Who’s Minding Your Business?

The Pros & Cons of an Owner Managed Vacation Rental

shutterstock_65009158I receive many calls throughout the year from new property owners asking about our services.  Many are researching the pros and cons of professional vacation rental management verses listing and managing their properties themselves.  There are many things to consider … the biggest … how much spare time they have to spend managing their property, particularly if they do not live in the area and whether they have a reliable, trustworthy person they can call upon 24 hours a day.  The primary issues to consider are cleaning, maintenance, tenant assistance, emergencies, overseeing the property while occupied and city/state laws and compliance.

As a vacation rental manager for over eighteen years, I can tell you from personal experience that there is much more than a 50/50 chance that issues will arise during a guest’s stay.  Even the most meticulously clean, well maintained property will have the occasional issue.  When a guest calls, the “manager” of the property MUST answer.  Most of the time the call will be a minor issue; the guest cannot find a needed item or the guest cannot figure out how to use the cable TV remote, etc.   Here are just a few of the more serious scenarios to consider … and all are true stories.

A tenant calls in a panic to report a bad leak is flooding your property or an overflowing toilet has flood the hall carpet.  These kinds of emergencies must be addressed immediately and if you are an owner managing your property … do you carry your cell phone with you all the time?  Sleep with your cell phone by the bed?  You must!  If you do not hear the phone at midnight because it is in another room …. you can imagine how upset the tenant will be in the morning when you finally call them back … they may even have gone to a hotel and expect you to reimburse them for the night’s stay as well as their inconvenience.   An owner will also be worried about the damage to their property.  Who should they call to take care of the repair and damage?  What if the guest cannot get the garage door open and they end up calling a taxi … they are going to expect reimbursement.  Do you have someone reliable you can call 24 hours a day, 7 days a week to assist with emergencies and make good, sound decisions?

I have personal experience with owners who have set up their cleaners to not only clean and maintain their property but also handle 24 hour emergency services.  This does not always work out well in an emergency situation as in one case where the owner could not reach the cleaners on Thanksgiving Day to ask for assistance with an emergency at their vacation property.  The guests called the owner to report that the breaker would not flip back on and they had a stuffed turkey in the oven that they could not cook.  The cleaners were at a family gathering and did not hear the phone.  With no assistance from the owner, the rental guests tried to use a heavy duty extension cord they found in the garage to run the electricity to another outlet in the home.  Thank goodness this did not work… it could have been disastrous to the guests and the property.  The guests ended up taking their family to a restaurant for Thanksgiving dinner and the owner not only paid for their entire meal but also for the turkey and fixings that went unused.

An even more disturbing occurrence, and I have two owners who experienced this scenario prior to joining Vacation Rentals of the Desert, was finding that the designated cleaner or friend that the owner arranged to manage the property in their absence, rented out the property unbeknownst to the owner and pocketed the rental fees.  Unfortunately I have heard this story over and over again.  Or … and this happens even more often … the designated “manager” allows their friends or family to stay at the property without informing the owner.

Who’s minding your business? 

The above are just a few stories associated with absentee ownership and every vacation rental owner contemplating owner management verses professional local management should be aware and weigh the pros and cons.  Professional management will definitely cost you a percentage of your rental fees … but in the long run, is the peace of mind and cost of your time worth the price?

Following are some of the other benefits that come along with professional “local” vacation rental management.  These are the benefits we offer at Vacation Rentals of the Desert.  Most of these benefits apply to all professional companies however this is a good check-list to use when interviewing for a management company that suits you and your property.

24/7:      We manage vacation rentals 24/7.  We respond quickly and professionally to guest inquires, vacationing guests and homeowners.  Also, we respond to emergencies 24 hours a day.  We provide all guests with our after-hours emergency number and we provide a guest book with important information about each particular property.

Guest Services:  From reservation inquires to booking; from check-in to repair calls; from concierge services to housekeeping and inspections; we take care of guests and vacation properties 24 hours a day.

