LITMIR.BIZ

      An inspector for a rental agency recalls arriving at a property one late May afternoon to value the property for inclusion in the agency’s portfolio. He reports:

      “The outside of the cottage was just gorgeous — lawns leading down to sparkling water, flower tubs on the deck — I just had great feelings about it. Then I went inside. What a letdown that was, although it could have been so different. There was cherry wood flooring, cedar and pine surrounds, with huge picture windows overlooking the lake. But the furniture was ancient and mildewed, the appliances looked like they were out of the ark, and a very unpleasant smell pervaded every room. The owner seemed unaware that there was anything unusual about this and chatted about how much he could make on rental. He was already renting ad hoc to friends for $1,000 per week, but was hoping to achieve more through our agency. My report was clear: If he was willing to upgrade throughout, have the place thoroughly cleaned, and employ a service to undertake rental turnarounds, he could expect to increase his rental income by as much as 75 percent. Outlay on the upgrades and maintenance would be recouped over the first summer.”

      If your property is on the waterfront, what watercraft are you prepared to offer to guests? The minimum should be a canoe or pedal boat, although some owners offer a rowboat, sailboat, or windsurfer. Allowing your guests the use of a boat with a motor is not recommended as this has greater inherent risks and subsequently higher insurance premiums. In general, it is far better to have details about the local marina, with daily and weekly rental rates.

      Do you have launching facilities for guests’ own boats? Is there a marina or public boat launch nearby? Are there bicycles available for guest use? Do you have a pool/billiard table? All of these features add value and help your cottage to stand out in an overcrowded off-season market.

      For year-round rental, think about the attractiveness of fall and winter vacations at your cottage. Is there a wood-burning stove, a Jacuzzi, perhaps a hot tub? Satellite TV is definitely an attraction for out-of-season guests, so it is worth the cost of installing it. Some owners of cottages attracting quality renters offer computer and modem connection for those who need to be in constant contact with their office. If you are in an area with high-speed Internet connection, there is distinct added value in offering this. Remember that providing these additional amenities may incur maintenance costs that must be allowed for in your calculations. The overhead for keeping a hot tub going throughout the winter, for instance, can be high, so your winter rental rate should reflect this. Owners in ski areas charge more for their vacation rentals in the winter than in summer — and their occupancy rates are higher! Just remember that higher prices equal higher expectations. If you intend to charge executive rates, you must provide executive facilities to match.

      Will It Rent As It Is?

      A good starting point to gauge how well your property will rent is to do an analysis of the good and the bad points, the opportunities you have available to rent, and the problems you may face along the way. This is known as a SWOT (Strengths, Weaknesses, Opportunities, and Threats) summary and is a useful way to determine what is unique about your property. In this analysis, what may devalue your property are its weaknesses, and the obstacles you may have to overcome in order to maximize your investment are the threats.

      Sample 2 is an example of a SWOT analysis.

       Sample 2: SWOT Analysis