Turn Your Second Home Into an Asset
You love your second home but, to be honest, you’re not there as often as you’d like. Maybe you’ve got a big trip planned somewhere else this summer. Or, the kids now have jobs and you don’t feel like going to the beach house as much without them.
Either way, it’s a shame for it to sit empty. Especially since Canadian cottage prices are on a tear, and many people are looking for more “local” vacation ideas. Upkeep costs keep rising too, and that dock won’t fix itself. Maybe it’s time that your second home brought in an income of its own.
How can you rent out your cottage with the least amount of hassles?
Prep your digs – The first place to start is to fix the little things, like the ripped screen door or the exposed pipe.
Then, call your insurance company to make sure you’re covered for any damage during the rental period. Rentals must be specifically included on your policy and you should have at least $2 million worth of liability coverage. Adding this to your existing policy can cost $200 or more per year but is absolutely vital.
Gather your valuables and either remove them from the property or set aside in a locked closet or room. While most rentals go without incident, there is always the risk of breakage or damage.
Market your property – These days, most people use full-service rental websites such as Airbnb, Canada Stays, VRBO or Cottages in Canada. These sites either ask for a subscription, take a percentage of your rental income or pass on their fees to your renter, making the stay more expensive for them. However, they ensure your cottage gets seen, and can help you take deposits, final payments and communicate with customers.
You can also bypass these by setting up your own website and facilitate the entire transaction yourself. You may not get as many eyeballs on your listing as you would on Airbnb, but you’ll be able to keep all the money you make.
Price your rental based on amenities, such as number of bedrooms and proximity to water or tourist attractions, and also on the going rates in your region.
On the ground – Unless you plan on driving to your cabin every time you have a new rental, consider hiring a management rental company. They’ll do everything from visiting the property and taking photos to advertising and paperwork. Some will even include things like concierge services and on-site private chefs for upscale properties. A management agency could take care of things like cleaning and emergency repairs so that you don’t get a call at 2am with a problem.
Name your price – Price your rental based on amenities, such as number of bedrooms and proximity to water or tourist attractions, and also on the going rates in your region. “You can easily research the competition online and price your home competitively to increase occupancy. Most owners do dynamic pricing, charging more on weekends and for peak demand times, such as summer or ski season.
Pay attention to taxes – If you intend to rent out a cottage or ski chalet for many weeks of the year, there may be potential tax issues and this will likely mean more time spent tracking all of the income and expenses related to the property. Your advisor or accountant can help you understand the issues and explain the bookkeeping requirements.
Revenues earned from your cottage are taxable, but you can claim expenses, such as a portion of what it costs to run the cottage, plus rental-related costs such as cleaning and property management fees, etc.
But in the end, don’t forget to book a week or weekend off for yourself, too. You may still get the urge to get to the cottage, even if it’s only once a year.