Use caution with rental cabins

How do you handle the family cabin as a rental?

Howard Craft is one of four adult children who inherited a lakeside cabin from their parents. Every year, the kids gather for a dinner meeting to decide the dates when the individual families will use the popular getaway, assign cleanup chores and discuss possible improvements to the aging structure.

For the first time since the parents stopped their summer residency at the lake place, none of the four children could schedule vacation time to take advantage of the family cabin. Two of the siblings had moved out of the area to take new jobs and could not justify the costs to return to the North Cascades for vacation. Another, Howard, had accepted a teaching job in New Zealand for a semester, and the fourth felt pinched by the economy and decided to postpone any vacation time.

“We didn’t know how to best go about renting the place,” Craft said. “We weren’t real eager about paying a property management company, and there really wasn’t one company specializing in the area.

“It turned out that when we got the word out that our cabin might be available, most of the available time was requested by people we had known for years at the lake. They had family visiting from out of town or had friends they wanted to host but did not have enough room for them. It actually turned out great because we were able to rent to people we knew – people who would take care and look out for us.”

The situation is not uncommon. Most second homeowners are surprised by the number of friends and neighbors who would rent given the chance. They also are surprised with how easily potential renters can be found on the Internet. But one nagging thought continues to cloud the prospects: What if I get a bad set of renters and they trash my beloved getaway haven?

According to Christine Karpinski, author of “How to Rent Vacation Properties by Owner,” the key to worry-free renting is to have a system in place that allows you to properly screen your guests long before they settle in for their stay.

“Much like employers interview job applicants and worried parents scrutinize new baby sitters, you must properly vet your potential renters,” Karpinski said. “However, very rarely have I run in to a problem with one of my renters. If you use common sense and ask the right questions, most of the time vacation rentals work out just fine.”

Karpinski suggests talking with – not just e-mailing – renters on the phone before taking their booking. By asking the right questions, you’ll be able to discern quite a bit about your guests. A few questions to ask:

•What’s the purpose of your trip?

•Have you stayed in a vacation rental before?

•How many adults and how many children will be staying?

•What attractions are you looking to take in?

“It’s amazing how much information about a person you can glean from a short phone conversation,” Karpinski said. “Not only will the answers to these questions provide you with valuable information about your potential renter’s plans, but they will also get her talking. I know from my own experience that these questions can ease people into a conversation with you.

“And that’s how you find out what you really need to know. You might discover you really like her and will gladly rent to her, or she might reveal something that sets off a red flag. These conversations should be a set-in-stone part of your rental process.”

If you are wondering about tax reporting, the four Craft families receiving a cash reimbursement are required to report the income to the IRS. Owners can derive tax-free income from renting a home or getaway, provided it is rented out for 15 days or fewer and they don’t claim any of the tax deductions typically allowed on rental property, such as for depreciation or maintenance. Once the 15-day threshold is reached, a different set of taxes laws comes into play.

“Personally, I am just glad somebody is going to be using it,” Howard said. “It’s too great a place to have it just sit there vacant all summer.”