FAQ: Running a Vacation Rental Business
Christine answers the Owner Community's most frequently asked questions about vacation rental ownership
How can I accept credit cards?
Do you recommend collecting all payment prior to rental for longer rentals?
How much should I charge friends to stay at my property?
Screening Guests
Should you ask for a renter's driver's license?
What is the appropriate information to ask for from vacation rental guests?
Security Deposits
Should you cash security deposit checks?
What about security deposits via credit card?
What are you allowed to withhold if damages do incur?
Insurance
How do I obtain insurance for my vacation rental property?
How much liability insurance should I carry on my vacation rental home?
How do I know if the insurance company is a good one?
Managing Bookings
Can you recommend a small business accounting software that is helpful for vacation rental owners?
What is the best way to organize bookings?
Minimum-Stay Requirements
How do I determine the minimum night stay for my cottage rental?
I would love to hear your opinion on one-night stays, do you accept them at all?
Miscellaneous Questions
I have a new tanning bed and baby grand piano, which are not on your list of amenities on HomeAway. Where should I list them?
Can I restrict people from smoking outside our vacation home?
I need to sell my vacation property. How do I attempt to sell while I still have renters?
Q: How can I accept credit cards?
A: There are many resources for owners to accept credit cards. You can use PayPal, or you can set up your own merchant account. HomeAway and VRBO have teamed up with a merchant account company who allows vacation rentals to be processed through credit cards. Their info can be found at PayPros.com.
A: For the longer stays, you can break up their payments into five or six payments; however, I still recommend you collect the full amount upfront. This prevents them from renting your place, staying for a week and then wanting to move to a different place. I rent my Florida properties for three months during the winter and the renters always pay the full amount prior to check in. They are pretty accustomed to it.
Q: How much should I charge friends to stay at my property?
A: If your friend wants a peak week in your second home and wishes to book ahead of time, then by all means, let them. Just charge the full price! You could also offer a discounted or even free week if you have a last minute opening. It is also a good idea to establish a friend rate since they will be using power, water, etc.
Q: Should you ask for a renter's driver's license?
A: Sure, you could require a proof of someone's identity, such as asking for a copy of his or her driver's license. But really? Come on. Anyone who is ill-intentioned will have a fake ID. This would only provide a false sense of security on your part. How would you verify that the IDs they send are really their own?
Q: What is the appropriate information to ask for from vacation rental guests?
A: All I ask my guests for is the following. Because they are paying me all the money upfront, there's no need for the other info.
Name
Address
Home and cell phone
E-mail,
# of people
Check-in dates
Check-out dates
And credit card number (for payment)
Q: Should you cash security deposit checks?
A: Yes, you should cash the check if they are paying via check. This is the first fiduciary transaction between you and your renters. If that check bounces, guess what? Cheap insurance for you...don't rent to them.
Q: What about security deposits via credit card?
A: You have two options:
1. Go ahead and charge the deposit. But realize that you will be charged by your credit card company. When you refund (credit) the deposit upon departure, you may also be charged.
2. You can also do a “pre-authorization” of funds. This is where you “hold” that amount and then release it upon departure (hotels commonly do this). Check with your credit card merchant account to see if/what any applicable fees may be.
Also, there may be time limits on a pre-authorization. For instance, you may only be allowed to hold funds for 30 days. In this case, you should charge the renter upon booking and go with your regular payment schedule, then a couple of weeks before their rental dates, process the pre-authorization, making sure you have ample time after the guests stay to make any necessary charges.
Q: What are you allowed to withhold if damages are incurred?
A: You are only allowed to withhold the amount of money it actually costs to rectify the problem and you must have a receipt to prove the costs.
For example, say you have a $200 deposit and the renters break your $50 clothes iron. If your housekeeper charges you an extra $25 to go and buy another iron, and the replacement costs $50, you can only withhold $75 (the 25 fee from your housekeeper + $50 charge for the iron). You cannot keep the entire $200 because of “pain and suffering.”
A: Sure, you could require a proof of someone's identity, such as asking for a copy of his or her driver's license. But really? Come on. Anyone who is ill-intentioned will have a fake ID. This would only provide a false sense of security on your part. How would you verify that the IDs they send are really their own?
Q: What is the appropriate information to ask for from vacation rental guests?
A: All I ask my guests for is the following. Because they are paying me all the money upfront, there's no need for the other info.
Name
Address
Home and cell phone
E-mail,
# of people
Check-in dates
Check-out dates
And credit card number (for payment)
Q: Should you cash security deposit checks?
A: Yes, you should cash the check if they are paying via check. This is the first fiduciary transaction between you and your renters. If that check bounces, guess what? Cheap insurance for you...don't rent to them.
Q: What about security deposits via credit card?
A: You have two options:
1. Go ahead and charge the deposit. But realize that you will be charged by your credit card company. When you refund (credit) the deposit upon departure, you may also be charged.
2. You can also do a “pre-authorization” of funds. This is where you “hold” that amount and then release it upon departure (hotels commonly do this). Check with your credit card merchant account to see if/what any applicable fees may be.
Also, there may be time limits on a pre-authorization. For instance, you may only be allowed to hold funds for 30 days. In this case, you should charge the renter upon booking and go with your regular payment schedule, then a couple of weeks before their rental dates, process the pre-authorization, making sure you have ample time after the guests stay to make any necessary charges.
Q: What are you allowed to withhold if damages are incurred?
A: You are only allowed to withhold the amount of money it actually costs to rectify the problem and you must have a receipt to prove the costs.
