Here's an outside-the-box idea for managers of vacant, foreclosed properties: rent them to tourists.
Mom-and-pop lodging options are popular among vacationers on a budget, after all, and some real estate owned is close to popular vacation sites. It may seem like a stretch, but the upswing in the number and management costs of vacant seized homes requires new ideas. This untraditional approach represents an opportunity to minimize losses and ensure upkeep on vacated properties in strategic locations.
"As long as they are fully furnished," vacant properties can be rented, said Christine Karpinski, the director of owner community for HomeAway Inc. of Austin, Texas, which has more than 540,000 paid vacation rental home listings in 120 countries.
Apparently the thought has crossed the minds of at least a few pioneers who already are offering short-time rentals in Florida. "I've seen it in Panama City Beach and Destin City," Karpinski said.
The four states hardest hit by the foreclosure crisis — Nevada, California, Florida and Arizona — all have impressive tourist attractions. For example, Nevada takes the lead in all national foreclosure reports. It also leads lists of the nation's unique destinations: Las Vegas, Lake Tahoe, the Grand Canyon in nearby Arizona, and the Hoover Dam.
In certain states, such as Florida, renting REO condominiums means the bank must pay homeowners' association dues that can be anywhere from $300 to several thousand dollars. The dilemma for the banks is that they can only rent homes to travelers on a nightly or weekly basis. It is doable, Karpinski said, because properties in popular travel destinations usually have on-site or nearby rental managers who can lease furniture and rent out the property. The revenue is used to pay for the taxes and homeowners' association dues, plus the property has a better chance of appreciating.
"It would be a brilliant business strategy not to dump REOs for such crazy losses," Karpinski said, allowing banks to "sit on them for a little while until the market rebounds."