Vacation & Other Short-Term Rentals
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Members' Homepage Landlords in seasonal vacation markets often find that they can get the same amount of rent for a three-month winter or summer season as they can get if they rent the same property year round at market rents. Or, they may have a personal vacation property from which they wish to generate some extra revenue. Special Considerations Vacation and other short-term rental properties have unique potential problems because:
1. Rental periods are short
2. A new tenant may be scheduled to come in immediately after the scheduled departure of another tenant
3. It is almost always necessary that a short term rental be completely furnished
4. The landlord must usually keep most, if not all, utilities on in his own name.
5. The property is usually located at some distance from the owner's permanent residence.
These unique characteristics create concerns for the owner and/or property manager in addition to all those that apply to longer-term unfurnished properties. Managing your vacation home as a rental is much easier and less time-consuming than many might think.
Buying a Vacation Home
Finding Tenants
Screening & Selecting Tenants
Deposits
Civil Rights
Health & Safety
Lease Documentation
Collecting Money
Property Inventory Lists
Utilities
Insurance
Maintenance & Repairs
Cleaning
Keys, etc.
Buying a Vacation Home If you're buying a vacation home research your destination town thoroughly for details such as average household income, crime rates and more. If your purchase is depending on how often and for how much you can rent the property, be sure to research the market. If the property has been a rental in the past, your real estate agent should be able to provide details on how often the home was rented and at what price. However, since the agent has an interest in selling you a property so that he can make a commission, do your own market research. Finding Tenants There are numerous ways to find tenants and we'll discuss a some of them.
List your property using one of the many online services such as CyberRentals.com or Vacation Rentals.com. Sites such as these typically charge flat fees to advertise the properties and can help you reach hundreds of thousands of potential renters. You can advertise for several months on many sites for the same price it would cost for a single day's ad in the classified section of one major metropolitan newspaper.
Listings usually include a generous text description and several photos of the property. Owners can often include additional photos at additional cost. They also can choose to have renters contact them directly by email or phone.
Another way to find short-term tenants as a fill-in between vacationers is to might try contacting local companies that are transferring executives to the area. Some of these transferees may need temporary housing while looking for a place to rent or buy. Send info sheets to the human resources departments of companies already located in the area as well as companies that are planning to move to the area and companies in the process of expansion.
You can also contact some local realtors to see if they have any people whose homes have sold and must move out before they can move into new housing.
You should also not completely ignore newspaper ads even though they tend to be relatively expensive. You can also consider advertising in any of the magazines that offer homes for sale in the area. One can sometimes have success because those newly moving into the area often want to rent short-term while they determine which area they wish to rent in long-term or buy a home.
You might also consider having your own web site on which you can post a lot more information then on commercial listing sites or most print media. Domain names can now be registered for less than $10 per year and server space is available for less than $10 per month including easy to use software for designing it yourself. You should then include the site address in all your advertising. With your phone number and email address provided on the site, you need not include either in print advertising, where you might be paying by the number of characters. Once set up, the site needs no attention unless you wish to add or change information. It is extremely unlikely that prospective tenants will find your site. The purpose of the site is to easily provided detailed information to those who find the address in the various advertising media you are using or who have contacted you as a result of such advertising or from other sources.
Screening & Selecting Tenants A significant advantage of online listings is that the you can maintain better control of who stays in you home compared to leaving it up to a management company. There is much less risk of a tenant trashing your place when you screen potential renters yourself rather than going through an agent.
If the listing format allows, provide details regarding such issues as your smoking and pets policies. Include as much detail as possible about what furnished and what's not.
To avoid a lot of phone calls, you might want to get your initial rental inquiries by e-mail. However, you will never want to actually rent out a home until you've talked with the prospects on the phone because that gives you the opportunity to "read" them. This is a good time to also be sure they understand your smoking and pets policies. You may also be fortunate enough to develop a group of repeat tenants who return year after year.
Just because your prospect will be your tenant for only a week or so doesn't mean that you can ignore proper screening procedures. In fact, it can often be even more important because you will likely be renting a furnished property, meaning that there are many more things to lose then when renting an unfurnished property. In addition to the fact that a lot of personal property items, many fairly valuable, are usually provided with a short-term rental, there are other issues that are important, issues that are not factors with a longer-term unfurnished unit.
There are many other scenarios that occur in short-term rentals that are unlikely to be of concern for the usual long-term unfurnished rental. Accordingly, screening tenants is actually more important for short-term furnished rentals than for a long-term unfurnished rentals. We provide a lot of information about screening on our Tenant Screening and Selection pages.
If renting to anyone with whom you have no previous relationship or who was not recommended by a trusted source, you should, as a minimum, utilize credit reports. You might also consider criminal background and eviction checks. Don't forget to verify identity, as a credit report or other screening of the wrong person is worse than no screening at all.
Consider that giving possession of your property to the wrong person, even when you've gotten the agreed upon monies up front can still result in serious trouble if the tenants refuse to vacate by the date agreed. The requirement of an eviction, resulting in loss of possession for a month or more could wreck havoc on the plans of several other tenants who were scheduled to follow the bad tenant. This will not only result in significant lost income and additional expenses, but will almost certainly result in loss of potential repeat business from most or all of those scheduled following tenants.
