Richard Stein – Realtor®, Douglas Elliman, GREEN, SFR, CBR, eCertified®

Local Agent, Worldwide Marketing – Douglas Elliman Real Estate formerly Prudential Douglas Elliman Real Estate

3 Questions Clients Should Ask Before Buying a Vacation Rental

If you have buyers interested in purchasing a vacation property as an investment and for extra cash flow, now is a great time, according to finance expert Rob Stephens, co-founder and general manager of Avalara MyLodgeTax, a tax solutions provider. Sites like Airbnb and HomeAway have contributed to the explosive growth in the number of travelers seeking to rent private homes for comfort, privacy, and sometimes lower costs.

“There’s no question that the vacation rental business is booming,” Stephens says. The short-term rental market in the United States alone is approaching $18 billion in revenue, with a projected annual growth rate of 6.6 percent, he says.

However, before your buyers decide to take on a short-term rental, Stephens advises that you pass on these three questions to help ensure their success:

1. Is a vacation rental a smart investment for you? Buying a vacation property can certainly be exciting, especially if it’s in a destination where the buyers love to spend time themselves. However, your clients need to be confident that they can cover all the costs involved. In addition to the transaction costs, make sure they understand what it will take to operate the rental. Do your clients plan to manage the property themselves or hire a professional (possibly you)? A vacation rental only generates income when it’s occupied, so your client needs to figure out how many renters they need each month and how much to charge to cover the cost of the property, and then decide whether it’s realistic or not.

Beyond the Mortgage: Explore Ownership Expenses With Investors

2. What are the laws governing short-term rentals in the community? Before you put in that offer on behalf of your investor clients, make sure the community or homeowners association allow short-term rentals. “Many communities prohibit owners from renting out their homes for fewer than 30 days,” Stephens says. Even some cities and states are starting to impose regulations on vacation rentals, he adds. Help your clients investigate short-term rental laws and regulations, including fines and other penalties if the property doesn’t comply. Call the HOA property management company, visit the city hall website, and have conversations with local agents who also handle vacation rentals.

3. Which taxes and fees are you required to collect from guests? “Many real estate investors overlook the fact that lodging or occupancy taxes need to be paid in order to rent the home in compliance with city and state tax agencies,” Stephens says. State and local lodging taxes vary widely, and can change with little notice, Stephens says. Your buyers need a lodging tax compliance tool or software if they’re planning to handle the rental themselves. “The right tool will offer a full range of solutions, including determining the vacation rental taxes and reporting requirements as well as calculating and filing returns on a monthly or quarterly basis,” Stephens says.

Source: Rob Stephens, Avalara MyLodgeTax

Housing Will Likely Surge in These Cities

The South boasts many of the fastest-growing cities in the U.S., where unemployment is low and companies are hiring. Home prices are rising in many of these cities too, as new residents compete for the limited number of homes for sale. 

San Antonio, Texas, is the nation’s fastest growing city lately. Builders are putting up single-family homes in several master-planned communities in the city, and homes priced under $250,000 are getting snatched up in a matter of days. Phoenix saw the second biggest growth with the addition of more than 24,000 new residents. 

“Supply is at record lows, and prices continue to climb,” Tucker Blalock, an associate broker at The Brokery in Phoenix, told realtor.com®. 

The 10 fastest-growing cities, based on census data, are: 

  1. San Antonio, Texas
  2. Phoenix, Ariz.
  3. Dallas, Texas
  4. Fort Worth, Texas
  5. Los Angeles, Calif. 
  6. Seattle, Wash.
  7. Charlotte, N.C.
  8. Columbus, Ohio
  9. Frisco, Texas
  10. Atlanta, Ga. 

View the full top 15 list at realtor.com®.

Source: “The Fastest-Growing U.S. Cities Aren’t Where You’d Expect—and Home Prices Are Rising in Them,” realtor.com®

Report: Outside Remodeling Projects Pay Off

Tackling a project to spruce up a property’s outside may be a wise investment for both residential and commercial property owners, according to the National Association of REALTORS®’ and National Association of Landscape Professionals’ 2018 Remodeling Report: Outdoor Features. The outdoors doesn’t require a major overhaul to see a strong return either financially or in homeowner enjoyment. 

The outdoor project that produces the most substantial financial payout at resale is standard lawn care service. That alone recovers 267 percent of the project cost at resale, according to the report, which analyzed 13 outdoor residential projects and 10 commercial projects, based on REALTORS® responses of value. Landscape maintenance and tree care, both of which recovered 100 percent of the cost at resale, are also among the highest payback outdoor projects. Installing an irrigation system recouped 86 percent of the cost, according to the report.

“REALTORS® understand that a home’s first impression is its curb appeal, so when it comes time to sell, a well-manicured yard can be just as important as any indoor remodel,” says NAR President Elizabeth Mendenhall. “Even homeowners with no immediate plans to sell can gain more enjoyment and satisfaction from their home by taking on a project to revive their outdoor spaces.” 

As for which outdoor projects can bring the most enjoyment to homeowners, a fire feature and irrigation system tied for first place in the survey. Eighty-three percent of homeowners who installed a fire feature said they have a greater desire to be home since completing the project, and 69 percent of homeowners who installed an irrigation system said they feel a major sense of accomplishment when they think of the project. Other appealing projects included: a new wood deck, a water feature, statement landscaping, and an overall landscaping upgrade. 

“This report validates that landscaping is an investment worth making, offering the immediate benefits of increased enjoyment of your property, as well as desirable long-term value that holds if or when it comes time to sell,” says Missy Henriksen, vice president of public affairs at NALP. “From lawn and tree care to installing a new fire or water feature or landscape lighting, there’s no shortage of opportunities to enhance your landscape and to reap the benefits these upgrades provide.”

Further, 43 percent of REALTORS® surveyed said they suggested that a commercial client improve the curb appeal of a property before listing it for sale. The most frequently recommended projects were for standard lawn care, completing a landscape management service, and an overall landscape upgrade. 

“It is not just homeowners that need to think about curb appeal when it comes time to sell; a beautiful exterior is just as important for commercial property owners,” says Mendenhall. “In fact, 81 percent of REALTORS® said they believe curb appeal is important in attracting a buyer.” 

Source: National Association of REALTORS®

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