Vacation homes: Not just for the rich and famous

By Teri Cettina • Bankrate.com

It may hit you every year about this time as you schedule your annual family trip to the coast or other favorite vacation spot. "Wouldn't it be great if we owned our own beach home (or condo or ski chalet)? Instead of paying rent to someone else, we'd be paying ourselves."

Then you sigh, write out a deposit check and envy those wealthy tycoons who can afford to own vacation homes.

Boston-area resident Paul Boulanger would challenge you to think again. This self-described "old-fashioned tightwad" saved money for years and now owns a time share in The Bahamas, a vacation condo in Florida and a traditional saltbox home on a secluded peninsula in Maine.

He's not fond of mortgages, so Boulanger scrimped and paid cash for the properties. And because he rents out and maintains his rentals directly, rather than paying exorbitant fees to a property-management company, Boulanger is making good money with this less-than-part-time venture. (His "real" job is with a printing company.)

In fact, Boulanger says he needs to rent out his Maine home for less than eight weeks each year to cover the property's annual expenses. Any additional rental weeks -- and he gets a lot of them -- are pure profit.

Buying homes for love and profit
Boulanger is very happy that his rentals make money, but that wasn't the sole reason he bought them. "I bought homes in places I personally love -- places I like to visit every year -- with the idea that they might even become my retirement homes," he says. "Renting them out was simply a way to make them affordable."

Christine Karpinksi, author of "How to Rent Vacation Properties By Owner," says she teaches seminars around the country "to help regular people learn how to buy and rent out their own vacation homes in places they love." She's more interested in long-term investments than in showing people how to buy cheap properties, fix them up and sell them quickly.
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The 17-week formula
How do you know if you can afford a vacation home -- even with the help of renters? Karpinksi has developed a simple profitability formula. She estimates that one peak-week rental fee should be enough -- and hopefully more than enough -- to pay the home's monthly mortgage if you finance your purchase.

For example, if you borrow $300,000 at 5.5 percent for 30 years on your beach cottage, your monthly house payment would be $1,703.36. That should be your minimum weekly peak-rate rental fee, Karpinski advises. If you don't think you can charge that much for rent, don't buy, she says.

However, if you can be reasonably sure of renting your home for at least 17 weeks a year, you should break even. Most owners can count on 12 peak rental weeks each year. Those 12 weeks each year should pay the annual mortgage. Five additional weeks of non-peak rental income usually enable owners to cover taxes, cleaning and maintenance expenses, and other incidentals.

Eliminating the middleman
The crucial key to the vacation home dream, says Karpinski, is to manage the properties yourself, rather than give anywhere from 40 percent to 60 percent of the rental profits to a property-management middleman.

Karpinski says managing your own rentals is much easier and less time-consuming than most people might think. She encourages homeowners to start by listing their vacation homes using online services such as VacationRentalDirect.com, Vacation Rentals.com and Vacation Rentals By Owner. Sites such as these typically charge flat fees to advertise the properties and can help you reach hundreds of thousands of potential renters.

CyberRentals, which currently lists some 10,000 vacation properties throughout the world, charges as little as $60 for a three-month listing -- about the same price some owners would pay for a single day's ad in the classified section of a major newspaper.