I have a list in my desk, at the real estate office, where I record every inquiry for long-term housing. Folks come in and I take their name and phone number and put a date next to the notation. Every once in a while, I get to match a landlord with a tenant.
The other day, a mother and daughter came to see me at the suggestion of a local business person. They were looking for summer housing, and it had been suggested that I might have a connection. These women had done their homework earlier in the winter but their housing had just fallen through. The owner of the unit that had been promised to them had decided to “go weekly.”
I shook my head. I was sorry that they had been misled, and I wished that I could have spoken with the homeowner. I have worked up the profit and loss on weekly versus long-term rentals, and the weekly picture is not what one would expect.
Most often, when we sell a home to a person who has fallen in love with the island, his intention is to secure a little piece of the island. A weekly rental situation allows these new homeowners to have periodic use of their new digs while defraying the mortgage expense.
Buyers are aware, ahead of time, of the numerous expenses which accompany the weekly rental option. A simple profit and loss statement is normally part of the information that you gather for a prospective buyer or have as part of a listing packet. The basic process is one of starting with the gross income, whether real or projected, and then subtracting the rental expenses
The expenses include:
It has always been a matter of how much out of pocket a weekly rental cottage would cost a prospective buyer.
Ocracoke has always had an escalating sales price market with a static rental price market. The first time I did this calculation for a buyer, I seem to remember it being $700 per month out of pocket to own a rental home on Ocracoke. At the peak of the bubble, the math showed $1,900 per month.
Obviously, you can affect the computations by getting a lower mortgage interest rate, putting more money down, or doing the spring cleaning yourself. The passion to own on Ocracoke is so strong that people will dig into their own pockets to do it.
The weekly rentals are enticing when you consider the rates people are willing to pay. But with any business enterprise, there is “always a wolf at the door.” It is those dang expenses. The greater percentage of rental cottages cannot break even, unless you can trim those expenses.
A long-term rental arrangement, with the appropriate tenant, is a situation which reduces the homeowner’s expenses to the mortgage, taxes, and insurance. The long-term tenant will be paying the electric, water, cable, pest control, phone, Internet, lawn care, trash pickup and propane. This can definitely change the net for the homeowner.
Long-term rentals can have their problems.
Finding the right tenant is critical. Pets can be an issue. Should the off-island homeowner have an agent for emergencies? How can the homeowner guarantee that the utilities are getting paid? Who will write my lease? Each of these concerns is real and has a true story to back it up.
On the day that I was standing with the two women who were desperate to try to secure some housing, I just wanted to pass along the pros of long-term housing to the homeowner who had decided to go weekly. I knew that the owner lived on the island and could solve the bulk of the issues with going monthly.
I just wanted to tell the owner that “weekly” is not always what you think. It’s not the gross that one should dwell on. It is the net.
(B.J. Oelschlegel has lived on Ocracoke Island for more than 30 years and has worked in the real estate business for almost as long. She is a broker with Ocracoke’s Lightship Realty and a real estate columnist for The Ocracoke Observer. You can reach her by e-mail at [email protected])