Renting Your Recreational Property for Profit. Heather Bayer
Cottage owners Jan and Chas Clark have made the most of their renovated three-bedroom property and two-bedroom self-contained guest cottage. They find these facilities offer very flexible rental opportunities as both can be rented to larger parties in the summer, but either or both can be offered in out-of-season months, depending on demand.
Amenities
Location and size alone don’t set the rental price: people will also expect certain levels of comfort and quality as the price rises. Yes, there are still a great many recreational homes across North America advertised as “basic and full of rustic charm” that fetch a bare minimum per week in high season. If you don’t want to spend much time or money in making your property attractive to the higher spending market, you could easily achieve a reasonable return. However, if your goal is to make a substantial profit, you need to present your property in a way that will attract renters willing to pay a little more for that extra comfort and quality. Even a small property can command a good rent if it offers a high degree of ambience and comfort. Added features need not cost a large amount; the expense of refurbishment will pay off in the long run.
“We bought our lake cottage for $200,000 in September 2003. It was OK for rental — we could have just done a few minor alterations and it would have been ready to go and we could have easily got about $850–$900 per week in high season. However, we want to use it ourselves and it was in need of some loving attention. We ended up stripping it out, fitting a new kitchen and hardwood flooring, tiling the bathroom, redecorating throughout, and furnishing it with hard-wearing and durable materials. The total cost was just over $20,000 and we are now charging $1,350 per week — and this may turn out to be on the low side. It may take a couple of years to recoup the cost, but the value of the cottage has also increased by upgrading.”
Think about how you can add value to your property. This could mean purchasing additional appliances, installing satellite TV and a DVD player, making sure the furniture and fittings are in good repair, etc. Purchasing attractive and matching furniture can require a considerable outlay but will reap rewards in the higher rental fee you can command. Offering air conditioning in summer and installing a good propane fireplace for winter warmth can both add significant value.
Think too about the décor. Grandma’s hand-crocheted throw she made 40 years ago may have sentimental value and be quite functional over the old couch, but it won’t go down well with the guests who have paid a premium price for their week’s stay. Take a look around your property as if you were a renter about to pay $1,200 per week. What would you expect for that? Certainly not cracked and chipped dishes, or a 1970s-vintage single-channel television. You would expect the place to be well furnished, attractively decorated, and to have all the comforts of home. This attention to detail is all-important, and is explored further in Chapter 5, Getting Ready for Renting.
An inspector for a rental agency recalls arriving at a property one late May afternoon to value the property for inclusion in the agency’s portfolio. He reports:
“The outside of the cottage was just gorgeous — lawns leading down to sparkling water, flower tubs on the deck — I just had great feelings about it. Then I went inside. What a letdown that was, although it could have been so different. There was cherry wood flooring, cedar and pine surrounds, with huge picture windows overlooking the lake. But the furniture was ancient and mildewed, the appliances looked like they were out of the ark, and a very unpleasant smell pervaded every room. The owner seemed unaware that there was anything unusual about this and chatted about how much he could make on rental. He was already renting ad hoc to friends for $1,000 per week, but was hoping to achieve more through our agency. My report was clear: If he was willing to upgrade throughout, have the place thoroughly cleaned, and employ a service to undertake rental turnarounds, he could expect to increase his rental income by as much as 75 percent. Outlay on the upgrades and maintenance would be recouped over the first summer.”
If your property is on the waterfront, what watercraft are you prepared to offer to guests? The minimum should be a canoe or pedal boat, although some owners offer a rowboat, sailboat, or windsurfer. Allowing your guests the use of a boat with a motor is not recommended as this has greater inherent risks and subsequently higher insurance premiums. In general, it is far better to have details about the local marina, with daily and weekly rental rates.
Do you have launching facilities for guests’ own boats? Is there a marina or public boat launch nearby? Are there bicycles available for guest use? Do you have a pool/billiard table? All of these features add value and help your cottage to stand out in an overcrowded off-season market.
For year-round rental, think about the attractiveness of fall and winter vacations at your cottage. Is there a wood-burning stove, a Jacuzzi, perhaps a hot tub? Satellite TV is definitely an attraction for out-of-season guests, so it is worth the cost of installing it. Some owners of cottages attracting quality renters offer computer and modem connection for those who need to be in constant contact with their office. If you are in an area with high-speed Internet connection, there is distinct added value in offering this. Remember that providing these additional amenities may incur maintenance costs that must be allowed for in your calculations. The overhead for keeping a hot tub going throughout the winter, for instance, can be high, so your winter rental rate should reflect this. Owners in ski areas charge more for their vacation rentals in the winter than in summer — and their occupancy rates are higher! Just remember that higher prices equal higher expectations. If you intend to charge executive rates, you must provide executive facilities to match.
Will It Rent As It Is?
A good starting point to gauge how well your property will rent is to do an analysis of the good and the bad points, the opportunities you have available to rent, and the problems you may face along the way. This is known as a SWOT (Strengths, Weaknesses, Opportunities, and Threats) summary and is a useful way to determine what is unique about your property. In this analysis, what may devalue your property are its weaknesses, and the obstacles you may have to overcome in order to maximize your investment are the threats.
Sample 2 is an example of a SWOT analysis.
Sample 2: SWOT Analysis
Making Changes
Once you have done this analysis, you are able to look objectively at what you will have to do to shore up the weaknesses and challenge the threats. In this example, you may decide on the following changes:
• Improve the amenities you offer to put your property at a higher rental level than your local competition. For example, purchasing a hot tub pays dividends in increased bookings in the colder months. Providing a computer and Internet access will also give you that competitive edge.
• Promote the advantages to specialist hiking/walking groups for fall and spring, and to snowmobile enthusiasts during winter. Offer special packages such as “Breakfast included” (where you stock the fridge with breakfast fixings).
• Explore ways of making the property more winter-accessible and for attracting people looking for a winter getaway.
• Develop one-year, three-year, and five-year plans that incorporate prioritized capital improvements.
• Purchase a combination washer/dryer that will fit into a small space.
If you are using an agency, let them know you plan to add value by making changes, and make sure these are mentioned on their web pages. If you have chosen your agency carefully, they will be actively promoting out-of-season rentals and will welcome discussion on how best to market your property.
Calculating