Why Now is a Good Time to Sell or Rent Your Vacation or Second Home
The landscape of real estate is always evolving. From changes in the way we work to the increasing needs of the homebuyer, today’s biggest financial decision is knowing how to handle your personal real estate assets. With that in mind, you may be wondering if now is a good time to sell or rent your vacation home or second home. There is a good case for both.
This current housing market is wild and has pushed prices through the roof while interest rates remain historically low. As a result, there’s plenty of incentive to sell. On the other hand, and especially in the Aspen / Snowmass area, the rental market is always hot, so you may be motivated to hold on and let the property pay for itself as it gains value.
When you are juggling more than one property, you need to know when it’s a good time to sell it or hold on to it and rent it. To make the best decision, let’s explore both sides of the issue to better understand the market conditions and your options.
For owners in popular vacation markets, this is a prime time to rent out your home. Record-high demand and low inventory means that vacation rental landlords are commanding a premium, and setting their own terms.
First thing’s first though, if you do choose to rent your vacation or second home, you don’t have to do it alone. When working with an Engel & Völkers Rental Advisor, you’re granted ease and convenience of allowing our professionals to handle the entire rental process for you, while enjoying the feeling of earning income on your asset. Your property will be rented out as soon as possible while being protected and rented in favorable terms and conditions.
Here are other reasons why renting your home could be the best option.
Renting Your Home Can Provide Monthly Cash Flow
By keeping the house, you continue to build equity as you pay down the mortgage while earning passive income. Plus, the market value of the home continues to increase over time.
If the house is in good condition, in a favorable rental location like the Roaring Fork Valley, and you have adequate cash reserves, renting could be a wise decision. Especially if you are already using the home “seasonally”, don’t let your home sit empty; let it do the work for you.
Renting can change your home from financial liability to a profitable asset. As an owner, you can charge about 1% of a home’s value for monthly rent (or more), depending on the market and the size and location of your second home. If you are an owner acting as landlord, you will need to set aside cash to have on hand for expenses and maintenance, anywhere from $10,000 to $15,000 or more depending on the size and location of your home.
As A Rental Owner You Have Choices
You can choose when to rent your home as well, you may want to stay in your home in Aspen or Snowmass for the ski season and rent it out during the summer months. As a rental owner, you have choices. You can keep your home while it continues to build equity and provides a monthly income.
You may want to rent your home if…
- Rentals are in high demand in the Roaring Fork Valley
- You want to be the owner of a rental property
- The house offers appealing amenities that occupants seek
- You are confident that you can make a profit
- You owe more than you can make by selling
- The local home-buying market is weak
- You have a personal attachment to the house
Your Home Can Be an Even Stronger Investment
A luxury vacation rental can provide a wealth of benefits, including asset appreciation, tax deductions, business networking opportunities, and most importantly, personal enjoyment.
Choosing a location with a typically strong market is key; mountain areas like the Roaring Fork Valley and ski resort towns like Aspen and Snowmass are prime for luxury rentals as well as areas with access to golf and water sports. Local rentals during high months in Aspen can earn upwards of $20,000 monthly for an Aspen rental and more for a luxury home.
Again, the Roaring Fork Valley will always remain a desired place to visit and live. No matter how the market changes (for better or worse), people will always be wanting to come here. Additionally, it’s not just a “seasonal rental” place. This valley serves as a vacation destination all year round because of ski season, and a plethora of summer and fall activities.
And the bonus? Renting your second home here in the Roaring Fork Valley has the potential to give you year-round income.
Don’t let your empty home leave money on the table. Renting out your home has never been easier.
Getting Started as Rental Home Owner
Before you decide to rent, consider what the home has to offer. As with home buyers, occupants are looking for neighborhoods with low crime, good schools, convenient shopping and other neighborhood amenities. Prospective occupants who are “vacationeers” are looking for properties that offer access to their favorite hobbies, sports, and activities.
The best properties show well and include all of the appliances and conveniences of a luxury home that is relevant to that area. How will your house compete in the local rental market?
Real estate and home values fluctuate. Therefore, the decision to rent your vacation home shouldn’t be made with the assumption that the property’s value will provide a huge monthly income. There are two main factors in achieving successful rentals on your property: 1, pricing the rental effectively and 2, finding quality guests. Being realistic and informed is essential but having a good rental partner is vital!
Home Values Have Increased
Home values increase, on average, between 3.5 and 3.8% every year. A recent forecast by the National Association of Home Builders projected a whopping 14% increase in 2021 alone. The numbers are equally staggering here in Colorado where homeowners experienced an average equities gain (YOY) of $92k!
If you have been in your house for more than a year or two, chances are your home equity has increased. You may need that cash to purchase your next home, and there are other good reasons why selling could be the best choice. We will discuss home equity in more detail further down in the article.
