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Tips to Turn Your Second Home into a Source of Income

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RISMEDIA, September 18, 2010—After a hot summer, it’s a relief to step outside to find that autumn breezes have finally arrived. As a second homeowner, you can hardly wait to bask in those calm winds at your beach cottage or take in the views of changing leaves around your woodsy cabin. You’re ready for fall, all right, and you’re not the only one. It seems the whole recession-weary world is longing for a getaway—and you’re in the enviable position of being able to make money off their vacation fever.

“So many second homeowners have a potential source of income just sitting there,” says Christine Karpinski, director of Owner Community for HomeAway, Inc. and author of How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment. “It doesn’t make good economic sense.”

Karpinski offers the following tips to successfully turn your second home into a source of income.

Make sure you’re in compliance with all regulations. Depending on where your home is located, it could be subject to any number of laws and regulations. Get familiar with state, county, and city zoning laws for short-term rentals. Determine whether you are required to obtain a business license before renting out your home. Investigate any homeowners’ association policies and regulations and familiarize yourself with any health and safety codes the market mandates. Finally, check with the sales tax office in your county about its laws regarding sales tax you are obliged to pay.

Decide whether you’ll do it yourself or choose a property management company. While Karpinski strongly suggests that you consider renting by owner, she knows it’s not for everyone. If you’re not willing or able to be a do-it-yourselfer, you’ll need to hire a property management company. Just shop around and ask plenty of questions before you sign on the dotted line. Will they oversee maintenance issues? Is advertising included? Will they interview potential guests or guarantee a certain number of bookings?

Hire help you can depend on. Hiring a housekeeper and maintenance staff should be a top priority once you decide to rent out your vacation home. (Unless, that is, you live nearby and plan to do all the work yourself). These are the people you will trust with the quality of service and comfort that your guests receive—don’t make this decision lightly, urges Karpinski.

Develop a marketing plan. If you are renting your home for the first time, it can be a daunting task to approach the marketing of your property. Find your target demographic for the area. When you are visiting the area, pay attention to the people renting the properties around yours. How old are they? What is their familial status? Income bracket? Education level? Once you have answered these questions, determine where your guests are from. Do they travel often? Do they travel internationally? Do they fly or drive to your destination? Finally, observe their behavior. What do they do during their leisure time? What is the reason for their travel? What is their preferred method of payment?

Get your house rental-ready. Your vacation home may suit your tastes and needs just fine, but look at it from a potential guest’s perspective before opening the door to renters. Rid the home of clutter and personal effects, and take stock of the amenities you will need for each room. For example, make sure the kitchen is stocked with dishes and cookware, and that you have plenty of linens for all of the beds. Remember that these basics are only the beginning, says Karpinski.

Make sure your price is right. In order to remain competitive in today’s market, you have to know what other properties in your area are charging. Look online for weekly and nightly rates offered for neighboring properties of similar size and location that offer amenities comparable to your own. Check on local hotel rates (they are your competition too) to make sure your pricing is competitive. Research school schedules and holidays for the upcoming year to determine your peak season and adjust your rates accordingly.

Set up a system for screening potential guests. Screening your guests is a cost-free insurance policy against loss, so figure out a method you feel comfortable with. For example, it’s entirely appropriate to schedule phone conversations with potential renters to ask them questions about the length of their stay, the number of people in their party, and whether or not they will be bringing children or pets. Let them know that the property is your second home so that they will feel encouraged to feel comfortable and to take good care of it during their stay.

Be prepared to handle complaints. No matter how good your intentions are and how hard you work, at some point something will go wrong. You will have to deal with a guest complaint. And just like in any other business, the customer is always right. When a problem comes up, apologize sincerely and take immediate action to rectify the problem. After all, your guests are paying for their time in your home and it’s not fair that they waste it waiting for a water heater to be fixed or a mess to be cleaned.

Resolve to keep it clean. The number one complaint that most renters have is that a rental property is dirty and unkempt. That’s why you should make sure that cleanliness is your top priority. Establish a clear check-in policy for your guests to inspect the home upon arrival and to report any problems immediately to the housekeeping staff. Make their job easier by creating a stock of extra linens and cleaning supplies for a smooth transition between guest stays. If guests can count on a clean and comfortable place to stay, they will return to your property year after year.

Educate yourself. The really good news is that there is plenty of information and support out there to help you get started renting and perfect the process as you go along. HomeAway’s Owner Community (www.OwnerCommunity.com) is an educational mother lode for newbies and seasoned pros alike, providing access to a wealth of free and inexpensive resources such as articles, seminars, podcasts, webinars, sample contracts, checklists and much more.

Don’t just ask for feedback. Act on it. The only way to judge the success of your rental property is to ask the people who use it. Leave comment cards or a guest book in the home and encourage your guests to leave feedback on their stay. Don’t leave it open-ended. Ask specific questions: What was your favorite part of your vacation? What didn’t you enjoy? Was anything missing in the home that you needed during your stay? At the end of each season, evaluate the feedback you have received and make changes for the following year. Returning guests will be delighted by your attention to detail regarding their comfort and satisfaction.

It may help to look at your foray into renting as a trial period, advises Karpinski. “Make up your mind that you’re going to try it for a year,” she says. “If at the end of the year you don’t like it, take your home off the market. If you’re like most people, you’ll find that not only will you quickly get the hang of renting, it’s actually fun. You’ll meet some great people along the way—and the rental income will make you feel even better about your great investment.”

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