Monday, February 2, 2009

Rental Income

Last fall we rented a small apartment in Nice, France for some close to end of year r & r. This property was new to us and we were both impressed with the location and design of it. For a 45 square meter apartment, it had most of what we would want should we be in the market for such a property. I would love to own one like it but at close to $550000 euro (area comparable), I think I'll have to pass!

D took the opportunity to bring up a topic again -- extra income. Why don't we rent out our cottage and ski condo? If someone like our Nice apartment owner can do it, with such a valuable property, we could rent out our much less expensive ones too!

I hadn't given it any thought until now. This past weekend, D approached me with a "rental proposal" for both properties. I took a look at it and I will admit I'm not as opposed to it as I was a year ago.

My biggest issue has been the amount of work it would require, having to remove my personal items (thus making it feel less like mine), having to make sure it was spotless (no magazines strewn all over the coffee table), sharing a place where I go with others (I like having hideaways).

Unlike most cottage owners around us, we do not invite people to come up (Honestly, we are not anti-social! We just prefer to entertain at our main house!). In fact, only a handful of people (non blogging!) even know of their existence! I like heading up when I feel like it and I like the option of changing my mind if traffic is particularly bad or the weather isn't too good. If I schedule things, then I "have" to go and for me, that defeats the purpose of owning in the first place.

Since I've started blogging and after reading many other blogs, I've warmed up to the idea of adding rental income to our lives. Our vacation properties are natural to consider as we already have them. The cottage is paid for and the ski condo is 40% owned. We are considering the possibility of renting them out to people we know once or twice max per month.

I have to admit that I'm having fun dreaming up how to run things. Basically I'd want guests to be able to enjoy the area like we do. We'd supply linens and towels and a guest area info booklet. I'd have a great time drawing that up. We'd design a website likely from a free source like Blogger or Wordpress. I'd have fun taking the pictures. It will force us to finish the odds and ends that are currently on the "things to do list".

Working out the logistics of key, money, linen/towel exchange has been trickier. What if our friends from out of town want to rent it? We'll need to price out courier costs for keys. We can store several sets of clean linens/towels on site. It isn't as much an issue for the cottage but the ski condo is 3/12 hrs away by plane so a lot of planning will be needed.

Start up costs will be in the range of $600 dollars for both properties. This would cover things like extra pillows, mattress and pillow protectors, some new pots and pans, rubbermaid containers for clean linens, a couple of dressers, paint, gas bbq (we go rustic at the cottage and like using a charcoal bbq but from a fire hazard and insurance perspective, I think most people are more familiar with propane) and increased insurance.

Preliminary searches for comparable cottage rentals in our area shows $650 - 850 for a non waterfront 2 bedroom up to 4 people occupancy. Our cottage has no neighbours on one side nor at the back and is a stone's throw from the water. And for a ski in,ski out, village center 2 person condo $665 per week is the comparable.

We are thinking of charging $550 per week for the cottage and $450 per week for the ski condo. There will be a higher per night pricing for anything less than a week. We priced lower for skiing as we feel it is our way of supporting the "ski bum" lifestyle! As for the cottage, we know of a number of younger families that would be able to consider a cottage rental at that price. Is that bad business?

We looked at what it would cost should we enlist with a management company to handle both rentals on our behalf. Fees aside, for us, it seems easier to control occupancy vs. having to "apply by the year before" to the companies for times we'd like to use. As I said, I kinda like flexibility.

So once everything is set up, running will hopefully not be too work intensive. We would be doing the cleaning ourselves but will be asking everyone to please leave the properties the way they found it. Those who know us, will know of our standard of living and that they would not be renting "dives" nor would we like to walk into our places looking like one either.

D sees it as an opportunity for a win win situation -- to provide vacation opportunities at a couple of neat spots for a fraction of the cost and for us, if we make enough to pay for our trips out west and season passes, or our annual trip to France, that would be awesome!

Would you consider doing the same if you were in our shoes? Are there other things we need to consider? I'd appreciate any input!


  1. I would definitely consider this option. Its bringing the 'mortgage free' date a little closer anyway. I plan to rent out the Crete house once the landscaping is finished (at the moment you could plunge to your death through the roof of the old house!). We just plan to have a lock up walk in cupboard where the more personal stuff can be locked away with minimal problems. I was planning for the key and cleaning, linen change etc to be taken care of by someone local, so helping the lcoal comunity in a moderate way as well. I would also let them have commission on any rental which they arrange.
    Hope it works our=t for you.

