Renting Your Second Home
Many buyers in the Breckenridge area – and throughout Summit County – have an interest in renting out their second home to help defray the costs of ownership. This is a terrific idea, but requires a bit of education. There’s more than one way to skin this cat, and here’s a bit of an overview, to assist buyers in understanding the process.
There are two main options available:
Option A: Work with a great local management company
We’ve got plenty of good management companies in the area, and there isn’t just one company that’s best for all properties. Some companies specialize in specific complexes; some companies only work with properties adjacent to the slopes; some companies serve only luxury homes. After you decide what type of property to own, take a look at the property management companies that work best with your niche.
Outside of having their special rental niche, most companies will fall into one of these two categories:
- The old-style management company has a location on Main Street, and guests stop into the office to pick up keys, sign paperwork. These companies offer convenience and service; guests can usually use a fax machine or copier at these offices, or talk to a staff person about restaurant and shopping recommendations.
- With the age of the internet, a newer type of management company has been evolving: companies that don’t have a front desk and are not located on Main Street. This helps to lower the cost of running the business, and has the potential to put more income into the pocket of the home owner. This option is not as service-oriented as the old-style management company.
Management Fees. The payment an owner makes to a management company is based on a percentage of rental income. A Main Street management company may charge the property owner 40% of the total rental income for the service provided, while a scaled back management company, with no Main Street location, may charge 30% of the total rental income. This basic fee varies from company to company, and will be explained in the Contract between the management company and the owner.
Services Provided. What exactly are the services provided by both types of companies mentioned above? The management company creates an advertising presence that makes the phone ring; they qualify the potential guests, and book the reservations. They have enhanced websites that draw visitors, those visitors become guests. They collect the rental fees and take care of any problems that come up during the guest's stay. After departure, they clean the property and prepare it for the next guest. Depending on the property, they may be involved in shoveling driveways and sidewalks, removing trash, and servicing hottubs. If a problem arises during a guest’s stay, such as an appliance needing repair, they are there to arrange the service needed. When a guest loses the key, and it's midnight, the management company is there to let them in. This is an over-simplification of the work of a management company, but enough to cover the general territory.
The AGREEMENT. Every management company has a contractual agreement with each property owner. Buyers/owners should never be satisfied to just know what the split is (such as a 60/40 split), but should read the contractual agreement. These agreements typically cover a 12-month period, are renewed annually, and cover items such as:
- If a travel agency books the unit, is there a fee that’s passed onto the owner?
- Is there a credit card fee that’s passed onto the owner?
- Does the management company have insurance policy requirements ?
- What is the annual cleaning policy (annual spring clean)?
- Who pays for the unit to be cleaned after each use (sometimes the guest pays the fee, sometimes the fee is included in the management fee, sometimes the owner pays)?
- If the owner books the unit themselves, is there a reduced fee paid to the management company?
- If an owner sells the property, what happens to the future rentals, already booked to the property?
Option B: Become your own management company
This option wasn’t logical or viable before the age of the internet. But the internet has brought change to how owners can mange their second homes.
Check out the website www.vrbo.com, and select Breckenridge, Colorado as your destination – this will introduce you to the second option in rental management.
This option gives the owner an opportunity to make a bit more money, but it also requires a fair amount of time and organization on behalf of the owner to be successful. When a potential guest calls or emails regarding making a reservation, the owner must be available to speak, write, answer questions, and even negotiate the rates. If you’re not available, the guest will call the representative of their next condo selection. The owner also needs to have a cleaning company on hand that can clean the unit as soon as a guest departs, especially during ski season, when there are frequent back-to-back rentals. Establishing a relationship with a local handy man is also important, should any problems arise that the owner can’t handle from a distance. Some owners have been very successful with this option – but it takes a bit of work to get the system up and running smoothly.
There are also hybrid options that combine parts of Option A and Option B.
Susan Gunnin has been working with local management companies since 1991 and can assist buyers and owners in making decisions that fit their needs.
For a list of local property management companies, contact Susan today.
Call direct: 970-389-0182
Email: susan@breck4sale.com
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