THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, February 17, 1996 TAG: 9602160414
SECTION: REAL ESTATE WEEKLY PAGE: 22 EDITION: FINAL
COLUMN: About the Outer Banks
SOURCE: Chris Kidder
LENGTH: Long : 109 lines
Columns I wrote late last year concerning vacation rentals at Pine Island are still drawing comment. The controversy centers on two points that should be interest to anyone - not just Pine Island owners - contemplating rental property investment.
How do buyers determine whether projected rental income is sales hype or solid analysis? And how should a buyer go about choosing a rental agency to make the projection a reality?
Some of the homeowner comments printed in the previous columns implied that real estate agents weren't to be trusted. These drew the ire of Cola Vaughan, a broker who spent many years with Joe Lamb & Associates before forming his own company a year ago.
``I'm greatly concerned about the idea that you can't trust a real estate agent to give you good information,'' Vaughan said. If an agent really gave buyers information that was as intentionally distorted as some of the comments I published suggested, it raises legal questions that ought to be pursued through the North Carolina Real Estate Commission, or a lawyer, he said.
``You can, and should, expect better from an agent.''
Yet Vaughan admitted that there are probably distortions in some of the figures tossed around to clinch sales and rental contracts. With new developments, where sales and rentals are initially controlled by one company, it's easy to do, he said. Requiring agents to use a standardized rental analysis form might provide buyers with more reliable numbers.
With his own clients, Vaughan said, ``I make it a goal to do a careful, conservative rental projection. I want to err on the side of caution.'' It pays off because people don't count on the extra income and are delighted when they get it.
I'm not sure that Vaughan's comments shed any new light on the old dilemma of whom to trust. The fact is that some agents take liberties with numbers and buyers need to beware. But he does help remind us that not all agents will say whatever it takes to close a deal. How you know which is which is still open to question.
When it comes to renting vacation property, I've always advised owners to seek out a rental company with a good showing in the neighborhood where their property is located. Vaughan disagreed with my advice when property is in a new subdivision like Pine Island. He made some good points.
``Choose the best, reputable company that has the least number of cottages in the development,'' advised Vaughan. ``Pick a company with a presence in the area, a company that wants to break into that market but isn't there yet.
``You can have a property that's fundamentally sound, but if the rental company has to spread inquiries through 60 or 70 listings, you're just not going to get the weeks you want. There's only so much demand that can funnel through one opening,'' said Vaughan, drawing on his experience as a rental manager.
Even companies that don't specialize in a particular location will get their share of requests.
One company with 50 cottages in one development will have to spread their calls thinner than a company that has only a few cottages. In Pine Island, for example, rentals were concentrated in two companies. ``If those owners had spread themselves around, they'd have come out better,'' said Vaughan.
He was right on the money.
The 24 Pine Island houses listed with B&B on the Beach averaged 24 rental weeks in 1995, according to Doug Brindley, the company's president. (In an earlier column, I said his occupancy rates ``matched'' R&R's: In fact, they were higher).
Ben Garrett, president of R&R Resort Rental Properties, said his 58 Pine Island properties averaged 18.5 weeks. Twiddy & Co., with only six houses, averaged over 38 weeks per house.
Jackie Myers, rental manager for Twiddy, said that Vaughan's theory may work in Pine Island but she doesn't buy into it across the board. ``I think it has some validity because Pine Island is so high priced,'' she explained. ``But if you look at the Villages at Ocean Hill, we have 50 houses there and they all did great, too.''
Myers said she had no problem booking the company's six Pine Island houses, three of which were oceanfront properties. ``But if we suddenly got 50 houses in Pine Island, I'd be worried. Anyone should be. The high rents aren't for everyone. I wouldn't hesitate to tell an owner that we might have problems if we had that many houses.''
While everyone seems to agree that the flap over Pine Island's brief rental history is tied to numbers, some say the real culprit is rental rates.
I talked with another Pine Island owner several weeks ago. ``I've been hearing all these complaints about Pine Island,'' said the man. ``It hasn't happened to me.''.
The owner, a Sanderling resident, said he's owned rental property on the Outer Banks for 24 years. Britt Real Estate handles his Pine Island house. ``I feel strongly that if you charge people a fair rental for a well-outfitted house, you'll do okay.''
``I see people inching up the rental rates just to see how much they can get. In Pine Island, it's my impression that a majority of the cottages are too pricey. Price is important.''
One Pennsylvania owner who responded to my request for Pine Island comments said he switched rental companies at the end of last summer because his company had booked only 10 weeks for the year. ``My brother had 22 weeks four doors away (through another company),'' said the man.
The new company asked him to drop his prime season rate by $300, although those weeks had actually rented ``pretty well,'' the owner said. ``I don't really know what made the difference, but this year looks like it's doing great.''
``All I can say is one company was hitting home runs and the other was hitting only singles and doubles.''
That's the bottom line: Finding a company that turns rental properties into winners. If someone thinks she has a foolproof way to pick 'em, let me know. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags Head,
N.C. 27959. Or e-mail her at realkidd(AT)aol.com
by CNB