Tips for Renting Out Your Second Home

Renting out a vacation home can be a positive experience and help justify the cost and expense of vacation and second home ownership.

You may want to consider the following:

1. Rely on your real estate agent who has experience in vacation rental properties to give you a feel for the local market.

2. Check the fees on comparable rentals nearby on vacation-rental Web sites such as Homeaway.com, Ownerdirect.com, and Vamoose.com.

3. Determine whether the rental income would cover the costs of owning and maintaining the home. In addition to the mortgage and property taxes, the rental income should cover monthly utility costs, homeowners insurance, routine maintenance, and the cost of hiring someone to market, maintain and clean the home.

4. Decide who will manage the property. Fees for property management vary widely depending on location, but average fees run between 8% and 10% of the gross rental fee. The company should typically handle the maintenance, marketing and reservation.

5. Determine whether the home is a second home or an investment property. The IRS says if you use the home 15 days or more a year, or more than 10% of the days it is rented, it’s a second home so you can deduct expenses, including depreciation, repair costs and operating expenses.

6. Set up a rental contract. The contract should include details on cancellation fees, what the damage deposit covers and specifics on pets, smoking, etc. Free sample rental contracts can be found online at Formsguru.com, or for a fee you can order customized rental contracts from LawDepot.com.

7. Buy duplicates of bedding, towels, and kitchenware and store one set for your personal use away in a locked room or cabinet. Also, secure all personal objects, such as picture frames and family heirlooms.

Anyone have any other tips?

–Editor’s note: Tom Harris is the principal of Colorado Lifestyle Real Estate, which connects second home buyers and sellers with the top Realtors in Colorado resort towns. He blogs about Colorado’s real estate market for CH&L each week.