November 3, 2013 in Business

Vacation rental owners stand to benefit from new options

Tom Kelly
 

The biggest push-back against purchasing space for a listing on vacation rental sites – especially for owners with a short rental season or a single event, such as golf tournament, bowl game or roadrace – has been the up-front annual fee.

Why pay the median price of $349 for an annual listing if you only have a week or two of rental time to offer?

While word-of-mouth referrals fill thousands of short-term vacancies every year, HomeAway recently took a step to corral a bigger piece of the vacation rental pie by offering owners a per booking (“pay for performance”) alternative, charging 10 percent of the total cost of the rental instead of an annual up-front fee.

“Our research tells us that many owners who don’t subscribe to our sites are concerned about the time commitment required to rent their property,” said Brian Sharples, HomeAway’s chief executive officer. “With the launch of the referral network and pay-per-booking, it’s never been more attractive to work with HomeAway to turn your second home into a source of additional income.”

HomeAway, the parent company of VRBO.com and Vacationrentals.com, has 775,000 paid listings in 171 countries under its umbrella. HomeAway plans to offer the per-booking option, along with a full-service option, on HomeAway.com exclusively before possibly making both services available on affiliate sites. The additional services option starts at 20 percent of the cost of the booking period and goes up from there depending upon the type and number of services chosen. Think basic meal plus additional costs for the side dishes.

Sharples said he believes the per-booking option will allow owners who are skittish about the annual fee to “test drive” the sites for performance and efficiency. The new program is promoted specifically to owners with six or fewer weeks available for rental, yet the numbers become comparable at 3.5 weeks for rentals offered at $1,000 per week.

For example, if your two-bedroom cabin at the lake has been renting for $1,000 per week and four families take the month of July for a total of $4,000, HomeAway would receive $400 on the per-booking program – or $51 more than its annual fee. In that case, the annual fee begins to look even more attractive.

According to a company press release, HomeAway said per booking will also benefit large property management companies that have historically listed only a subset of properties due to cash constraints that preclude them from paying subscription fees in advance for all of their properties.

In conjunction with this pay-for-performance model, HomeAway also rolled out the Professional Referral Network, which is a first-of-its kind directory connecting new HomeAway.com owners to professional property management services during the sign-up process. The option can be helpful to owners who do not have the time and patience to field inquiries and calls from potential applicants, replace lost keys or worry about a dripping faucet in the middle of the night. An efficient property manager can be a boon –and a tax deduction – for owners who rent out vacation properties as a full-time business.

If you have a property with several open weeks and have decided to give renting a try, the next question becomes should you treat the property as a full-time rental or a part-time venture? And, what does it take to break even?

Here’s a basic rule of thumb: If you buy in a four-season resort with a conventional down payment, then rent the property for 17 weeks a year, the revenue you collect usually can pay your annual mortgage costs plus all other associated rental bills.

If you deem a second home as a full-time rental property, you can deduct up to $25,000 of rental expenses in excess of rental income. On the part-time side of the ledger, if you rent your second home (or even your primary residence) for fewer than 15 days a year, the rental income is tax-free as long as your personal use days exceed 14.

HomeAway’s latest move is aimed at both long-term and short-term rental owners. While some might balk at the costs for the additional services option, you can never put a price on what some individuals would pay for not dealing with the public.


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