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Long Distance Landlord

Long Distance Landlord

Mountain Life
By Hal Clifford
posted: 05/18/1998

First things first: Renting out your ski country home won't make you rich. "A realistic goal for anyone investing in a property is just to pay your bills," says Jack Stout, general manager of Alpine Vacation Rentals and Management in Teton Village, Wyo. So how do you break even? Agents around the country say the most critical component is to recognize that you are starting your own small business, with your home or condo as the capital investment. Treating it like a business, they say, will make it easier to do what it takes: Spend money to make money.

And you will have to spend money. The key to renting your property successfully is repeat business. You must nurture a loyal clientele that likes your place and wants to return to it every year. That means investing in decent dishes and flatware, providing cable TV, a good stereo system, a washer and dryer and other amenities that vacationing skiers have come to expect.

"People want more modern conveniences than they did a few years ago," says Dan Powers, property manager for The Prudential California Realty in Truckee, Calif. "The properties that provide those conveniences do better."

Whether your capital investment makes money depends on your property management firm-the staff of your "business." Set up interviews with agents to find out whether they are a good match. How long has the company been in business? How many properties do they represent, where are they, and are they similar to yours? How do they market properties? Go with licensed real estate agents; their license can be threatened if they screw up. In some states-California, for instance-not all rental agents need to be licensed.

All things being equal, hire an agent with an office near your property. That way, if pipes freeze or water heaters melt down, staff can be there quickly. Also, walk-ins to the agency's office probably want to rent nearby for convenience.

Ask to see a typical agent-owner contract and a copy of the company's liability insurance policy. The contract should be for a year at a time, self-renewing, with an easy-out clause that lets you cancel with reasonable notice and without cause.

A rental agency should have $7 million to $10 million in liability insurance, and should ask you to carry a policy of at least $1 million. Make sure the company's employees are also insured, so that if a maid dumps hot ashes in the trash and burns your house down, you aren't left empty-handed.

Get references-not only from current clients but past ones, too, who may speak more openly. Finally, ask to see the actual income and expense numbers for properties similar to yours. The agent should be willing to block out the property owner's identification and share the financial information with you.

Beware of rosy income projections. "Any property manager can make the numbers work on paper, but that's just paper," says Stout. "Be brutally honest."

Lastly, do all you can to make sure the property is rented as often as possible. It's an open secret in the property management business that while all properties are treated equally, some are more equal than others.

"Every property management company will tell you that they do a rotation system where they make sure every unit is booked equally," says Stout. "That being said, the people who are on the phone renting the units are human, and the end result is that the nicer units tend to get booked more frequently."

It helps, of course, to have the right kind of property: a ski-in, ski-out condo, a house with a stunning view or striking remodel. Beyond that, the best thing you can do is take care of the people who will be making your sales for you: the rental company's staff.

Reservation agents go on regular tours of rental properties to become familiar with them. Savvy owners, however, will invite these people to open house parties, sometimes catering the event. Remember, you're running a business-this is just a form of taking care of your sales team. Annd there's no rule against rewarding people who take care of you.

Plan to pay between 15- and 45- percent commission for short-term rentals. (The higher figure usually will include services such as snow removal, housekeeping and so on, while lower rates don't.) For long-term leases, the agent's cut runs from 10 to 20 percent.

It's reasonable to expect to cover your expenses (mortgage, taxes, maintenance) over the long haul-in five years, agents say. In exchange, you get to use your home a few weeks a year, and-with luck-the property will appreciate over time.

"There are people who try the quick turnaround, but that's the exception, not the rule," says Stout. "Unfortunately, that's the exception everyone hears about."

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