It is best to disclose screening requirements up front (your own web site is a good place to include such information).
Deposits Be sure that your deposit requirements are in line with the landlord-tenant laws of the state where your property is located. Most states have limits on the maximum amounts of deposits and what can be called non-refundable. Most states also have strict requirements for how soon refundable deposits must be returned and require a detailed accounting for amounts not returned, with significant penalties for failure to follow the law. Some states have different deposit laws for vacation rentals than for primary housing rentals.
The only safe thing to do is to read and understand the laws of the subject state.
Be sure that you provide clear explanations regarding what amounts are refundable and non-refundable and that this information is also in your rental agreement. Civil Rights Short-term rentals are covered by fair housing laws, except that handicap modifications will almost certainly not apply. Health & Safety Short-term rentals must meet most of the same health and safety requirements as any other rental housing. Lease Documentation It is even more important to utilize adequate documentation for short-term rentals than for long-term leases. As discussed under the Screening & Selecting Tenants section, one of the reasons is that misunderstandings regarding the length of occupancy can have serious ramifications on tenants scheduled to follow. Having a written rental agreement will significantly increase your chance of collecting damages via a lawsuit than for an oral agreement.
Again, as for screening, it is important that the person signing the documentation is the person claimed. Collecting Money Eliminate potential payment conflicts by requiring renters to send you at least half of the total rental fee to hold a reservation (especially during peak season) and require the balance of the fee two to three weeks before the tenants are to arrive. Require security deposits to ensure against damage. Unless they are repeat customers, with whom you have adequate experience, get the funds in the form of cashier's checks or via wire transfers.
If, for some reason, you do not get the full amounts of deposits and rent up-front and some amount is due after giving possession, be sure that you credit first amounts received to deposits, with the final amounts credited to rents. Be sure that this order is written into the lease and/or receipts. The reason for this is that it is easier and quicker to evict for non-payment of rent compared to failure to pay the balance of a deposit. Property Inventory Lists Short-Term rentals almost always include furniture, appliances, towels, linens, kitchen utensils, cleaning supplies, TV(s)/radio/VCR/DVD/CD-players, washer/dryer/vacuum cleaner, patio furniture (perhaps including a gas BBQ), and all the numerous other items that one would normally expect to find in and about the average home of occupants having the tenants' standard of living. In other words, the tenant brings his clothes, toys, toothbrush and buys his food. Even certain staple food items (e.g., salt & pepper, sugar, catsup) and certain sundries (e.g., paper towels, toilet paper, detergents) may be provided by the landlord.
In view of the large number of personal property items rented and entrusted to the tenant, the owner should have detailed inventory lists of all items of personal property and their condition at the time of possession. There are several reasons, including: tax deductibility, deprecation and possible claims for damage or loss.
Some owners of vacation property don't bother with good business practices because they will only rent their prized possessions to family and close personal friends. If your family and friends are anything like some of ours, it is all the more reason to document; both for the IRS and to help prevent misunderstandings leading to hard feelings. Utilities In view of the short rental terms and the expense and hassle of repeatedly turning all the utility services on and off, the owner must usually provide telephone, CATV, electricity/gas, water, trash removal, and any other necessary utility service in his own name. The normal costs of these services, which may vary by the season, must be included in the basic rental rates. However, the property owner should also try to avoid unexpected expenses for any service that could vary significantly depending upon usage. This is particularly important with long-distance telephone service where the potential expense is almost unlimited. Your tenants may have friends in Iran, Russia, or Japan or may like to call 900 numbers for psychic readings, phone sex , participate in TV polls, or charge telegrams and other items to your phone account.
It can be difficult to collect for charges made to your phone bill by tenants. First, you usually don't have the phone bill covering the period of their stay until a month or two after they leave, depending on the billing date as compared to their stay. Second, even once you have the bill in hand, determining which calls belong to which ex-tenant can be difficult and generating billing paperwork for the tenant is time-consuming. Third, the ex-tenant may dispute some of the charges allocated to him, leading to additional work and to arguments. Finally, the ex-tenant may simply refuse to pay the bill, particularly if he has no expectation of again renting from you anyway.
The easiest solution is to have your phone company block long distance, 900 number calls, and all other charges to the phone service, requiring that tenants provide their own telephone credit cards or prepaid calling cards. Be sure that you do not have 800 and other toll-free area codes blocked, as that will make it impossible for the tenant to call long distance using calling cards.
If the property is not regularly occupied, consideration should also be given to the various other utility services. If the property will be vacant for more than about a week, the circuit breaker for any electric water heater should be turned off. For a gas water heater without electronic ignition, the best approach might have the departing tenant turn down the thermostat rather, than turn the systems off. Relighting pilot lights is more than many tenants, some of whom might not have ever even seen a pilot light, should be expected to deal with.
You must also be sure that departing tenants turn off air conditioning and heating systems at the thermostat control. Of course, the incoming tenant must be provided with instructions regarding turning water heaters and heating/cooling systems back on.