Marketing:    Who knows better how to market your vacation home than a professional manager?  Who has more marketing dollars to spend on advertising?  And strength in numbers?  We live here, we participate in our communities, and we are part of the tourism efforts.  Local events, holidays, and customer base of thousands of guests who often return year after year as repeat customers.

Internet Marketing:    We know Internet Marketing!  We know Search Engine Optimization!  Our website is attractive, easy to use and up-to-date.  We know how to help guests find your property online, easily, when they are planning a vacation in the area.  We manage email marketing to past guests, social media marketing, listing sites and a variety of other internet marketing strategies that will lead browsers to our website and to book our properties.

Promotions:    Print, radio, internet, travel bureaus, chambers of commerce, email blasts and Facebook, pre-arrival and post-vacation emails, guest surveys, low-season promotions, rental brochures and rack cards …. We are hospitality experts who promote the area and your property!

Reservations Made Easy:    In person, online or on the phone, our reservationists know your property and know how to promote it to inquiring guests.  Whether paying by check or credit card, Vacation Rentals of the Desert makes it easy for guests to book your property in a secure, professional environment.  Rental and refund policies are clear and professional.  We absorb the credit card fees into the cost of doing business … a savings to our homeowners.

Additional Services:    Travel insurance, additional housekeeping services, golf cart rentals, linen services and much, much more … professional managers offer guests everything they need for a great vacation.

Housekeeping & Inspections:    We employ trained, skilled housekeepers who keep your vacation rental home cleaned to industry and sanitation standards.  Inspectors are in your property before and after every guest, ensuring consistency, quality and making sure that everything is in order.

Maintenance:    We make sure all properties are in great shape at all times; are clean and in good repair.  We offer professional maintenance services with a timely response to maintenance problems and after-hours requests for emergency services 24 hours a day, 7 days a week.  We use reliable vendors who are qualified to handle practically any situation, at fair prices.  We offer guest plans to cover against accidental breakage/damage.

Money:    As professionals, we maximize the return on your investment property or second home, earning you money when you aren’t using it.  Professional marketing and excellent guest services earn guests’ loyalty and repeat visits.

Records:    We keep the records … from revenues to repairs; from lodging tax to 1099s … you’ll receive professional accounting of what is happening at your property.

Communication:    We let you know what’s happening … from property repairs and marketing initiatives to local issues and industry standards.  We know the vacation rental industry and we’ll keep you informed.

Security:    As professional managers, we are the constant “eyes and ears” for your property.  Instead of sitting empty year-round, vacation homes are lived in, checked and maintained during tenant occupancy.  We meet your guests and we’re available if a problem arises.

Accountability:    As your vacation rental manager, we are primarily accountable to you, the property owner.  All guests are required to sign a detailed rental agreement and review the policies.  We primarily rent to families or adults and do not handle “party houses.”  We do everything we can to protect your home and your investment and to be good neighbors.

Local Connections:    We maintain relationships with HOAs as well as local city officials and agencies … from tourism boards to the police, city compliance officers, City Councils and Chambers.  We are constantly making sure our homeowners views are taken into consideration and that their vacation rental property is viewed favorably.

Good Neighbors:    As professional vacation rental managers, we understand the importance of being good neighbors.  We maintain connections to property owner’s associations, your neighbors and neighborhoods; we keep guests informed about subdivision rules as well as local laws and ordinances.  We patrol our properties in order to enforce policies that do not allow overcrowding of your home, house parties and parking violations.

Local Advocacy:    Professional vacation rental management keeps homeowners’ best interest in mind at all times.  We advocate for clean, attractive communities and we participate in our chamber and tourism boards, planning commissions and other local and tourism related organizations.  We sponsor and volunteer for location initiatives that promote the positive impact from tourism.

Consumer Confidence:    Booking a professional managed vacation rental through a member of the VRMA (Vacation Rental Managers Association) is a seamless process, as all members are held to the highest standard, and committed to quality hospitality, professionalism and industry excellence.  Vacation Rentals of the Desert is a member of the VRMA and the owner serves on the Communication Board.

Time:    Vacation Rentals of the Desert will save homeowners time, worry and simplify the business aspects of vacation rental ownership!  We just about do it all! 

