You’ve found a place in the sun, but you can’t use it all the time. If you were going to rent it out — perhaps to offset maintenance and mortgage costs — what would be the best thing you could do for the place?
“Add a hot tub,” said Bill May, whose Sunspots Inns, Resorts & Rentals owns and maintains more than 100 resort and rental properties in Hawaii and the mainland.
“It’s a four-season amenity and something people really like to have available even though they might not use it. It would probably pay for itself three times over in less than a year.”
Vacation- and investment-home sales continue to rise. Consumers are not only looking to get a foot in the door to a reliable investment, but they are also seeking ways to get a leg up on resort-home competitors.
“What people want and will remember is that the home is pristinely clean,” said Penny Taylor, May’s wife and business partner. “Renters remember crisp linens and sparkling floors and are after a spot where all they need to bring is clothes and food.”
The hot-tub addition has been a favorite since the couple bought a ski condominium a few years ago. May rented out his condo, which has a hot tub, and he was asked to rent an identical condo owned by his neighbor. The neighbor’s unit had the same floor plan, exposure and appointments — except for the hot tub.
“The figures showed the unit with the hot tub earned $14,000 more a year in rent than the condo without the hot tub,” May said. “When I showed the figures to the neighbor, he had a hot tub installed for about $4,000, and he then made close to $14,000 in additional rental income because of it.”
The Mays said hot-tub maintenance horror stories are overestimated and that high-quality tubs with basic features (“heat on, heat off — jets on, jets off”) work best. A maintenance contract from a reliable supplier ensures proper attention for both renters and owners.
The Mays got into the resort rental game about six years ago when they bought a home on a mountain lake and another in Poipu on the Hawaiian Island of Kauai, which became popular with visitors who wanted to return as renters. However, trying to offset the monthly mortgage payment by renting has become more difficult with rising home prices and skittish interest rates.
“We do think owning a second home is a wonderful prospect,” May said. “And we now hope owners approach it from the tried-and-true aspect of first having a home for their families and profiting second. That’s a sane and reasonable philosophy. No one expects values to double and triple again in three to five years — but who knows.”
According to a new second-home study released by the National Association of Realtors in May, 75 percent of vacation-home owners purchased for personal use (although one-third of those also wanted to diversify investments) and 18 percent intended that the home would become a primary residence in retirement.
Only 13 percent of vacation owners listed rental income as a reason to buy. The typical owner spends 39 nights per year at their property, and three-quarters do not rent out, the survey revealed. Of those who do rent their vacation home, the median number is 12 nights per year.
An unexpectedly high number of vacation-home owners — 21 percent — own two or more vacation homes, according to NAR. In addition, 34 percent of vacation-home owners report they own two or more investment properties.
The survey also revealed that two-thirds of vacation-home buyers wanted to be close to an ocean, river or lake; 39 percent wanted to be close to recreational or sporting activities; 38 percent wanted to be close to vacation or resort areas; and 31 percent wanted to be close to mountains or other natural attractions.
Results indicated that the median size of a vacation home is 1,480 square feet and that 29 percent were new when purchased. Owners estimated the current value to be a median of $300,000; 68 percent said the value of that property was lower than their primary residence. Sixty-five percent of owners said their vacation property was a better investment than stocks.
Now, it’s time to consider investing in a hot tub.
Tom Kelly’s new book, “Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border,” was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com. Tom can be reached at email@example.com.