If the refrigerator can be emptied between tenants, significant savings might also result from turning it off, but be sure that the doors are propped open.
If the property is located where freezing water pipes is a potential concern and the heat will be off for an extended period of time, then you must provide instructions for turning on and turning off water and even draining the water heater and water lines. For a detailed discussion of everything that must be considered under adverse conditions, see our Winterizing Checklist page.
For the absentee landlord without local management another relatively minor problem can result when the tenant departs just before the next scheduled trash pickup and leaves a container full of spoilable garbage.
For long-term vacancies one should considering having certain services temporarily disconnected. Turning off a utility in the normal permanent manner usually results in significant costs for turning them back on. Some utility services have provision for maintaining open accounts at reduced rates during the off-time with a low or no turn-on charge.
Whatever the owner does regarding these utility issues, it is extremely important that tenants know what is to be done at arrival and departure. The tenants should be provided with detailed written instructions regarding all matters.
Insurance
Although most insurance companies insure rental property, you must be sure that your policy does not have any exceptions in the event your seasonal property is sometimes vacant for long periods.
Some insurance companies accept the increased risk of vandalism, water damage, and other hazards related to a long-vacant property. Some do not. Review the information about income property insurance in this Property Management Web.
Additionally, if your personal vacation home is insured as such, and you are renting it out when not using it, be sure to check the issue with your insurance agent. Some policies covering personal residences allow for limited rental use each year, but sometimes for a maximum of only 30 days.
Maintenace & Repairs Owners should be as vigilant or more so about taking care of their rentals than their primary residences, since so many different people are using the homes. Also, even small, unexpected problems can eat into their income streams. Try to find a local handyman to inspect the property periodically and take care of any problems found. Remember, it is usually less expensive to do preventive maintenance than to wait until something breaks and both cause collateral damage and requires a higher cost emergency visit. Be sure to provide a list of maintenance vendors that the tenant can call in the case of emergency if he cannot immediately reach you or your agent. You should at least provide vendors for the plumbing and heating/cooling trades. It is also useful to provide tenants with the name and phone number of a local agent that can be contacted prior to calling vendors in such emergency and in non-emergency situations when you cannot be reached. This is particularly important when calling you means a long-distance charge.
Cleaning Even though you may cover the issue in a rental agreement, it is difficult to ensure that the departing tenant leaves the property in the condition that you want and need for the next tenant. Of course, you must, as with any vacant rental, insure that showers, tubs and toilets; kitchen sink, stove/oven, refrigerator, microwave, and dishwasher; tile/vinyl flooring and carpets; and numerous other things are clean. But, with a furnished short-term rental you must also insure that bedding and towels have been washed; that beds have been made; that dishes have been adequately washed and put away; and that there is an adequate supply of toilet paper, laundry & dishwashing detergent, and other cleaning supplies.
If you live nearby you can, of course, inspect the property as soon as the tenant departs and do what is required, either doing the work yourself or hiring someone to do it. However, if, as is the case for many vacation rentals, the property is located some distance away, you may have to depend upon others to not only do the work, but also to decide what needs to be done.
If a profession property manager is responsible for the property, then he will usually have "tried and true" cleaning vendors available for use and the only issue is the cost. In our experience, the cost of cleaning a typical furnished unit will be on the order of $100. The cost can vary somewhat depending on the number of bedrooms and bathrooms as well as size in general, but it can also vary depending upon the amount of bedding and towels that requires washing and whether the departing tenant adequately performed some of those tasks.
The price may not vary much between the conditions in which a "good" tenant or a "bad" tenant left the property because of a number of factors. For example, travel time is involved in either case and the bedding may have to be re-done if it is not obvious that the tenant had already done it. Just as important is the fact that even the best departing tenant's highest standard of cleaning may not be up to standards of what you want for the incoming tenant. Because cleaning costs represent a larger share of the operating budget for short-term rentals, you need to be sure that the cost of cleaning is considered when setting rental rates.
RHOL provides a tremendous amount of information about dealing with various cleaning problems, including pet odors.
Keys, etc. The owner or manager must also take steps to avoid the loss of keys and garage door or gate remote controls. You should make it clear where the tenant is to obtain or find these items upon arrival and what to do with them when departing. For example, upon arrival the door key might be obtained from a neighbor, a real estate agent, some other person, or from an exterior hidden location. You can instead simply mail keys to each renter. Another option is to maintain a key safe (lock box) with a combination lock. Tenants get the code to the box when they've paid their fees in full. The garage door control and pool key might be kept in a certain drawer or other specific place.
The tenant should be instructed that items are to be left or returned to the same or specific other locations upon departure. Since instructions will not be followed 100 percent of the time, be sure to have spare keys and controls on hand and, if you are not always in the area, also where an incoming tenant can get them.
Finally, you can require a significant refundable key deposit, either separately or specified as part of the general security deposit, to provide strong incentive for the control of keys and remote controls. The deposit amount should at least be large enough to pay for replacing the keys and controls, including the cost of the time for someone to do so.
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