April 4, 2016
Case Study: Frustrated with Self-Managing, Homeowner Stops Doing the Work & Makes More Money
Relieve a frustrated homeowner from his duties to his vacation rental, and help him generate more rental income from his family vacation home.
Lance and his family live in northern California. Wanting a place where his family could escape their busy lives and create memories together, Lance purchased a $200,000 Palm Springs vacation home in 2008. The home was perfect for his family: With four bedrooms, a private pool, a hot tub, fireplace, and grill, the home was a relaxing getaway for Lance and his family.
Soon after buying the house, however, Lance realized that the family wasn’t going to be able to use the vacation home as often as they’d like.
In order to make his purchase more valuable to his family, Lance decided to start renting out the home and self-managing the rental process.
For a while, Lance enjoyed self-managing the home. A hospitable man, he would create personable experiences for each of his guests.
The tough part for Lance was managing the booking process: With many interested guests, Lance was glued to the phones and his emails. As a professional Salesperson, Lance already was on the phone for most of the day. When he came home from work, the last thing he wanted was to again be on the phones to cater to potential guests.
The Breaking Point
With the music and arts festival, Coachella, being so close to the home, Lance would get nearly 10 calls a day around festival season. On top of managing the bookings and the calendar, however, Lance also had to vet each caller to determine whether or not they’d be a good fit or potentially trash his home.
To simplify the vetting process, Lance came up with a houseguest rule: He would not allow anyone under 25 to stay in his home.
Year-round, Lance continued to be careful when vetting guests. Even with the rule in place, however, it was difficult—if not impossible—for him to determine how truthful his renters were with their intentions. Eventually, fully vetting his guests proved to be impossible even for the most cautious of homeowners.
One day after allowing a group of six seemingly responsible 30-year-old golfers from VRBO stay in his home, Lance found his property in complete disarray.
Lance was utterly shocked at the condition in which he found his property: Cigarette butts littered the floors, remnants of stale vomit were splattered on his tiled and carpeted floors, and garbage was strewn about everywhere.
He immediately called his cleaners, but even with several cleaners working on the home, it took them three days to fully sanitize the home and prepare it for the next group of guests. Lance kept the $750 deposit he required, but it still was not enough to cover the damage and cleaning expenses.
Lance had reached his breaking point.
Soon after the incident with the golfers, Lance received a call from Rented.com associate, Paul Liguori.
Paul explained the concept of fixed rent arrangements to Lance—a solution that would provide Lance with guaranteed rental income and turnkey service from a professional management company.
Unlike traditional vacation rental property management contracts in which the homeowner might have to pay the gardeners, cleaners, etc. each month, Rented.com’s solution was all inclusive. Instead of Lance paying his staff monthly checks, a property management company would pay Lance a guaranteed and fixed amount every month.
Convinced that Rented.com was “too good to be true” and impressed with how easy it seemed to be, Lance decided to try to find a professional vacation rental management company through Rented.com’s marketplace.
Richard worked with Paul to create a private profile on Rented.com’s website that managers would use to place their offers. Managers would have 7 days to offer the highest amount they would be willing to pay Lance.
After the bids came in, Lance liked what he saw. The highest bidding manager estimated that he could make approximately $57,000 in retail rates from the home.
As the manager would also be paying for marketing, booking, occupancy taxes, maintenance, cleaning, and home essentials (i.e., linens, towels, etc.) without charging Richard, they estimated that after expenses, they would be able to offer Lance a total of $37,000, giving him an 18.5% cap rate.
Lance was extremely happy with the offers he received and decided to accept his highest offer.
Lance is still fairly new to his term; however, he has already seen the results from his fixed rent arrangement. With no work on Lance’s end, he is happy to simply receive a check in the mail each month.
[The management company Rented.com set me up with] is very good at renting out my home; it’s like a revolving door.
And that’s why Lance can now…