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It Is Very Expensive to Be Cheap!

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Recently we added a new condominium to our rental program.  It’s a gorgeous, high-end vacation home which was completely remodeled, updated and decorated about this time last year.  My new clients purchased this condo a few months ago.  The previous owners who had remodeled the property, rented it through VRBO last season.  The condo is located at Rancho Las Palmas Country Club in Rancho Mirage.  Vacation Rentals of the Desert represents approximately 82 properties in this particular country club, and my personal experience with Rancho Las Palmas goes back to the 1980s and has spanned over thousands of rental guests.  So it was not a surprise when one of our past guests called to say she had rented this particular property directly from the owner for a three month stay.  She could not get assistance from the owner with her struggles to hook up to the internet.  She was hoping we could help her as we had in the past when she had rented through our company.   Of course we went to her rescue … she was, and would again in the future be, an excellent tenant.

We sent an employee who is internet savvy and the guest’s laptop was up and running in no time.  After our employee returned to the office, he told us that it was a fantastic property but the guest had shared a few complaints.  She had pointed out that there were no blinds in the living room and kitchen which made her feel like she was living in a fish bowl.  I found this odd since the living room faced a busy fairway and was clearly visible to street traffic as well.  The owners had hung beautiful curtain “accents” on the sides of the windows, but they could not be pulled closed for privacy.  Her second issue was the lack of kitchen supplies … cooking and serving utensils and cookware, which was very frustrating since she liked to cook and entertain.   Even though she liked the property, she said that she would not rent it again.

Season ended and our business slowed.  Over the summer this gorgeous property was listed and quickly sold.  The buyers where friends of an owner on our vacation rental program.  We were recommended, introduced and fortunate to add this fantastic property to our rental program.  In conversations with the new owners, I mentioned the issues of the previous guests.  The new owners were quick to address these issues.  They thoroughly went through our “minimum requirements” worksheet and purchased all the missing kitchen and linen items, and even added more amenities.  They asked me to contact our window treatment company for recommendations and quotes and settled on motorized blinds operated by remote control, and even changed the inexpensive faux blinds in the bedrooms to beautiful wood blinds.  In addition, they replaced the tattered awning over the back patio and are currently gathering quotes on replacing the aged HVAC unit.  I love this owner!

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The point I am trying to make in this article is that functionality is key to a successful rental property.  Just because the vacation home looks like it’s right out of the pages of House Beautiful, does not necessarily mean it is comfortable, functional or livable.  I have mentioned this point in previous posts.  Decorator lamps look beautiful, but do they give off adequate light for reading?  A big screen TV mounted over the fireplace looks perfect in the great room, but is it mounted so high that you have a stiff neck after watching the latest episode of NCIS?

I have been fortunate this summer.  I have added several properties to our vacation rental program with owners who are heeding my advice and being mindful of the comforts of their future guests.  I met with Tom and Carolyn yesterday to go over repairs and updates to their property.   A first time vacation rental home, their condominium has been in the family for many, many years.  It is a much loved second home filled with memories of family holidays and celebrations spanning three generations.  As happens to so many families who own second homes; children and grandchildren grow up and busy lives and commitments drastically limited their ability to visit.   Tom and Carolyn do not wish to sell the family home, but instead, hope to generate a little income by sharing it with vacationing guests.  The condo is … or should I say “was” dated.   Over the past couple of months they have updated furnishings, art and décor, linens, bedding, kitchen supplies, window coverings, TVs, patio furnishings and the BBQ.  The property I walked into yesterday was entirely a different home than the one I viewed when meeting Tom and Carolyn two months ago.  Not only did they follow our “minimum requirement” worksheet but they kept in mind that it would be their family’s vacation home for many years to come, so they selected décor and supplies based on quality and not on cost or trying to cut corners.  They clearly understood that spending a few dollars more on quality would not only be recognized and appreciated by guests, but would probably mean less repairs or replacement costs in the future.  These “well put together” properties will almost always generate more repeat tenants … and good repeat tenants are every owner’s goal.  I love working with these kind of owners!

