Rent schedule for a property that is rented on a seasonal basis, help appreciated.

[KJR2008]

Any input will be greatly appreciated. Property is a beach front property typically rented for 1 week at a time, mostly during summer months and holidays. Most if not all of the properties are reneted similarily. The property is handeled by a rental agency. The rental agency is going to provided as musch information as they can. No information in MLS on rentals of this type, no homes are rented on a year-year. Not sure how to gather comparable information, no rental agency is going to provide me financial information.

 

[JRS at OBX]

Rent schedules are generally not reliable on properties like that without doing a lot of research. Houses like that may be rented for 3 solid months during the summer with a few weeks rented here and there during the off season. The problem is that some owners will reserve a week or two for themselves. If they use it in the off season, no problem. If they use it the week of July 4th, the rental data is skewed. You have to figure that the first week in June is cheaper than the second week in July. So a property that is not used by the owner may get $100,000 in yearly rent. If they reserve a mid-July week for themselves, they might only show $90,000 in income. That is a 10% difference.

My MLS has rental income for seasonal properties, but you usually don't know if the owners used the house or not. Your MLS should have the info also. Most buyers for seasonal rentals want to know if it will cash flow or not.

I explain these issues in my rent schedules. Other factors can come into play with seasonal rentals. The comfort of the furniture can affect repeat rentals. The advertising of the rental company, even the friendliness of the rental company employees.

If you work those types of properties regularly, get to know some rental managers.

 

[Lloyd Bonafide]

That can be a very difficult situation - I had an assignment like that recently and it wasn't fun.

If it's for a lender, I would check with the client and see if they allow you to use actual annual revenues collected for comparable vacation rentals, even if the rental comps are rented by the week or day during the summer, and rented the other 9 months to one tenant. Vacation property managers in the area should have that info readily available.

Lenders may not allow that - they might require you to find comparable rentals that are leased for the whole year rather than as weekly or daily rentals in the summer. And I agree with you that that kind of information might be very difficult to come by, because in some beach areas it makes economic sense for landlords to rent by the week during the summer.

 

[PropertyEconomics]

Im guessing seasonal rentals may have a resulting higher vacancy rate (reflecting the non seasonal / non rental times) ....

 

[appraisalreview]

Seasonal Basis

You could re-create a schedule/spreadsheet on a 12-month, or even better, 52-week basis.

Example: Column 1 -Week Column 2-$/Rent Column 3-Weighting (%)

Wherein, the total at the bottom of the weighting column (3) would be = 100%.

Your weekly or monthly rentals ($ and/or $-PSF) can be plugged-in as obtained from interviews, phone calls, or other sources your seeking to verify.

Offerings could be used also (expanding to current or recent historical information may also help).

This may assist in determining the relative value of the high-season rentals, the off-season rentals, (ect.,) overall and show you where your gaps are and the impact(s) upon the reconciled conclusion.

Thereby, allowing you to explain the relative reliability of your method and results to the intended-user. If integrated with pie-chart or bar-graph, it can even more quickly visually represent the impact of seasonality (and changing scenarios, if desisred) to a reader/intended-user in the report.

 

[Mike Boyd]

I've done a few of them through the years. Typically, I will get rental comps from a rental agency. I do not split hairs whether or not they were weekend, weekly or month long rentals. I develop a GRM from that info and show the results in the income approach. However, I still give most weight to the market approach. There are too many variables to consider the income approach. (unless they want to pay $2 to $3 K for the report.)

 

[BOCK FOLKEN]

I've done a few of them through the years. Typically, I will get rental comps from a rental agency. I do not split hairs whether or not they were weekend, weekly or month long rentals. I develop a GRM from that info and show the results in the income approach. However, I still give most weight to the market approach. There are too many variables to consider the income approach. (unless they want to pay $2 to $3 K for the report.)

I'm with Mike. Use Total Annual Rent and develop a GRM. The information should be easier to develop and will net out with the same accuracy.

Around here many beach condo's rent out in this fashion with a high rental during winter season, and some off season here and there. The only way to do it is annually. It is very typical for the income approach to come in way below the market approach for these types of properties so dont be surprised, just explain the "seasonal" aspect.

Depending on where you are, it is also possible that you will have declining market adjustments for the rental data...so be aware of occupancy rates now versus when your data is originating.