Erica Muller

Erica Muller
www.MySunnyHolidayVilla.com

I'm sure by now most of you have heard about XL Leisure Group, Britain's third largest holiday company, going under and leaving stranded nearly 50,000 holiday-makers abroad. Due to the skyrocketing price of fuel and the sagging economy it may not be the last story you hear about a large tour operator going under.

How does this affect you, the investor who owns a small piece of the pie in Florida that just wants to get some solid bookings to help cover your expenses? It may have a bigger affect than expected due to the fact that 80% of the bookings that come through your management company are directly from tour operators such as XL Leisure Group. This means that if more tour operators start tanking you could also see a dramatic decline in your bookings. This is not necessarily something to be too concerned about as I don't think it will last long term and as the economy bounces back so will your bookings.

My suggestion to you would be to contact your management company to find out if your bookings have been affected at all. If they do not do business with XL than you have nothing to worry about however, it's highly likely that they do and you should find out what their plan is to fill those bookings. On the bright side, this may be a fantastic opportunity to those of you who depend on your own bookings. With thousand of people out of a holiday they will most likely be looking online to make other arrangements. Now would be a great time for you to start advertising your villa. www.VRBO.com is a great site to list your holiday rental villa on without having to pay any management fees.

In closing I just want to say that this is yet another reason why management companies need to start becoming more independent of tour suppliers. If you are in the process of looking for a management company please find out how much of their bookings come from tour suppliers vs. their own marketing. It's very important and it DOES affect your rental income.

For many of you buying short sale properties is nothing special. you practically do it in your sleep. For the rest of you who have never done this before I advise you to make sure you are working with an agent who is seasoned in selling short sale properties and please heed their advice. It could costs you thousands in the end if you don't.

I ran across a situation with one of my colleagues who was selling a short sale property to her clients. It was the first time they have ever attempted to purchase a piece of real estate and they were so excited. Since the market had crashed and home prices came tumbling down they could now afford to purchace a cozy home in their price range in a nice neighborhood. They couldn't be happier.

After looking at about a dozen homes, their Realtor (my colleague) had finally found them "the one". It was a short sale property that was being sold by a trust for the owner...the trust consist of 7 people who were investors. They quickly rushed back to her office to write the contract up along with the short sale addendum. They gave their Realtor a good faith deposit to be placed in escrow to show the bank it was a solid offer.

Their offer was presented to the Trust and the trust insisted that they remove the short sale addendum stating that if the response time from the bank goes past a certain time frame (2 months) her clients were released from the contract and were to be given back their deposit. My colleague insisted that her clients NOT sign the contract without that addendum and she warned them that if they did it could be difficult to get their deposit back if they changed their minds.

Needless to say, her clients did not heed her advice. They were so excited to get the home they signed without the short sale addendum. Three months went by and still no response from the bank on their offer. Nothing. Her clients decided to start looking at other properties as a back up plan. They find another home that is now "the one" they have to have it but they can't place an offer because their good faith money is tied up in the escrow account for the short sale property they bid on.

They call their Realtor and ask her to try and get them released from the contract. She calls the Trust and explains to them that the process is simply taking to long and her clients can no longer await a response and need their deposit back. The Trust refused to release their deposit and thus began a two month battle for the money. In the end the money was finally released back to the buyers die to the law that states that taking out a time frame in a contract no longer makes it a binding contract because all Real Estate contracts have to have a time frame in them.

The buyers wasted five months of their time because they did not listen to their agent in the beginning. Luckily there is a happy ending. The buyers ended up getting the house they found and lived happily ever after.

The End

I never wanted to be a whistle-blower but I just can't sit back and watch good people get ripped off by property management companies on their vacation homes. Having worked for a management company briefly in the past and seeing what goes on behind closed doors I have a first hand view of the hidden expenses that most companies don't tell you about when giving you their sales pitch.

The first thing one does after placing and offer on their cozy, sunny holiday villa is shop about three or four property management companies to find a reputable company who is going to get their home rented out while they are gone. The first question many people ask the sales rep for the management company is "How Many Weeks Can You Book My Property?" They are most likely going to quote you a lovely figure that sounds nice to you and entices you to want to turn your home over to them. STOP! Before you start celebrating and getting excited you MUST know that 98% of the time this figure may not apply to your home. It most likely applies to one or two particular homes they have under management that are rented like crazy and often because the owner is very active in the process. This doesn't mean you are going to see those numbers. Request booking reports on a home similar to yours to see what it's really doing.