Our handyman Alex, made a statement several years ago that I have repeated often … “It is very expensive to be cheap.”  This is oh so true.  An example would be the faux wood blinds mentioned above in our new Rancho Las Palmas condo.  The previous owners had bought and hung inexpensive “out of the box” blinds in the bedrooms about a year ago.  They lasted one rental season.  When raised they bowed badly and on one, the wand to open the blinds had snapped off.  This was probably frustrating for rental guests.  For a slightly higher cost, the new substantial, wood blinds were hung and will probably last for the next ten years.  This same scenario applies to almost everything in life … “Do it right the first time or you’ll end up doing it over and over again.”  Inexpensive/cheap does not work in a vacation home that most likely will go through a lot of wear and tear.  Quality is key … which does not always mean “expensive.”  I never recommend cutting corners … it almost always costs you more in the long run.

Because of blinds and a few kitchen supplies, the previous owners of the “House Beautiful” Rancho Las Palmas condo, lost a three month repeat guest and probably received a bad review on VRBO.  If the guest told us about how unhappy she was, you can bet she told her friends as well, who also rent at Rancho Las Palmas.  It’s a small community and word travels fast.  They say “word of mouth is the best advertising” … adversely, it can destroy you.  Was this a case of “expensive to be cheap” or was it a costly oversight?  To a paying guest … it always appears to be lack of care.  Now that the “livability” has been improved, and with the level of attention and care from the new owner, I’m certain this condominium will be one of our most popular vacation homes and having had a guest already … the first review was outstanding!

A very cool side story to this post.  When visiting Tom and Carolyn yesterday, I learned that they had recently purchased a historic 500 year old estate in the beautiful countryside village of Flavigny-Sur-Ozerain, France.  The purchase and renovations are feature in an upcoming episode of “House Hunters International, Renovations” on my favorite cable network HGTV.  The airing will be November 22nd at 10 p.m. pacific.  This property looks like it’s right out of the movie “Chocolat.”  It is amazing!  Unfortunately I do not handle properties outside the Palm Springs desert … but the photos I have seen of this property make me wish I did.  If Tom and Carolyn end up listing it as a vacation property, I will share details with you in a future post.

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The Sharing Economy

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This week I am sharing an interesting article published in the VRMA (Vacation Rental Managers Association) Newsletter. Posted August 5, 2014, Consumer protectionReal Estate by Cynthia Flash.  

Keeping in compliance with the various desert city ordinances, state laws and HOA regulations is a full-time job.  Managing vacation rental permits, enforcing ordinance rules and regulations, reporting IRS and state taxes and submitting city T.O.T. (transient occupancy tax), on top of keeping up with the constant changes made to these laws and ordinances, has created a new, full-time position at Vacation Rentals of the Desert.

 

Laws and tax implications of short-term rentals and the new ‘sharing economy’

With all the buzz around Airbnb, HomeAway, VRBO and other short-term home rental services, some homeowners may be wondering if temporary renting is an option for them. Should they rent out their home, a bedroom in their home or their vacation home for some extra cash?

Before lying in that bed, it’s important to understand the legal rules and ramifications that go along with renting to travelers on a short-term basis. It’s not as simple as taking out a craigslist ad and leaving the key under the mat.

Know the (very local) law

Because these private short-stay home rental services are new and emerging, the laws around them are changing too.

“Each city, state, county, long-term property manager or homeowners association can have restrictions on the type and amount of short-term rentals permitted,” said Scott Breon, chief strategy officer for Vacasa, a vacation property management and marketing company headquartered in Portland, Oregon.

“Homeowners associations and long-term housing property managers typically prohibit ‘commercial activity’ and ‘subletting,’ which short-term rentals typically fall under; so they are prohibited in nearly every high-rise building in the United States. Each city and state will have varying regulations governing short-term rentals, with some banning them outright and others limiting the number of nights you can rent.”

For example, he said, Portland outlawed short-term rentals in residential areas while Cannon Beach, Oregon, greatly limits them by letting owners rent them only once every 14 days.

