Brokers say summer rentals are big business
Photo by Ralph Stewart
Seasonal rentals is big business on Martha's Vineyard. It is a healthy business and it is growing according to Sean Federowicz, co-owner of Coldwell Banker Landmarks Real Estate in Vineyard Haven and others in the trade. Where real estate businesses like his used to handle most of the rental transactions on the Island many homeowners now use the Internet to advertise and book their homes themselves through online services. But an increase in rental properties has feed the market and many real estate companies the Times contacted consider their rental businesses to be an important income stream. Most of them also list rental properties online on their own sites.
The rental market remained strong over the last decade and even benefited from the real estate sales downturn that began with the bursting of the real estate bubble and the resulting recession in 2008 according to Mr. Federowicz and others in the business. Mr. Federowicz said people who might have been buyers before the downturn sometimes decided to rent instead because of the market uncertainty. He added that damage along the Jersey shore from hurricane Sandy in October has pushed some new summer renters up to the Vineyard helping to bolster the market.
Renting during the summer on Martha's Vineyard is a tradition for many families, some as a homeowner renting out a house and others as renter, he said. Whether it makes more sense to rent or buy or buy and rent depends on the individual situation and the family's goals according to Mr. Federowicz. The initial cost of the house and how much is tied up in a mortgage is always a consideration as well as the house's condition. Renting can be but is not always cheaper than buying a second home he said, particularly if the property can be rented for part of the year.
Some families who own Vineyard homes find that renting them out for at least part of the summer season can help cover some if not all of the expense of home ownership. Some properties have rentable guesthouses or apartments that cover some of the costs of ownership and some Vineyard families find cheaper summer rentals allowing them to make money renting their main houses.
Renting a house out for the winter is also an option for owners but Alan Schweikert, of Ocean Park Realty, in Oak Bluffs, does not recommend it. "Winter renters are often transient people, sometimes they have animals and other guests staying with them so the house may suffer from wear and tear." He said when the winter tenants don't move out in time for the summer rentals it can become a huge problem. "If you like your property, don't do a winter rental," he said. "Why would you? A summer rental can make as much as a year round rental leaving the owner with a house he can use most of the year."
Another buying option is to share the cost and use of a summerhouse with another family. While this can have the economic benefit of reducing the cost of a summer home for each family there are sometimes scheduling conflicts and style issues.
Ben Weintraub, a healthcare IT consultant from Scituate, who has been visiting the Island for over 40 years, bought a house in West Tisbury with an old high school friend 25 years ago. It came with a one-bedroom guesthouse they rented out full-time. They rented the main house for three or four weeks during the summer and for the month of September. It cost each family about $4,000 a year in addition to the rental income to cover the costs of maintenance, taxes and mortgage.
The style of the house and its furnishings did not meet the tastes of either family. "We compromised," he said.
Their agreement allowed either one of parties to make an offer on the house if they wanted to get out of the deal and buy it outright, then they could sell it or keep it, and the other party could counter-offer. Mr. Weintraub said his friend wanted to consolidate his finances and offered to buy the house two years ago. With the added appreciation value Mr. Weintraub said the house wasn't worth it for him to keep. So he sold.
He and his wife are renting another house in West Tisbury he found online for three weeks this summer. The rent is more than his annual cost was when he owned. "While we don't have the headaches, we have given up the spontaneity of owning," he said. "We would sometimes come down in the off-season when I didn't have work or on weekends. Now we just can't do that."
"Homebuyers in our marketplace today are definitely either curious about or intend to offset the carrying costs with a portion of the season in rents," said Mr. Federowicz. "Whether they employ an agent like us or use one of the online sites depends on how hands-on they want to be." He said many people employ a multi-pronged strategy where they do some of their own promotion and list their property with several agencies. "Despite the economy our rental department has been thriving it's been growing. Not only with repeats but with new business," he said.
