Rental Income

Rental Income For Your Property

It is very common for property owners to obtain rental income to cover some of the expenses of their property, but also have someone look after the property when they do not live there.

You really need to speak with either your Certified Public Accountant or tax attorney as to how to structure the onwership of your property.  There are two different ways to take title to the unit or home, either as a second home or an investmernt property.  There are some grey areas of interpretation between the two and that is where you will need the advice.

The property rental industry in Breckenridge and Summit County is going though some changes with the advent of the internet, as are many other service industries.

It used to be years ago, before the internet came along, that property owners who wanted to obtain rental income, would contract with a traditional short term rental managment company.  This company was responsible for obviously obtaining rental income and also maintaining and cleaning the interior of the unit or home.  How in those days and to a lesser extent today, they would market the property primarily by becoing members of the Breckenridge Resort Chamber.  The Breckenridge Resort Chamber (BRC) owns and manages Central Reservations.  The BRC would market Breckenidge and the resort through trade shows, ski show exhibits, magazine, newspaper, billboard , tv and radio advertising.  When someone called the 800 number, it would be routed to Central Reservations to take the booking.  Central Reservations would have a database of all the participating management companies units or properties available for reserving for vacations.   The central reservation staff member would qualify the prospective guest about what size unit they would like, location, price range, date, etc.   The guest would really be trusting to a large extent on the knowledge of that employee for making the choice for the unit, as many times the guest does not know the location or property.  The booking and deposit would be made, and then Central Reservations would FAX the booking to the management company to take over from there.  For this service the BRC would charge upwards of 20% of the booking as a fee.

The participating management company would then make contact with the guest and maybe send out a welcome and information package.  When the guest finally arrives in Breckenridge, in most cases, they would show up at the management companies check-in desk, pick up their keys, etc. and go to their unit or home that they have rented.  The management company would be responsible for towel changes, cleaning the property, or any other problems that the guest may have, like a plumbing problem or something.  For this service the management company would quite rightly charge their fee to the property owner.  This was quite oftern and still is a 20% fee of the total rental income obtained.  So when you add the 20% that the BRC got, then the 20% that the management company got, that would equate to 40% to the management company (20% of which they have to pay the BRC) and 60% to the owner.  Hence the 60/40% split that is so often heard.

Then the internet came along which has changed things.  A the years have gone by and the adoption of using that internet is now just about in every household, potential guests are researching units or properties for rent themselves.  Everything now is so much based on visual presentation.  The guest can look at interior shots of the property, virtual tours, calendar availability, ariel location shots of the property.  They can make the booking directly themselves with the owner or the managment company and make the deposit by Paypal or credit card online.  All this without using BRC Central Reservations!  With this in mind, there has been an increased split trend back to the owner.

However, many owners are busy professional people and do not have time for taking bookings or dealing with guests, so the management company is still the way to go.  For some taking, on more responsability and contracting with a made or cleaning company to clean, inventory check and change the combination of the manual lockbox on the property between check-ins, having a plumber or handyman service on call if things are not right in the unit for the guest and obtaining 100% of the income is the way to go.

Good management companies realize that owners want to participate in the marketing of their property and will cooperate and work out a lesser fee for the bookings that the owner directly obtains for the unit on dates that the managment company has not already booked.  It is a great improvement or option for the property owner.  For the owners who want to carry out a rental by owner business, they may or may not book the property out as many days as full blown management company but they obtain 100% of the income minus costs.  In many cases they can obtain equal or more income per year than the old way of doing things for less days rental per year, which means less wear and tear and more days for them to enjoy using the unit or home!

There are different marketing strategies and ways to negotiate with a management company than I can write here.  If you have more questions, give me a call -Andrew Biggin at 970-547-7751.