YOUR SECOND HOME | RENTING OUT: Bright Spot in a Bad Economy

August15, 2008  |  The New York Times

ByBILLIE COHEN

IN these tough times, with gasprices setting records and airfares skyrocketing, many people are lucky to havejobs, let alone time to take a vacation. And yet there’s some good news forsecond-home owners hoping to rent out an investment property: vacationers areturning to these rentals more than ever.

“As the economy sours, demandfor vacation home rentals increases, as rental homes are seen as inexpensivealternatives to luxury hotels,” said Douglas Pope, a founder of HotPads.com, a real estate search engine. “Also,people are now beginning to divert their vacations to more local spots whererental homes are an option.”

Not that you should run outand buy an investment property with the hope of getting rich on rentals or ashort-term flip.

“If you’re going to flip it ina year or two, this is not the thing to do,” said Anne-marie Boyer, a brokerwith San Diego’s Finest Real Estate. “You need to plan to be in it for the longhaul.”

But if you’re already in it,there is room for hope.

“Vacation rentals as acategory are growing well in the U.S.,” said Justin Halloran, managing directorof United States brands for HomeAway, a group of vacation-rental Web sites.“They are taking shares from hotels because they give more space, freedom andamenities than hotels” — like kitchens, private pools and more bedrooms forless money.

Mr. Halloran said that bothsupply and demand are going up, particularly in what are called “drivemarkets,” regions that vacationers can reach by car, like the Hamptons in NewYork or Ocean City, Md.

In the second quarter of 2008,inquiries about vacation rentals in Las Vegas on HomeAway.com increased67 percent from the same period in 2007, and the supply of properties was up 31percent. Similarly, in Palm Springs, Calif., demand went up 58 percent andsupply 31 percent; and in Manhattan, demand grew 166 percent and supply 108percent.

So if you bought a secondproperty to rent out, you’re not necessarily in for a dry spell. And while yourfirst thought might be to hire a property manager to find tenants, that’s notnecessarily your best option.

“You need to be very cautiousin choosing your property manager, and be sure to have a firm understanding ofwhat is expected from their services,” Mr. Pope said. “You should also notnecessarily leave all the marketing up to the property manager. They generallyhave a lot of properties in their portfolio to worry about; you may want togive your own property special attention.”

To do that, look to onlinevacation-rental listings you can publish yourself, which can give you a wideaudience with little effort. Some of these sites, like HotPads.com and Craigslist.org, offer free listings, while others,like VRBO.com andHomeAway.com, provide a number of services based on a subscription fee.

“My first recommendation, tothe extent that your budget allows it, is to buy multiple subscriptions,” Mr.Halloran said. “You’ll reach different audiences.”

And don’t ignore the overseasmarket. “I wouldn’t recommend that someone, say, with an apartment or condo onthe Texas Gulf should advertise in the U.K.,” Mr. Halloran said, “but if you’vegot a place in Orlando, you’re probably going to get some good demand from Germanyand the U.K.”

The next step is to make surethat your listing stands out from the rest, by doing things like “taking theright photos, writing compelling titles and making sure your availabilitycalendar is updated,” Mr. Halloran said. Photos, he said, are the mostimportant factor.

You might also think aboutfinancial incentives to draw renters.

“A lot of people have ownedtheir property for a while,” said Robert Boyer, a real estate investor adviserwith San Diego’s Finest Real Estate. “They can drop their rates a little bitand still come out with a positive cash flow, or at least not a negative cashflow. Whereas people who’ve bought more recently have a more difficult time.”

If you aren’t having muchluck, consider offering a different kind of incentive. On HomeAway.com, Mr.Halloran has seen people offer a free eighth day on a seven-day stay or nocleaning fee. “There was one in Maine that offered a free bucket of livelobsters and a bucket of beer,” he said.

Clearly, with a little onlinesavvy, a little creativity — and maybe a little beer — you can still findrenters.