REDEVELOPMENT HELP TWO ELDERLY SISTERS PAINT AND REPAIR THE HOME THEY HAVE LIVED IN FOR 54 YEARS.Over the past several years vacation rentals have contributed significantly in the recovery of our housing market.  When the housing bubble popped in 2008 the nation watched as their home values plummeted, yet the vacation rental industry grew.  Why?  The way I look at it, it was a perfect storm …..

In the summer of 2008 Vacation Rentals of the Desert was booked solid for the height of the upcoming season … February and March 2009, and we were looking for more properties to sign on and accommodate our growing tenant waiting list.  Then the storm hit …. the housing bubble popped, the stock market took a nose-drive and the very heated presidential campaigns were being fought … the sky was falling and we were all going to hell in a hand-basket or at least that is what the media would have us believe.  That fall, through October and November, about 75% of our tenants called to cancel their reservation.

After the dust settled, the stock market steadied, President Obama was sworn into office and everyone realized that life would go on and winters would continue to be cold in the northern states and Canada … our tenants called back to reinstate their reservations.  But … what was surprising (and should not have been unexpected) is that we started receiving calls from owners interested in listing their second homes.  Most of these owners had never intended to rent their family vacation home, but due to the economy they were struggling and looking for options.  For most, selling was impossible.  For many owners the property was upside down or for those who did have equity in their vacation home, the challenge was to find buyers in the sluggish sales market and for those who did find buyers, losing them due to buyers finding that bank loans were unattainable.

There were other options to these struggling home owners such as long term rentals.  But here again there were many challenges such as removing personal belongings and striping the property of all furnishings.  And as real estate sales were down, so were long term rentals.  Monthly rental rates plummeted and it was difficult to find tenants who could pass a credit check.  The reality was that many of the families looking for long term rentals had lost their own homes in the recession.   Other options … foreclosure or short sale.  For most … the vacation rental option was the wisest financial solution.

So … we, as many other vacation management companies, added properties to our rental program.  Some home owners decided to manage their vacation homes by listing them on VRBO or HomeAway.  There were few options back then, VRBO being the largest of the internet based rent by owner (RBO) sites.  This is the time when VRBO really took off and grew, as did other vacation management companies.

As the vacation rental industry grew, the media took notice and vacation rentals were exposed more broadly to the public.  As public awareness grew do did the demand.  Now renters were coming in greater numbers, for longer stays and a wider range of dates.  And over the past several years I have noticed a great increase of local properties purchased expressly to be used as a vacation rental.  Some may call these new owners “investors” and may view “investment” as a singular selfish and money making scheme, but it is not that simple and one must look at the bigger picture.

This may be the best time to purchase a family vacation home or future retirement home … even better if you purchased it two or three years ago … then you property got a significant deal.   Good for you!  In our area, with our short “rental season,” it is almost impossible to generate more money than would just “offset” your carry costs.   The following are perfect examples:

Scenario #1) While visiting the desert (maybe for the first time or tenth time), Mr. and Mrs. Smith walk into a neighboring open house.  They tell the real estate agent they are “just looking” but explain that they have been visiting the desert for X years and would love to own a property but do see that it financially viable.  So … the agent explains how they can purchase a second home and offset cost by doing vacation rentals.  They can save the two months of rental fees they are paying, apply it to the house payments and further offset cost with seasonal rental income.

Scenario #2)  Same as above only Mr. and Mrs. Jones wish to retire in the desert one day.  The real estate agent highlights the same above advantages but also points out that property values are going up and they may save a significant amount of money by getting their foot in the door now while housing prices and interest rates are still low.

Scenario #3) Mr. Green has money he would like to invest.  He chose to purchase a vacation home instead of investing in the stock market.  He may like the idea that he and his family can also enjoy the vacation home when it’s not rented … a more tangible investment than the stock market.

Senior #4) Mr. and Mrs. Johnson have a little money to invest, a bit of free time and are looking for a project.  They find a bank foreclosed home, short sale or beat up property that they can purchase at a steal.  They throw some money into it, some back-breaking TLC, and come out at the other end with a gorgeous vacation rental home that will generate a little income throughout the year and continue to increase in value as the real estate market grows.

I am certain there are many more reasons vacation homes are being purchased but these four examples are the ones I see over and over.  This year I have lost five repeat vacation rental tenants that fall under the first two scenarios.  Some putting the vacation home into our management program, others have privately listed their property on line.  I have picked up four properties that fall under scenario #3, and I am working with several owners in scenario #4.

