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Vacation Homes: The Secret is Generating Income

(By Dale King) AUSTIN – Vacation homes are proving to be valuable resources for their owners, even when the possessor families are not using them for their own leisure time, says a report created by an Austin-based vacation rental firm.

“The most consistent statistic” observed in HomeAway’s 2016 Vacation Rental Report “is the ability for homeowners to cover the cost of ownership through renting to travelers.”

“Again in 2016,” the survey says, “vacation rental owners have been able to cover more than half of their mortgage through renting, and more than half (54 percent) cover three-quarters or more of their mortgage.”

“According to the National Association of Realtors, of the 920,000 vacation homes purchased in 2015 in the U.S., the average price was $192,000 and 61 percent of buyers used a mortgage to finance and will count on the income from renting to pay down the newly acquired cost of ownership.”

 “Over the years of polling our owners, we’ve seen strong performance with regards to an owners’ ability to generate significant income from their vacation rental,” said Adam Annen, HomeAway public relations manager.

“Though vacation home prices went up a bit in 2015, NAR tells us, the ability to rent a vacation home is an enormous contributor to the affordability of ownership,” he added. “Of HomeAway owners, 78 percent originally began renting their home to generate income or [make] a profit from letting travelers book their property, and from those bookings, owners generate $28,000 each year in rental income,” added Annan.

The revenue from renting a vacation home brings in a tidy sum, says the survey – about “24 percent of the average owner’s income. That comes “from investing just fewer than 10 hours per week in the management and marketing of their vacation rental.”

With the money brought in through the 10 hours a week of work – the equivalent of a part time second job – “owners use the money to pay off the mortgage (38 percent), upgrade and renovate the property (70 percent), fund their everyday living expenses (23 percent) and save for retirement (11 percent),” according to the survey.

By investing about 10 hours per week, the report says, an owner is essentially making an “hourly salary” of $54 working towards the booking of his or her property.

“The clear benefits of vacation rental ownership start with the personal enjoyment a family can experience with their own vacation home,” said Brian Sharples, HomeAway co-founder and CEO. “But the simple mathematics of renting that home to travelers and making a significant dent in your mortgage, and even increasing your family’s annual income, is an excellent bargain in a world where vacation rentals are growing more and more popular.”

In addition to bringing the financial benefits of vacation rental to light, the survey also uncovered another notable trend – shared ownership of vacation rentals. “The same 29 percent of properties for the survey’s last two years are owned by more than one person, most often with a family member or friend. Co-ownership is another method to ease the financial burden of taking on an additional property.”

The concern of return-on-investment, according to the survey, is not a concern for most, as the average vacation rental has been owned for 6.5 years and has appreciated $184,066 over that period of time.  With pooled resources from a family member or friend, equity growth, a continuing stream of travelers paying to rent and the opportunity for personal and family use, vacation rental investment can be a healthy one.

Additional findings in the Vacation Rental Report:

  • The average age when owners began renting their home is 49.5 years, 6.5 years younger than last year’s respondents.
  • 21 percent use or plan to use the income he or she received from the rental of their property to pay for their child’s education.
  • Of those who’ve rented their homes for large events (31 percent), the rental rates are $89 higher per night – translating into a 40 percent revenue increase for the time frame (based on the U.S. average rate of $220 per night.)
  • 8 percent of vacation rental owners claim to have purchased their vacation home before their primary home

HomeAway, based in Austin, is a leader in vacation rentals with sites representing more than 1.2 million paid listings of vacation rental homes in 190 countries, and is a part of Expedia, Inc.

July 21, 2016

Realty News Report is a Texas-based publication edited by Ralph Bivins. 

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