For example, say you have a $200 deposit and the renters break your $50 clothes iron. If your housekeeper charges you an extra $25 to go and buy another iron, and the replacement costs $50, you can only withhold $75 (the 25 fee from your housekeeper + $50 charge for the iron). You cannot keep the entire $200 because of “pain and suffering.”
Q: How do I obtain insurance for my vacation rental property?
A: Admittedly, insuring a vacation rental home is a huge challenge. Unfortunately there is not a quick, easy answer. Obtaining insurance depends on many factors, from the vocabulary you may be using, the agents you may be contacting, or your home itself. For a full detailed list of insurance factors, you can listen to my free podcast with an insurance specialist, or read the chapter in my new second edition on insuring your home.
Q: How much liability insurance should I carry on my vacation rental home?
A: However much you get sued for! While you may be a bit annoyed with this “skirting the question” response, the answer varies so much depending on your individual financial assets. We highly recommend that you speak with your insurance agents to individually assess your exposure in order to determine how much liability insurance they'll likely need. Simply put, a millionaire has much more exposure than your average middle income homeowner and would need much more liability insurance than someone who has little to lose. You need to individually figure out where you fall in “how much could they sue you for.”
Q: How do I know if the insurance company is a good one?
A: It's very important to check the financial status of any insurance company you're going to work with. To check financial status, go to www.ambest.com and type in the name of the insurance company. You'll be able to pull up a little history of that insurance company, how long they've been in business, and what their financial status is. What you'll really want to focus on is the company rating. Look for companies with a rating of “A,” “A+” or “A++.”
Q: Can you recommend a small business accounting software that is helpful for vacation rental owners?
A: Many small business owners use Quicken, Quickbooks and/or Microsoft Excel to handle the financial aspects of their business. Vacation rental owners also find these program quite useful for keeping track of their revenue and expenses. Compiling your reports on a quarterly basis is advantageous because come tax time, you will have to pull together only four reports instead of twelve. Without an organizational system in place, renting vacation rental properties can quickly become a bookkeeping nightmare.
A: Many small business owners use Quicken, Quickbooks and/or Microsoft Excel to handle the financial aspects of their business. Vacation rental owners also find these program quite useful for keeping track of their revenue and expenses. Compiling your reports on a quarterly basis is advantageous because come tax time, you will have to pull together only four reports instead of twelve. Without an organizational system in place, renting vacation rental properties can quickly become a bookkeeping nightmare.
Q: What is the best way to organize bookings?
A: There is no right answer to this question. HomeAway, VRBO and VacationRentals.com subscribers can use the HomeAway Connect calendar system to keep track of reservations and payments. However, we've seen a variety of systems used by vacation rental owners from hanging folders to paper organizers to Microsoft Outlook to third party solutions. The key is finding a system that works for you and sticking to it.
Q. Can I restrict people from smoking outside our vacation home?
A: There is no right answer to this question. HomeAway, VRBO and VacationRentals.com subscribers can use the HomeAway Connect calendar system to keep track of reservations and payments. However, we've seen a variety of systems used by vacation rental owners from hanging folders to paper organizers to Microsoft Outlook to third party solutions. The key is finding a system that works for you and sticking to it.
Q: How do I determine the minimum night stay for my cottage rental?
A: The first thing to consider is the location of your home. It is a good idea to compare to other property listings for your area to see how they advertise their rates. It is also important to consider the season. For the high season, you might be able to command a seven-night stay, but perhaps only three nights during the low season.
Q: I would love to hear your opinion on one-night stays, do you accept them at all?
A: The only time I will do a one night booking is if I have a stray one night open. Otherwise, I have a three-night minimum. But if you're looking at not renting at all vs. a one-nighter, it's your call. Just make sure to have the renters pay or split the cleaning fee…otherwise it could end up costing you more than you'd make.
Q. I have a new tanning bed and baby grand piano, which are not on your list of amenities on HomeAway. Where should I list them?
A: For amenities that are not listed specifically on HomeAway, you can simply add them to your free text descriptions and/or headline.
A: The only time I will do a one night booking is if I have a stray one night open. Otherwise, I have a three-night minimum. But if you're looking at not renting at all vs. a one-nighter, it's your call. Just make sure to have the renters pay or split the cleaning fee…otherwise it could end up costing you more than you'd make.
Q. I have a new tanning bed and baby grand piano, which are not on your list of amenities on HomeAway. Where should I list them?
A: For amenities that are not listed specifically on HomeAway, you can simply add them to your free text descriptions and/or headline.
A: Yes, you can try by adding wording to your contracts and on your advertisements; however, many smokers will just step outside and have a cigarette. I would, at a minimum, write something like PLEASE DO NOT throw cigarette butts in the yard. Ask your renters to please use an ashtray (if you provide them—I always have an ashtray on the decks even though my places are non-smoking). Some owners opt for a metal bucket filled with sand near the door.
Q: I need to sell my vacation property. How do I attempt to sell while I still have renters?
A: When selling your vacation rental property, you have two options:
1) Schedule showings of your home between renters.
2) Leave your property empty to allow more showings.
Your choice depends on how aggressively you want or need to sell your second home. If you need it sold right away, keeping your home open to potential buyers is your best bet. But if you need the rental income and are not in a particular hurry to sell, consider showing your home around renters. Whatever you decide, do not let real estate agents show your home while you have renters. Besides it being inconsiderate for the renters that have paid to use your home, you can't guarantee the condition of your home when potential buyers arrive.
|
© Copyright HomeAway, Inc. 2008 |
Updated: December 2, 2009 |
Related Podcast
Dealing with Newbie Anxiety
Louise Owenby speaks with Christine about the challenges and rewards of launching a vacation rental business.
Subscribe to the Podcast in iTunes