This is how vacation rentals have helped improve our local housing market and economy.  Other than possibly scenario #4 … these buyers were previously vacation renters and visitors and lived outside our community … they came, they fell in love with the area … and then they purchased.   Sometimes our city officials and year round residents do not see this bigger picture … but as the older literally die out … the above four categories  represent the growing demographic of new buyers.   This has caused some controversy in our desert cities … it has actually caused controversy world-wide in resort communities and heavily populated vacation rental areas.  This is the world we live in now.  It is the result of the perfect storm.  It is the ingenuity and resourcefulness of individuals that has grown the vacation rental industry, contributed toward growing the economy and housing market and even increased property values in many areas.

Let’s look at this last statement … “increased property values.”  I have seen this throughout our area in HUGE numbers.  I am talking about those three or four properties that you see in almost every neighborhood.  The ones that look like they should be torn down.  The landscape and exterior are in a deplorable state.  During your evening walk, you don’t even allow your dog to venture into the yard.  The house windows may be broken or boarded up, the wood fence is leaning and you are almost certain that someone or something is living inside.  You know what these homes have done to your property values!

So Mr. and Mrs. Johnson purchase this home and over the next few months you notice the transformation from eye-sore to shiny new beauty and all the homes in the neighborhood enjoy a boost to their property value.  I have seen this over and over and over and over.  Some of these same property owners who are enjoying the enhancement of their neighborhoods and the increase in their property values are the same people that are standing up against vacation rental properties and so called party houses.  What a shame!  I’m not ready to get on my soap box, but I will say that it seems these days that neighbors have found it easier to throw their neighbor under the bus rather than address the issue straight on.  What a crying shame to have to throw out the barrel of apples instead of picking out the bad ones.  If asked, would you want to go back to the abandoned, foreclosed eye-sore of a property next door?  Doesn’t it make sense to try to figure out a solution rather than pushing these people out and going back to the previous status quo?

So … without actual local statistics and survey numbers, I still feel comfortable in saying that vacation rentals have helped to grow our local economy in the following ways:

1)      Increased sales in the housing market

2)      Improved property values

3)      Continue the “circle of life” by bringing in new residents and property owners

4)      Contributed valuable TOT (transient occupancy tax) to cities

5)      Heavily contribute towards the tourism industry

6)      Supported local business and contractors with home improvements, furnishings

7)      Support maintenance companies such as pool, gardening and cleaning services

8)      Helped cities in marketing the desert to tourists, business and home buyers

9)      Bring in city sales tax from retail, dining and entertainment

I will close with these words … every resident is entitled to “quite enjoyment” of their home.  I would hope that all vacation rental owners be very aware of the type of neighborhood their vacation home is located in (condominium, private home, estate, etc.), and the “tone” of your neighbors (hot-spot for vacation rental complaints, tolerant party spot, etc.), and rent to the demographic that will fit best within your neighborhood.  Look at the “big picture” keeping in mind that a “party” could cause irreparable relations with your neighbors and/or possible restrictions through city ordinance.  Don’t be that bad apple … if you are, not only are your neighbors upset with your “business,” but your fellow vacation rental owners are as anxious to pick you out of the apple barrel and throw you away.  After all … they are trying to be good neighbors and following the rules.

If you are a vacation rental tenant please take note that vacation rental home owners are dealing with city and community issues throughout the world.  If you are planning a party or feel that you may get loud or rowdy … please make sure you talk frankly to the property owner or management company.  Many cities have ordinances that could cause you to be removed from the property if confronted with a city ordinance violation.  There are some properties that may be better for your enjoyment and peace of mind during your stay.  I am certain that no one wants a visit from police, ordinance compliance, the owner or manager during their vacation.  It is a very good idea that you ask whether there is a vacation rental ordinance in the city that you will be visiting and either request a copy of the ordinance or visit the city page to see what limitations there may be as far as age restrictions, occupancy and noise/music restrictions.  Be informed now so you won’t be disappointed later.  And please, please be a good neighbor … act as you would want the vacation rental tenants next to your house, your bedroom window on a Sunday night when you have to get up at 6 a.m. Monday morning to get ready for work … to behave.

Now I will step onto my soap box and say one last thing … perhaps we can rebuild and revitalize our communities … together!

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Photo:  http://www.denverpost.com/ci_23408140/wells-fargo-installs-ramps-repaints-home-elderly-colorado

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