THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, January 20, 1996 TAG: 9601190467
SECTION: REAL ESTATE WEEKLY PAGE: 18 EDITION: FINAL
COLUMN: ABOUT THE OUTER BANKS
SOURCE: Chris Kidder
LENGTH: Long : 102 lines
While winter makes me think fondly about snow and cold places, judging by my mail this past month it makes most of you think about summer vacations.
Would-be renters want to know how to find the perfect cottage. Cottage owners want to know where to find the perfect tenants.
One correspondent found the perfect cottage but, after renting it for four summers in a row, has been priced out of the house for the 1996 season. The rent increased from $1,330 a week to $1,650.
This unhappy renter called the real estate company to ask why the increase was so big. The owner had put in a hot tub, the renter was told. Although the rental agent had recommended an increase of $200, the owner decided the tub merited more rent.
``What this did was make it impossible for us to stay there next year so we will have to start looking for a new place to stay. Would you attribute something like this to not enough thought as to what an increase like this might do to the rentals for the year?'' the writer asked. ``Or to just plain greed?''
In the case of property management, an agent's recommendation for rent increases is usually based on solid knowledge of what the market will bear. Since agents earn their income from actual rentals of the property they manage, it is always in their best interest to maximize a property's income. No good agent would ask an owner to charge less rent than they could reasonably expect renters to pay.
But rental income isn't just a matter of dollars per week. The number of weeks rented each season is another factor and there are different theories on how this works.
Some rental agents tell owners that they're better off to get as much money as possible during the peak summer weeks (a time when occupancy rates almost guarantee rentals no matter what the price) and not worry about the rest of the year.
Part of their argument is that renting for fewer weeks reduces wear-and-tear on the property and utility bills.
Other agents believe that more weeks for less rent is better. They believe the longer rental season builds a stronger clientele base and makes the profitability of the property less vulnerable to market changes, economic down-turns or bad weather.
These differences in rental philosophy are fueling a small rental war at Pine Island, north of Duck. Phenomenal sales there have pumped nearly 200 rental houses into a market that didn't exist three years ago.
Two of the rental agents who have gone head-to-head there, Doug Brindley, president of B&B on the Beach and Ben Garrett, president of R&R Realty, represent these two market approaches. ``I believe in value-based increases (in rent),'' says Brindley. ``I don't think this market is ready for $6,000 a week rents.''
Garrett, on the other hand, insists that $6,000 does not price an owner out of the market. Six thousand dollars split between several families can be a bargain compared to staying in a hotel, he says. ``I don't think dropping prices so that owners can get more weeks is the answer. I look at gross receipts: It's that 18- to 20-week window where we make money.''
Going back to my correspondent's questions about rent increases, I can't say what motivates people to disregard the professionals they're paying for advice. But I will say that owners are foolish to stay with a company in which they have no confidence.
Once owners ignore their agents' advice, once they decide they know more about setting rental rates than the pros know, the relationship is shot.
No two property management companies on the Outer Banks are exactly alike. They all have their own way of looking at the market, as Brindley and Garrett - both experienced real estate agents - prove. Any owner should be able to find a rental agent with whom he can see eye-to-eye.
I also received a letter from an Elizabeth City reader who had decided not to use a rental agent for his vacation cottage.
``Could you tell me where I can get names and addresses of people who would like to rent our cottage?'' he wrote. ``I used to rent the cottage through a real estate agent but we wanted to try it on our own.''
My advice is don't try. I have yet to hear from any individual owner who has marketed a single vacation rental property on the Outer Banks and come out ahead.
If you feel you absolutely must pursue this, joining the Outer Banks Chamber of Commerce and the buying an ad in the Dare County Tourist Bureau's Vacation Directory is a good place to start. Working together promote tourism, these two agencies are the closest thing to a clearinghouse for rental referrals that the area has.
Your most affordable options for developing a client list would be to post a ``For Rent'' sign on the property with a telephone number and to run classified ads in local newspapers and in Norfolk, Richmond, Pittsburgh or one of the other cities from which we draw large numbers of vacationers.
Beyond the marketing of your property, the handling of security deposits, leases, cleaning and renter complaints and other details is no easy chore. You open yourself to all sorts of troublesome situations that rental agents normally handle on their owners' behalf.
The one scenario that might work with the do-it-yourself approach is an old, uncompetitive property in a less than desirable location where the owner is willing to rent a bargain rates and doesn't need regular rental income to pay the bills. But then, that's just my opinion. Shop around. You'll find others. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags Head,
N.C. 27959.
by CNB