This next part is the one you're really going to love. . .so you want to know what type of rates they will be charging for you home? They give you a print out with their rental rates on it quoting you low season and high season rates. STOP! The rates that you are looking at on that paper are RETAIL RATES not wholesale rates. Retail rates are what you will see IF the management company is able to book the stay directly through their website or marketing efforts. This only happens on average 20% of the time!!!! The main way management companies get their bookings is through travel agencies (tour suppliers). The tour supplies book their guests in your home at a discount of nearly 50% off the retail rates! The concept behind this is that they supply so much volume that it makes it worth it, and often time it does but beware!

So when they pull that pretty little rate sheet out and start quoting you these wonderful rates you now know it's a sales pitch and you need to ask them, "What are your tour supplier rates and what percentage of your bookings come from that source?"Once you get that figure subtract the 13% state and county taxes off the top and then subtract whatever fee your management company is charging off the booking and you will then be left with a real figure that goes into your pocket.

Lets just do the math: (these are just example figures not real figures)

Here is an example for a 3 bed Single Family Pool home in high season per week:

$665 (Retail, this is what they quote)
-13%= (Taxes for state and county, will vary among states)
_______
$575.55-
25%= (This is an average figure of what management companies charge per booking)
________
$431.66 (This is what you are left with on a Retail Booking)

Keep in mind the wholesale rates are 80% of bookings so even if the whole sale rate was only 30% less than retail you would be walking away with a figure closer to $300. So you can see it's less than half of what was quoted on your retail rates.

Now that you are armed with knowledge you can negotiate lower management fees on wholesale bookings!

If you've live in the SW Orlando area or you've looked at purchasing property here than you've most likely heard of the "Four Corners". It's the hot spot for vacation homes and holiday villas and is a fun place to live or visit!!!

The Four Corners area is made up of counties that surround the SW central FL area. The NE corner is the tip of Orange county, below that is the SE corner which is Osceola county. The SW corner is made up of Polk County and the NW corner is Lake County.

The homes in these areas make up most of the hot short term rental communities due to the close proximity to Disney. Most of the communities are all within a 20 minute drive to Mickey and Cinderella's castle.

I recommend the four corners to anyone who is considering purchasing a second home here in Orlando 1. for the location 2. for the location and 3. for the location. Isn't that the famous real estate quote. . ."Location, Location, Location". I can't believe I just said that but it's true!

Erica Muller
International Licensed Estate Agent
Right Moves Realty
561-723-4265
Erica@MySunnyHolidayVilla.com
www.MySunnyHolidayVilla.com

A common problem that I often run into with clients and often even sales people at new home communities is that they just don't understand the short term rental business but want to buy a second home. This is so important in our area because 70% of our buyers right now are Foreign Nationals and their main objective is to purchase a property and place it under short term rental management while they are not using it.

I just got done speaking with a sales rep from one of the new homes communities here in Davenport. He was giving me some of his marketing materials for me to pass on to my clients and was explaining to me about how his community is such a wonderful place for my Foreign National clients to buy in. When I asked him if the lots were large enough for pools he told me that only some of them were but you could not put a pool in all of the models. That is a huge problem because 90% of the short term management companies up here won't take on homes without pools and the ones that do can't really rent them. The last thing you want to do is spend $100,000 or more on a second home and not be able to rent it out to offset your expense.

To any prospective buyers out there who are considering purchasing a second home in Florida. I recommend you work with a Realtor who specializes in vacation homes so they can help guide you away from these potential problems. The sales people at the new home communities are great but most of them are not aware of the key factors that contribute to a sound second home investment. Have your Realtor escort you to all of these communities that you are browsing. The service is free and could save you thousands in the long run.

Erica Muller
International Licensed Estate Agent
Right Moves Realty. LLC
561-723-4265
Erica@MySunnyHolidayVilla.com
www.MySunnyHolidayVilla.com