An old friend of mine who owns and operates a small development company showed up in town for a weekend event. We blocked out some time to revisit the old days and what was next for his living and work future. Like me, his four children had grown and gone.
“If I were to do it again,” Vince said, “I probably would not have focused so much on commercial buildings. They are difficult to cash-flow because of tenant demands and tenant turnover. They all expect so much in improvements now when they move in. I probably would have bought some nice vacation properties and rented them out. Maybe even moved into one.”
The vacation rental industry continues to thrive. More and more owners are operating small vacation home businesses – especially in retirement. They are finding that even in a down economy, families often find a way to get away. The “staycation” philosophy rarely lasts longer than one year; people tend to invest in family vacations and reunions consistently – even if for shorter periods of time.
Helpful tools that enable vacation owners to run their businesses more efficiently also are on becoming more prevelant. For example, MyLodgeTax, operated by Seattle-based Avalara, specializes in gathering and paying city, county and state taxes for homes throughout the country.
“My brother and I bought a three-bedroom condo in Vail in 1999 and decided to rent it out to defray the costs,” said Rob Stephens, who started MyLodgeTax as HotSpot. “We checked out many of the property management models at the time and each required a commission of about 40 or 50%. We decided to list on the VRBO website for something like $119 and renting it out that way worked great.”
While exploring ways to best execute scheduling and cleaning, the brothers discovered three different tax forms that needed to be registered and paid.
“We were both CPAs and we began to wonder if other rental property owners understood what they needed to do to be in compliance,” Stephens said. “That discovery really provided the basis for our business model.”
MyLodgeTax charges about $20 a month per property. Its basic services:
Obtain any required business or tax licenses based on location. If an owner has not collected these taxes in the past or just purchased a property, MyLodgeTax obtains the proper registration and license from the appropriate tax jurisdictions.
Notification of the exact tax rate needed to charge renters. Based on the legal address of your vacation property, the company determines the applicable tax jurisdictions, tax rate and filing frequency. It also keeps owners informed of any tax rate or rule changes.
Provide reminders. The system tracks taxes that are due and automatically sends an email when it is time to report rental activity and file tax returns.
Files monthly/quarterly tax returns and remits payments on an owner’s behalf. Customized software computes and collects the taxes due directly from an owner’s bank account. The company files tax returns electronically or prepares and files the tax return forms and remits payment of the taxes on the owner’s behalf.
Record keeping. Retains copies of all tax returns filed. A history of all reported revenue, tax payments and tax calculations are posted to a personal account.
Correspondence. Handles any correspondence with the tax jurisdictions. If an owner receives a letter, notice or any correspondence from a tax jurisdiction, MyLodgeTax provides a response.
Another vacation property service is Walnut Creek, California-based Yapstone, the parent company of RentPayment.com, which molded its electronic-payment program developed for apartments and commercial properties to fit the vacation rental industry.
RentPayment allows owners to accept credit/debit cards and electronic checks, as well as convert paper checks to electronic payments. The group options the company has set up with rental sites like HomeAway (parent of VRBO) can be far less expensive than if an owner were to go it alone. It boasts a fully operational expense platform with an electronic check option.
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