The lure of a vacation home is strong this time of year, especially if you live in a chilly latitude. Imagine having a place at the beach. Swimming, tennis and golf in January! T-shirts instead of overcoats!
But can you make it work financially?
Face the facts: It would be awfully tough to turn a vacation home into a money-maker, even if it's somewhere highly sought by vacation renters. A vacation home is a luxury.
But renting it out when you're not using it can bring in substantial income, cutting your ownership costs dramatically. There are tricky tax questions here, which we'll save for another time. For now, let's look at ways to maximize the income.
Related: Find a Vacation Home for Sale
The first step, of course, comes before buying, when you research the property to find out how much rent it has drawn and how consistently. It will also pay to look at similar properties, to see what they charge, what they offer and find ways to gain an edge.
If the competitors offer 50-inch TVs, maybe you should provide a 55-inch TV -- and add a TV to each bedroom. If competitors offer basic cable service, maybe you should have some premium channels.
Today, many people are never quite free of the office. So think about providing high-speed Internet and Wi-Fi, plus a decent printer/copier/fax/scanner.
Next question: How will you get your renters?
The best option is to combine your own efforts with those of a professional. In many vacation areas, real estate agencies offer rental services, often for a commission of up to 25% of the rent. A good pro will have tips on making your place more appealing and will know how much rent you can get during the high season and offseason.
Related: Find Homes for Rent
In a well-designed arrangement, the agent's incentives are aligned with the owner's. Both of you, for instance, want to get the highest rent possible without scaring off prospective renters by overcharging. A good pro will know when it will pay to accept less rather than risk going vacant for a week.
Although the commission is negotiable, keep in mind that the agent will represent other properties and, given a choice, will steer prospective renters to the units that provide the biggest income and rent with the least effort. You might give the agent extra incentive by negotiating a sliding commission that would pay more if your rental income exceeds a given threshold. You might, for instance, pay 20% on the first $10,000 in income, 30% on anything above that.
Be sure that the agent will advertise the property on the multiple listing service for rentals used by all agents in the area, and that other agents will be provided a healthy slice of the commission if they bring in renters. Again, you might try to beat the average.
Also be clear on the duties your agent will perform. Those should include vetting prospective renters, arranging for cleaning and inspection after a renter leaves and sending in a handyman for such things as a plugged drain.
Your deal with the agent should also allow you to seek renters on your own. That will save you on commission costs and spur your agent to beat you to the punch in signing up renters. Many owners advertise on sites such as Vacation Rentals by Owner.
Because prospective renters going to your VRBO site will see your competitors' properties, it would be worthwhile to set up a website of your own on Facebook or a similar service. You can use that when people respond to your flier on the office bulletin board, for instance.
The key is to hustle. If you get a kick out of running a little enterprise, negotiating and keeping track of details, renting out a vacation home can slash your ownership costs.
If the thought of all those chores makes you shudder, maybe owning a second home is not for you.
See more on TheStreet.com:
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When Retirees Should Consider Renting When They Downsize
Why Paying Off Your Mortgage is Actually Dumb