Not only do state, city, neighborhood or building rules vary, but they also change frequently, notes Andrew McConnell, founder of VacationFutures, Inc. For example, New York banned most short-term rentals in 2011 while Florida considered – then rejected – plans for legislation to push short-term rental regulations down to the local level.

Check your resources and know the risks

California-based attorney C. Mario Jaramillo advises homeowners to check these resources to learn about rules governing the jurisdictions of their home locations:

McConnell suggests working with a professional company to rent your home. “Not only will these companies be better positioned to know the law and stay abreast of any changes, but they are typically licensed by the state’s real estate commissions, so will legally be on the hook to do so,” he said.

Chuck Ros, who, with his wife Lori, is renting their Atlanta home while traveling for six months in Europe, suggests having a real estate attorney draw up a lease. “The booking services like Airbnb.com will require property owners to fall under their leaseholder agreement, and if your local legal issues are at odds with their agreement, it’s up to the property owner to identity and act on that,” he said.

Suz Garber, an Airbnb host, said the primary issue she considered prior to listing on Airbnb was guest activity. “Would they trash our place? Would they engage in illegal activities (illicit drugs or sex, etc.)? Would they respect our rights as owners by adhering to what we consider acceptable behavior?

“We were very clear on having written house rules that are posted on the site prior to anyone requesting to stay with us as well as ramifications for not abiding by the rules (i.e., losing the house key will cost you $125. No discussion.). Furthermore, upon arrival, each guest is given a copy of the house rules so there is no confusion or miscommunication as to what is expected from them,” Garber said.

All that income … may be taxed

Rental services like Airbnb generally report to the IRS the rental payments they send to their hosts each year, so the IRS will know you have such rental income and expect you to pay income tax on it, Jaramillo said. However, income tax is only due if the home is rented for more than 14 days. Note that homeowners in California may still be liable for transient occupancy taxes.

Meanwhile, certain rental-related expenses can be deducted, including advertising, credit checks, insurance, cleaning costs, repairs for the rental portion and depreciation for the rental portion.

Ros said his CPA recommends that he maintain a “service calendar” that clearly shows the dates his property is being rented. “The big caveat is that, depending on how much our property is in service in a tax year, we may lose our homeowner’s exemption, which may just be the price we pay for our travel freedom.”

Because tax remittance varies by neighborhood depending on where taxing jurisdictional boundaries are drawn, Ben Edwards, president of the Vacation Rental Managers Association, suggests that property owners hire a professional property manager who can stay abreast of all tax implications.

Bottom line? Despite the popularity of these new short-term rental opportunities, homeowners are advised to complete significant due diligence to be sure they’re protected and following the law before jumping into the rental pool.

Cited from: The laws and tax implications of short-term rentals http://nakedlaw.avvo.com/consumer-protection/laws-tax-implications-short-term-rentals-new-sharing-economy.html#ixzz3Fr6D3LL8

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Advertisemobile!

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If only I could spend every advertising dollar as wisely!

Five years ago I decided to have a mini-wrap done on my Ford Escape.  The nominal cost has brought us a ten-fold return on investment.  I have been honked at and pulled over by interested owners and renters … over and over again.  I have met people at shopping centers, gas stations and even next door neighbors when visiting properties I manage.  I go through business cards and brochures like you wouldn’t believe … and they DO call and mention meeting me through my car advertising.  We have about eight-five properties in one particular gated community and we have been told by many that they thought we had multiple cars because they see Vacation Rentals of the Desert everywhere, all the time.  But nope … it’s just me!  Now that is great advertising!

Every time my husband and I go out of town we take my “advertisemobile,” and yes … I’ve received calls from people who saw us on the freeway or in a city where we were vacationing.

As the owner of the business, the liability is not the same as an employee will have.  You may need to look at the possible liabilities associated with employee cars … but if you are the owner I would highly recommend this type of advertising.   I wish all our advertising decisions could be as successful.

The only down side is that I cannot hide.  It took a bit of time to realize that people were not staring at me but rather, my car.  But I like people … it’s a great way of introducing myself and it’s amazing how many people are interested in vacation rentals or grab a card for a friend.  I have met some wonderful people this way … and many are now our clients.

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