Frustrated Sellers Turn Homes Into Vacation Rentals
"It was the right time to let it go, but the timing was bad," Powers says. Because she considered her home her retirement fund, she said, she needed to sell it for close to that $1 million mark. But in this market, she expects she could only get about $800,000. After selling her business, she couldn't afford to keep paying the $3,000 mortgage. Unwilling to sell for less than she wanted, Powers turned to a solution that is becoming more popular with homeowners who find themselves in a tough housing market: She turned her home into a vacation rental that would generate enough income to help her make mortgage payments and allow her to continue on her retirement path.
Powers is now charging up to $400 a night for the three-bedroom, 2.5-bath home, through VRBO.com, a division of vacation rental site HomeAway Inc. She and her husband are now able to cover 75 percent of the mortgage.
"I got a lot less than I had hoped when I sold my business," said Powers, who had owned a toy store in Crested Butte for 31 years. "I needed to sell the house, but I didn't want to give it away at the wrong time."
Powers is just one example of those who have discovered a way to avoid financial straits as they navigate through the tricky waters of the real estate market.
As the inventory of unsold homes continues to grow it remains difficult to sell a home: The number of homes available for sale in 27 metropolitan areas at the end of June was up 3.7 percent from May, based on information from ZipRealty.
According to a survey by HomeAway, one in five homeowners who started renting out a home as a vacation getaway in the past year did so in order to generate additional income due to a recent job loss, the inability to sell the home, or because of the risk of foreclosure. About 15 percent of owners are renting their primary residences. Others are renting second homes that they had previously reserved for their exclusive use, reports the survey.
Homeowners are not the only people finding new sources of income in the vacation rental market. Renters are renting out their spaces, too. Airbnb -- so named because the founders were offering an air mattress and breakfast to travelers who wanted to stay in their New York City apartment -- is a site that offers a range of properties in cities to travelers around the world. While some are full homes or apartments, others are indeed a bed, or a room, in a rental apartment.
The majority of Airbnb's clients are renting out primary residences, says Brian Chesky, co-founder and CEO of Airbnb. He told HousingWatch that he has received hundreds of e-mails from customers who said they would have lost their home or apartment if they hadn't found Airbnb.
"For a lot of people, this is the last stop before foreclosure, or losing their apartment," he says. "We have stories from college graduates who can't make their rent. They use us to subsidize their income. We have dual-income families where one of them has lost their job and can't pay the mortgage. And we've been a resource for seniors who are looking to make ends meet." He hears from clients who are renting their home for one week out of the month, and bunking with family. "These people are able to earn enough to pay the rent or mortgage for the month," he says.
HomeAway vice president Alexis de Belloy says that in the second-home market, his company has traditionally been a solution for people to be able to afford a second home, but in a small number of cases, it has also helped them avoid a foreclosure.
Or just having to sell at the wrong time. For Powers, who plans to sell her home when the market recovers, her short-term rental strategy has bought her valuable time. With 63 single-family homes currently for sale in the Crested Butte area, it's a buyer's market. And for those who can wait it out, it's now a rental market, as well.
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