U.S. census figures listed in the recent Martha's Vineyard Housing Needs Assessment study show a marked increase in the growth of seasonal Island housing in the last twenty years. This growth parallels the growth of rental properties according to industry sources. There were 5,390 seasonal housing units in 1990, 7,995 in 2000, and 9,253 in 2010, a 72 percent increase in 20 years. The report called it a "stunning increase in seasonal units or second homes." There were 17,188 total housing units in 2010 on the Vineyard over half, 9,250, or 54 percent, of those were seasonal units.
Lisa Stewart, principal broker at Lighthouse Properties said that many people were afraid to buy after 2008 or couldn't afford the cost of Vineyard property, but they wanted to spend time on the Vineyard and they rented. "The depressed sales market hasn't dampened the rental market at all, it has been busy for the past several years as many people were opting to rent rather than purchase," she said.
She said that the glut in the number of available rentals on the market, a result of the new construction over the last couple of decades, has resulted in renters becoming more selective. "Renters are less likely to overlook a stained sofa or a dipping faucet. This puts an added burden on homeowners who get top dollar for their rentals," she said. "The renters expect to get what they pay for." She said this is particularly true at the high end where the choicest properties rent for as much as $15,000 to $20,000 per week with a few in the $30,000 to $40,000 a week range. The rental marketplace has been particularly strong at the high end she said.
Realtors the Times spoke with are in agreement that today more homeowners list their rental properties online on various websites devoted to vacation rentals than in the past when the realtors handled a large chunk of the business.
Ms. Stewart said that some homeowners as well as some renters prefer working through a realtor who has an office and a staff to respond to calls but she said she encourages her clients to list their rentals online as well, to give them a better opportunity to fill up the season. She said that assuming the responsibility for filling a property for the whole season is a burden she would rather not take on unless she knows she has the customers to rent a property for the whole season. She said, "the summer season has been effectively reduced from the ten to twelve weeks of a few years ago to more like eight weeks due to shorter school vacations and the tighter economy." She said that having a rental vacant for even one of those weeks is a big loss.
The economic slowdown pushed some realtors into aggressively courting rentals to improve their cash flow when sales were down. Agents typically charge a 15 percent fee. For some this has become a regular part of their business. Ms. Stewart said that her office tracks rental properties on the Internet, contacting those they would like to represent. She said, "rentals are not hugely profitable for us. It was good for cash flow when the market tanked a few years ago. It creates future buyer and seller relationships. It is a service we like to provide for our customers."
Mr. Schweikert said he knows people who live on the Vineyard year-round who rent their houses for part or all the of the summer season and find a less expensive place to live or move in with friends or relatives. "This is a smart thing to do," he said. "It is commonly done, and we are fortunate that we have such a strong summer rental season. Island people can almost always make money doing this as long as they get good tenants and can find other lesser expensive digs." But he added, "The downside is that homeowners do not get to enjoy their own houses during the summer when we should all be having fun."
Judy Salosky and Jim Pepper have found summer digs that suits their lifestyle and allows them to rent their Vineyard Haven house for the summer, a forty-foot boat moored in the Vineyard Haven harbor. Jim is a long time sailor. He sailed everyday in junior high school and is now assistant harbormaster in Vineyard Haven. He doesn't even have to walk to work.
Ms. Salosky said that the move to the boat is a lot of work but that the income they get makes it all worthwhile. It forces her to downsize every year. They have partitioned half of the basement to store their belongings and lock several of their many closets. "It changes my life in a wonderful way," she said. She lists their house online and said that handling the rentals herself has been a positive experience. She learned early that creating a list of instructions for the renters with directions and lists of where to find things, operating instructions for the stereo and TV, and a checklist of things to take care of on checking out has reduced her workload. She said that she has a five-hour turn around time between rentals that gives her just enough time to clean and prepare the house for the incoming clients. They often rent into the month of September and move back to their house when they can take their time regaining their land-legs.