Add a hot tub and watch your vacation rental profits heat up
If you’re going to rent out your vacation place -- perhaps to offset maintenance and mortgage costs -- what’s the best thing you could do to improve it?
“Add a hot tub,” said Bill May, whose Sunspots Inns, Resorts and Rentals (www.sunspots.us) owns and maintains more than 100 such properties in Hawaii and on the mainland.
“It’s a four-season amenity and something people really like to have available, even though they might not use it,” he said. “It would probably pay for itself three times over in less than a year.”
He speaks from experience: May bought and rented out a condo that has a hot tub, and he was asked to oversee the rental of a neighbor’s condo. The neighbor’s unit had the same floor plan, exposure and appointments -- except for the hot tub.
“The figures showed the unit with the hot tub earned $14,000 more a year in rent than the condo without the hot tub,” May said. “When I showed the figures to the neighbor, he had a hot tub installed for about $4,000, and he then made close to $14,000 in additional rental income because of it.”
As vacation and investment home sales continue to rise, buyers are not only looking to get a foot in the door to a reliable investment, but also to get a leg up on competitors. Not all approaches require a lot of capital.
“What people want and will remember is that the home is pristinely clean,” said Penny Taylor, May’s wife and business partner. “Renters remember crisp linens and sparkling floors and are after a spot where all they need to bring is clothes and food.”
The Mays got into the resort rental game about six years ago when they bought one home on a mountain lake and another in Hawaii.
“We do think owning a second home is a wonderful prospect,” May said. But he cautioned buyers to consider such a purchase first as a home for their families and only then for its profit potential. “That’s a sane and reasonable philosophy. No one expects values to double and triple again in three to five years -- but who knows?”
According to a second-home study released by the National Assn. of Realtors in May, 75% of vacation-home owners purchased for personal use -- although one-third of those also wanted to diversify investments -- and 18% intended to use the home as a primary residence in retirement. Only 13% of vacation owners listed rental income as a reason to buy.
The typical owner spends 39 nights per year at his or her property, and 75% of vacation home owners do not rent them out, the survey found. Those who do rent them out spent 12 nights per year at their second homes.
Of vacation-home owners, 21% own two or more, according to the study.
The survey revealed that 66% of vacation-home buyers wanted to be close to an ocean, river or lake; 39% wanted to be close to recreational or sporting activities; 38% wanted to be close to vacation or resort areas; and 31% wanted to be close to mountains or other natural attractions.
Results indicated that the median size of a vacation home is 1,480 square feet and that 29% were new when purchased. A total of 68% of vacation-home owners said the value of that property was lower than their primary residence.
Sixty-five percent said they viewed their vacation property as a better investment than stocks.
Now, it’s time to consider investing in a hot tub.
Tom Kelly’s new book, “Cashing in on a Second Home in Mexico: How to Buy, Rent and Profit From Property South of the Border,” was co-written with Mitch Creekmore.