An old friend of mine who owns and operates a small development company showed up in town for a weekend event. We blocked out some time to revisit the old days, and what was next for his living and work future. Like me, his four children had grown and gone.
"If I were to do it again," Vince said, "I probably would not have focused so much on commercial buildings. They are difficult to cash-flow because of tenant demands and tenant turnover. They all expect so much in improvements now when they move in. I probably would have bought some nice vacation properties and rented them out. Maybe even moved into one."
The vacation rental industry continues to thrive. More and more owners are operating small vacation-home businesses, especially in retirement. They are finding that even in a down economy, families often find a way to get away.
The "staycation" philosophy rarely lasts longer than one year; people tend to invest in family vacations and reunions consistently — even if for shorter periods of time.
Helpful tools that enable vacation-home owners to run their businesses more efficiently also are on the rise. For example, HotSpot Tax Services, a Greenwood Village, Colo.-based company, specializes in gathering and paying city, county and state taxes for homes throughout the country.
"My brother and I bought a three-bedroom condo in Vail in 1999 and decided to rent it out to defray the costs," said HotSpot founder and partner Rob Stephens. "We checked out many of the property management models at the time and each required a commission of about 40 or 50 percent. We decided to list on the VRBO website for something like $119 a year and renting it out that way worked great."
While exploring ways to best execute scheduling and cleaning, the brothers discovered three different tax forms that needed to be registered and paid.
"We were both CPAs (certified public accountants) and we began to wonder if other rental property owners understood what they needed to do to be in compliance," Stephens said. "That discovery really provided the basis for our business model."
HotSpot charges a one-time setup fee of $49.95, and monthly ($6) or quarterly ($11) filing fees and a $19.95 annual fee per property. Its six basic services include:
1. Obtain any required business or tax licenses based on location
If an owner has not collected these taxes in the past or just purchased a property, HotSpot obtains the proper registration and license from the appropriate tax jurisdictions.
2. Notification of the exact tax rate needed to charge renters
Based on the legal address of your vacation property, the company determines the applicable tax jurisdictions, tax rate and filing frequency. It also keeps owners informed of any tax rate or rule changes.
3. Reporting reminders
The system tracks taxes that are due and automatically sends an email when it is time to report rental activity and file tax returns.
4. Files monthly/quarterly tax returns and remits payments on an owner’s behalf
Customized software computes and collects the taxes due directly from an owner’s bank account. The company files tax returns electronically or prepares and files the tax return forms and remits payment of the taxes on the owner’s behalf.
Retains copies of all tax returns filed. A history of all reported revenue, tax payments and tax calculations are posted to a personal account.
Handles any correspondence with the tax jurisdictions. If an owner receives a letter, notice or any correspondence from a tax jurisdiction, HotSpot provides a response.
"For about $130 a year, we take care of all tax issues," Stephens said. "It offers owners some peace of mind and also is a tax-deductible business expense."
Another new vacation property service is San Francisco-based Yapstone, the parent company of RentPayment.com, which molded its electronic-payment program developed for apartments and commercial properties to fit the vacation rental industry.
RentPayment allows owners to accept credit cards, debit cards and electronic checks, as well as convert paper checks to electronic payments. The group options this company has set up with rental sites like HomeAway (parent of VRBO) are far less expensive than if an owner were to go it alone.
"What blows owners away is that we can get them better rates and fees on their credit cards than they can get anywhere else," said Matthew Golis, Yapstone’s chief executive. "There’s no setup fee, no monthly fees … it’s a fully operational expense platform with an electronic check option. The vacation rental industry has been incredibly fragmented and what we offer no single owner could really do by himself."