  2. I'm amazed you didn't do it sooner. This sounds like a great way to make the properties "work" for you. I think Lizzie's idea is good, do you have someone nearby who could help manage it for a small cut? That would keep the workload down for you. I say go for it.

  3. My wife and I own a lake house vacation home which we use often. It is very rentable but I will never do it. Why? It adds stress and complexity to the entire ownership equation. Taxes, maintenance, liability, "owner's closets", scheduling, it's just not worth it. My partner has a condo in Park City and he reached the same conclusion after trying the rental thing for a year. Most people who rent their vacation property do it because they need to. If that's the case, they probably shouldn't have bought it to begin with.

  4. I really enjoyed reading this post, Middle Way. I say go for it! I've always wanted to run an English-style B&B just that in my country it's not the culture since hotels are plentiful, and property is way too expensive to buy a few at a time.

    Keep us posted on how this adventure goes!

  5. Hi - From a person who has owned and rented out 5 cottages, this is a great way to go. I am puzzled by your pricing though as it seems very low, but I guess you have done your homework and comparables. You'll find a ton of helpful stuff on my blog at and if you have any questions on setting up for rental, please feel free to contact me. I am heading out today with a home stager to video a project where we are moving a property from $1800 per week to $2500 per week, with some key design, furnishing and staging changes. It is a 7-bedroom cottage but may only need a relatively small investment to yield a much higher rental rate. I will be detailing the project on my blog.

  6. Hi Lizzie!

    I like your idea of using someone local to help manage thus giving back to the community. I can't wait to see the continued progress on your home!

    Hi Miss M!

    Thanks for the encouragement! The roadblock to this idea has definately been me for the last 5 years. D has owned rental property before (duplex) so he is comfortable with such things.

    Hi Mr GoTo!

    Thank you for your insights. I'm very conservative with real estate too in that I wouldn't dream of even trying to buy anything that I could not afford 100% on my own.

    Luckily in Canada, the rules for buying vacation property is much more strict than a rental property. When I bought the cottage, I had to come up with 35% down. That puts it in the same arena as buying a commercial property!

    D wants this to be his business to run so I think what we'll end up doing is seeing how he manages things for a rental or 2 and then decide from there if it is more headache than its worth. I'll be sure to blog about it either way!

    Hi Daphne!

    An English style B & B sounds lovely! As you know, I live in an old house and love architecture so that would be right up my alley too.

    Who knows, maybe one day, you'll own one outside of your country! You certainly think big enough that I would not be one ounce surprised!

    Hi Heather!

    Your website is a treasure trove of information! Thank you so much for commenting and sharing.

    D and I will be studying it and doing some more digging re: pricing. I'm excited to be following your latest rental progress.

  7. Sounds like a great idea (though I am biased toward rental income). You would get many tax write-offs by doing this as well.

  8. If I were in this position I would most definitely rent out the properties for some of the time. Like Lizzie said, it gets you closer to mortgage free and 'freedom'. How many hours do you have to work to earn what you could off the properties?

  9. Thanks Money and livingmyrichlife!

    Great points taken!

  10. My father has a mountain house that he rents out a little bit. The home is furnished and decorated quite nicely so it's a bit risky to rent to suspect tenants.

    He rents through an independent website (can't remember it) and doesn't use a mgmt co (too expensive). The renters are closely screened; so far only a handful who rent each year. He has a local cleanings service and handy man to help with keys and guest issues.

  11. Hi Carlos!

    A mountain house sounds beautiful! Your father's arrangement sounds like what's D's hoping to achieve. I take it that it is working well?

  12. His arrangement is working well. They rent it for a few weeks a year at this point (maybe 6).

    They had a break in recently and the TV was stolen. Crime seems to have increased substantially since the economy has turned south.

  13. @Carlos:

    Yikes,I'm sorry to hear about the break in. A stolen TV may not even be worth filing an insurance claim depending on the deductable.

    But the worrisome thing for me would be the increase in such crimes and the feeling of finding your home violated.

  14. Don't forget the wonderful world of vacation rental "swapping" . I do this all the time with our French vacation rentals - swap them with OTHER vacation rentals owners as we explore Europe.

    Vacation Rental swaps are the best because you don't have to travel at the same time as the person you are swapping with, unlike a swapper swapping (make sense?) a primary residence. For example, my family stayed in a person's place in Tuscany two years ago, and they are coming to Burgundy to stay in our place only this year...

    If you have any vacation rental questions, you can always send them my way!

    Laura in Burgundy

  15. Great idea Laura! That does make a lot of sense and so potentially easy too!! Thank you so much for letting me know of such an awesome option.