Turn vacation home into cash cow

Study finds more owners covering 75% of mortgage through renting

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Sep. 2, 2011

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So there is a change in mindset when it comes to vacation homes. According to research that HomeAway conducted for the National Association of Realtors, 94 percent of the people who buy second homes plan to rent them over the next 12 months, and seven out of 10 surveyed said rental income was a factor in the purchasing decision.

To check to see if all this survey information was consistent with other vacation-home rental companies, I called Stiles Bennett, president of North American operations for Newport, R.I.-based Wimco Villas.

Wimco boasts a very strong presence in the Caribbean -- and that's a totally different business. Most villa owners in those sun-drenched islands don't have to worry about paying off their mortgages; they don't have any. That's due to two principal reasons: it's difficult to get a mortgage for a Caribbean property, and many of the homeowners are wealthy.

"There are substantial operating expenses associated with owning a home in the Caribbean, so homeowners use the rental income to cover operating costs or to fund improvements," said Bennett. "And if the home is well-presented, well-located and well-priced, they have good chance to do that."

How's business? Bennett's answer was a resounding "excellent," although it was really for the wrong reasons.

During the bubble years, development blossomed in the Caribbean because people thought they could use the properties for a few years and then flip the houses, Bennett said.

"Sadly, a lot of those homes came on the market during the midst of the recession. Now, there are more quality villa rentals than there (have) been in the past. Inventory is good and there are more homes for us to look at."

The top markets for rentals in the Caribbean include the U.S. Virgin Islands, St. Martin, St. Barts, Turks and Caicos, and Anguilla, said Bennett.

In the United States, the hot markets, as reported by HomeAway, include Amelia Island, Fla.; Galena, Ill.; Hollywood, Calif.; Charleston, S.C.; and New Orleans.

As they say down in St. Barts, "Vive la difference" -- although I don't think they're talking about real estate.

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "Growing Up Levittown: In a Time of Conformity, Controversy and Cultural Crisis," is now available for sale on Amazon.com.

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