VRBO, Airbnb, and You
VRBO, Airbnb, and You
After their son moved away, empty nesters and Long & Foster agents Trudy and Nick Vandekar used his downstairs bedroom as an exercise room and office. But this year, the couple joined the ranks of thousands of Americans who’ve opened their homes to strangers for profit by becoming Airbnb hosts.
Airbnb has gained popularity in recent years, pairing up travelers and home owners with spare bedrooms (or, in some cases, spare sofas). But it’s not the only game in town. While Airbnb’s niche is travelers seeking low-cost and off-the-beaten path alternatives to the generic hotel experience, VRBO—which owns HomeAway and Vacationrentals.com—is targeting popular destinations for vacationers traveling in groups.
Benefits Beyond the Buck
Although guests pay a modest $75 to stay in the Vandekars’ spare room with a private entrance, the Berwyn, Pa.–based real estate agents have also gained a new perspective on homes that they can share with prospective buyers.
“Being an Airbnb host gives you another way to look at houses. It allows you to advise your clients,” explains Trudy Vandekar. “For instance, ‘This house potentially has the ability to rent part of it out. … If it is a stretch to buy the house, this is an easy way to make extra money without a permanent tenant.’”
This type of practical advice is why home-sharing sites are gaining popularity among home owners. For instance, HomeAway says its average listing generates $28,000 in bookings each year and more than half of the owners on HomeAway cover 75 percent of their mortgage by renting out their home.
Another perk for the Vandekars is that Airbnb also allows them to extend their brand into the surrounding community. “Although I do offer a simple breakfast, people like to go out for breakfast. I’ve reached out to a few independently owned breakfast places and said, ‘I’ll promote you if you promote me.’”
Transparent and Free
“Zero cost and a lot of value” is how Lynne Pope describes the home-sharing proposition. “It’s so easy. In a way, it’s like the MLS; you can easily see what others listings are getting,” says Pope, an agent with RE/MAX Estate Properties in Manhattan Beach, Calif. Although she lists her beach house on VRBO and Airbnb, she prefers Airbnb because, in her view, the site’s clientele is younger and has deeper pockets.
However, Pope credits VRBO with helping her pick up a buyer client. She says when she rented her beach house to one guest, “we had some good interaction. I said, ‘Whenever you get ready to buy a home, I’ll give you special attention.’ He later bought a home from me.”
Like the Vandekars, Pope notes that being versed in the world of home sharing has helped her gain understanding in other areas of her local real estate market.
In October, Pope hosted a broker’s open house on a two-bedroom home with a listing price of $974,500. About 38 agents viewed the property, and several agents whose clients were looking for investments inquired about using the house as a VRBO property, Pope says.
Guests Gone Wild
Home-sharing guests recently made the headlines after registering with aliases and ransacking properties or throwing wild parties in hosts’ homes or condominiums, revealing potential risks. Guests using home-sharing sites can purchase a property damage rider from CSA Travel Protection and Insurance Services to make sure they’re not liable for unintentional damages.
Hosts, however, should read the fine print of their homeowner’s insurance policy and leasing agreements before listing their property on home-sharing sites. While Airbnb offers a $1,000,000 Host Guarantee, double the amount offered in 2012, this guarantee appears porous, explicitly stating that it does not cover “cash and securities, pets, damage to shared or common areas,” and offers limited coverage of jewelry, collectibles and artwork.
Similarly, VRBO allows hosts to factor in property damage protection in the listing’s rental price, which provides up to $5,000 for accidental damage to the rental property that exceeds the damage deposit. If that amount is surpassed, hosts should not assume their homeowner’s or renter’s insurance policy will pick up the pieces and cover the difference. Most homeowner’s insurance policies do not cover commercial uses of properties. Property owners and agents entering the home-sharing space should consult their insurance carrier to identify potential gaps in coverage or conflicts of interest.
She also represents a five-bedroom rental property within walking distance of the beach that carries an $11,000 monthly lease. The property does not have a tenant, so Pope says "the owners are thinking of turning it into a VRBO, which means we have to furnish it, which is kind of a drag.”
Pros Help Owners Make the Most of Home Sharing
Another expense biting into the profit margins for these rentals is that local communities are getting serious about enforcing taxes associated with home-sharing sites. In September Airbnb announced it would begin collecting and remitting a 14 percent hotel occupancy fee for bookings in San Francisco.
“Tax compliance is a big issue. Renting a room on a short-term basis—less than 30 days—triggers sales and occupancy taxes, and these taxes need to be paid quarterly,” says Rob Stephens, president of Greenwood Village, Colo.–based HotSpot Tax Services.
His firm partners with VRBO and HomeAway and sets these collections on a sort of autopilot. Like a payroll service, HotSpot Tax Services prompts owners to report rental revenue and then calculates and files taxes for property owners, charging $10 to $12 per month per property for private owners and less for property management companies. “We have a lot of [real estate agents] who refer our services to their clients who dabble in leasing properties,” Stephens says.
In fact, there are a lot of ways that real estate pros can assist clients interested in dabbling in the home-sharing business. Staging properties, delivering high-touch customer service, managing multiple properties, and collecting remittances and nonrefundable damage deposits are property management functions that are familiar terrain for real estate agents, but not for the average home owner. That’s why some home owners outsource the property management duties associated with short-term home rental to agents, says Jon Gray, senior vice president of HomeAway. He notes that it typically takes eight to nine hours per week to manage a home, and that the property manager usually takes a percentage of the rent in exchange for their services.
‘A Natural Fit’
Sites like Airbnb and VRBO can be a good place for agents to “park” a property and earn income while a market rebounds or a buyer surfaces. And although it’s hard to determine how many real estate agents are using home-sharing sites, Gray says the number is significant, and that more than 350,000 HomeAway listings are professionally managed.
“Some of our largest customers are real estate agencies who also do property management, and they find a lot of success in marketing their properties through our sites,” Gray says. He also corroborates Pope’s and the Vandekars’ experiences, noting that agents using the site gain a new perspective on properties. “They are able to sell homes in vacation markets better based on past rental income,” Gray says. “They use it as a unique selling feature of the home to say, ‘By the way, it grossed $30,000 on VRBO last year, so that’s something you should think about in your calculus of whether to buy this home.’ I think it’s really an effective tool for real estate agents.”
According to Gray, travelers have not expressed a preference for renting from a real estate agent, private owner, or professional property manager. The bottom line, he says, is, “Travelers are looking for great home to stay in.” Conversely, “People have realized it’s not that big a deal to have people rent their homes.”
These new attitudes have created another venue for real estate agents to market their services and leverage properties. That’s why, when Gray considers his site and real estate agents, he says: “It is a natural fit.”