How Airbnb can help you pay off your vacation home
Photograph courtesy of Garrett Gannon / Ocean Atlantic Sotheby’s International Realty.
Taking out a second mortgage is daunting, especially if you’re relying on tenants to pay it off.
Let’s say you put 20 percent on a $ 1 million beach house in Rehoboth. You have a 30-year mortgage with an interest rate of 5%, which takes you to a monthly payment of around $ 4,300. What do you need to do to break even, or at least cut the bill?
There are plenty of ways to answer this these days – websites like Airbnb, online booking agencies like HomeAway, and traditional property management companies are all resources for finding tenants who will help you pay off your mortgage. debt. But they are not created equal.
If the goal is to cover your entire mortgage in a popular destination such as Rehoboth or Bethany, you will likely need to rent out your beach house throughout the peak season from mid-June to August, when weekly rentals vary from $ 1,200 to $ 7,000 and more.
HomeAway, whose annual subscription fee of $ 349 is the best value for homeowners planning to lease their properties for long periods of time, is a good bet. For fees, you can register on one of the company’s three US sites (VRBO is the most popular) as often as you like. To list a property, you create an account, provide a description of your home with at least six photos, and organize how you will receive payment. Owners are notified via email whenever a potential guest is interested.
HomeAway spokesperson Adam Annen said properties are booked an average of 18 weeks a year, with subscribers earning an average annual rental income of $ 28,000. Fifty-nine percent of underwriters get at least 75 percent of their mortgage covered by the lease flow.
John Fitzsimmons, an upstate New York attorney who co-owns a home with his sister on Fenwick Island near Bethany, uses VRBO to market the property online and book guests himself, but he still relies on an old-fashioned property manager in Ocean Atlantic. Sotheby’s takes care of on-site maintenance and other needs.
Annen says this is a common arrangement, with 40% of HomeAway listings also being partially handled by property managers, as online tools cannot replace humans when it comes to responding to inquiries. nightly calls from tenants who locked themselves in or broke the garbage disposal.
Fitzsimmons, whose home cost nearly a million dollars, pays 10% of his rental income to the property manager to check people in and out, hand out keys and troubleshoot maintenance issues. He says he and his sister have still earned enough over the past two summers to cover that commission, the VRBO subscription, and the full mortgage.
Or would you rather rely on a traditional property manager for everything, including marketing and reserving your home? You should expect to pay around 15% commission on each rental, and you will need to plan well in advance. Emme King, Long & Foster’s manager for the Bethany and Fenwick Island properties, said owners should sign a listing agreement and have all marketing photos of their property ready for use by early winter, c that is, right now.
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If you want to be more spontaneous with your bookings, you might want to consider Airbnb.
The site’s “instant booking” feature allows customers to book the same day they check in.
Airbnb is also a solution for those who do not want to give up their place. Unlike VRBO, which only lists full homes, you can use Airbnb to rent out a single room, floor, or wing of a property. As long as you’re comfortable with strangers staying downstairs while you and your friends live upstairs, the feature lets you enjoy your beach house during the more auspicious summer months while still generating additional income.
Airbnb is your cheapest option if you want to rent your home only for short stays rather than a full season. Owners pay a 3% service charge for each booking instead of an annual subscription or commission to a property manager. However, you probably won’t be able to partner with a local property manager to handle the day-to-day maintenance. Because Airbnb is still relatively rare in the Bethany / Rehoboth / Lewes market, most traditional management companies are not yet willing to handle these announcements.
For the busy types of professionals who often guard houses at the beach, this is a problem. Fitzsimmons says posting rentals and managing reservations is hard enough: “That’s about all I have time for.
Editor-in-Chief Jackson Knapp can be reached at [email protected]
This article appeared in our February 2016 issue of The Washingtonian.