Influx of Luxury Buyers
In this market, we are seeing new luxury buyers emerge. Each one poses a variety of distinct needs unique to their lifestyle and personal definition of luxury. If you own a luxury home, it could be a great time to list your house today while demand is so high.
You may ask, “where is this heightened demand for luxury homes coming from?” In 2020, we saw a 2.2% growth in the number of individuals with wealth of over $5 million in net value, but in 2021 that number grew by an outstanding 19.8%.
This total increase has resulted in the introduction of over 660,000 new individuals into the high net-worth bracket. Combine that with the existing affluent looking to both diversify and add new properties to their portfolio, and that provides a true insight into why the demand for luxury properties have skyrocketed.
So, if you’re looking to make changes to your real estate portfolio or are looking to sell your current house, it may be a great time to list and benefit from the high demand for luxury homes today.
Home Inventory is Low
Yet amid this glut of homebuyers, the number of homes for sale to actually meet this pent-up demand is at an all-time low.
And surprisingly, the reasons for the shortage of available homes have little to do with the recent pandemic. The number of homes for sale is at a “generational low,” because people are living in their homes longer than they used to. In fact, NAR (National Association of Realtors) data shows that Americans are spending an average of 13 years in their homes before moving. As of 2018, the median duration of homeownership in the U.S. is 13 years. Compared to previous years, homeowners opt to spend more time holding onto their residences. Median tenure has increased by 3 years since 2008.
Home Prices are Up
With demand for homes up and inventory down, the conditions are perfect for home sellers to get high prices.
In the affluent Roaring Fork Valley, an international destination, the average single-family home sales price has doubled since 2019, and sits on the market for half the time.
Reports from ABOR (Aspen Board of Realtors) indicate that the average sales price of an Aspen single-family home from January – May 2019 was $7,146,315 and was on the market for 277 days. Jump to January – May 2022, and the average sales price of an Aspen single-family home was $18,156,750 and was on the market for 125 days.
According to NAR, single-family home prices increased in most markets during the first quarter of 2020. Many had expected that the housing market would take a hit and home prices would drop because of the pandemic, but it’s quite the contrary. Home asking price growth is actually higher now than it was before the pandemic.
The Roaring Fork Valley will always remain a desired place to live and relocate to, and remains a highly sought after vacation mecca. No matter how the market changes (for better or worse), people will always be relocating here. And with the current market conditions of home price and days on the market, selling to the affluent buyer just may be the answer.
Listing For Twice as Much, & Selling Twice as Fast
Engel & Völkers doesn’t just list your property, we sell it. With our unparalleled passion for real estate, local expertise, and the collective marketing power of a global network, we will navigate you home. Our advisors provide an exceptional real estate experience for every client, every time.
Changing Lifestyles – New Homeowner Needs and Working Remotely
With the changes in the workplace and more people working from home, why not live and work in your vacation dream spot? The luxury buyer will not be deterred by fluctuating interest rates. People can now work remotely, and we are seeing a trend AWAY from big cities, and TOWARD the places they love. And since the number of homes for sale is at an all-time low, many sellers can get top-dollar in the current market conditions.
Along with working remotely, people have been spending more time at home in general. This, in turn, has sparked a fresh deluge of home buyers whose current homes no longer seem as comfortable or roomy as they were pre-pandemic. So YOUR vacation or second home may have exactly what the new luxury homebuyer needs: added space, outdoor living, a home office or chef’s kitchen, entertainment room, etc.
Location definitely matters to the vacationeer at heart! As people realize their needs are changing, many are turning to luxury housing to find their dream home. Working from home allows more access to the places where they love to play. It could be a condo at a ski resort like Aspen or Snowmass. A spacious home on the lake where they love to fish. It could be any luxury home throughout the Roaring Fork Valley that offers access to luxury activities like arts and entertainment, high-end shopping, dining, and more.
Your vacation home could be that buyer’s dream home… should you decide to sell.
The equity in your home is the highest it’s ever been. If you sell your home, you will be taking advantage of this record-setting market. The strength of this market can increase your return.
Recent reports illustrate that home equity is skyrocketing, thanks to ongoing home price appreciation. In the first quarter of 2022, the average homeowner gained approximately $64,000 in equity during the past year. And here in Colorado, the average equity gain year over year, was $92,000. Not a bad investment!
We’ve outlined some of the top reasons for selling your home. Every situation is slightly different, but it mostly boils down to profitability and your personal preferences. Your home may be a great place to rent, or it may be time to sell.
Whether you choose to sell or rent your second home or vacation property, we invite you to experience it with Engel & Völkers. Our real estate advisor’s in-depth, specialized knowledge and understanding of the market turns our range of services into a valuable, all-inclusive package for you.
Engel & Völkers can help you write the story of your selling, renting, or home-buying experience. Don’t wait for the page to turn itself, let the power of our worldwide brand help you write your next chapter.