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How To Avoid IRS Compliance Traps

Thursday, June 12th, 2014

With all sources of income, taxes are an important consideration. Income from your vacation rentals is no exception. With vacation rentals, there are 3 key tax considerations.

1. Personal Use and Rental Days

The number of days you personally use your vacation rental property has a significant impact on how the IRS treats your rental income:

a. If personal use is limited to 14 or fewer days or 10% of the time your property is rented, you can write-off 100% of rental expenses against rental income.

b. If personal use exceeds 14 days, you can still write-off a portion of your rental expenses against rental income. For example, if you rented your property for 90 days and had 30 days of personal use during the year, you are allowed to write-off 75% (90 rental days/120 total usage) of your rental expenses against rental income.

c. If you rent your property for 14 days or less, you are not required to report the rental income for income tax purpose.

2. Common Rental Expenses
The following is a list of common rental expenses that may be written-off against rental income:

* Management Fees
* Mortgage Interest
* Mortgage Points
* Repairs
* Taxes
* Utilities
* Advertising
* Cleaning & Maintenance
* Commissions
* Depreciation
* Insurance
* Legal/Professional Fees

3. Passive vs Active Income
The IRS usually considers income from rental real estate to be a passive activity; that is, you get income mainly for the use of your property rather than for services provided. The IRS allows you to off-set passive losses against passive income, not ordinary income such as wages. Any excess passive losses are carried forward to the next tax year.

If you are actively involved in the rental of your vacation home, up to $25,000 of the loss from your rental property could be deductible against ordinary income. There are restrictions and limitations if you make more than $100,000 annually.

At VRS we recognize that keeping more of your rental income is one thing all vacation homeowner have in common. That is why we provide essential rental management services as an affordable fixed monthly price. Compliance Services are just $50 per month.

Rental Inquiry Response Time Study

Thursday, January 30th, 2014

Promptly responding to rental inquiries is critically important to converting rental inquiries into rental bookings. Most vacation homeowners and Rental Managers (RMs) believe they respond promptly to all rental inquiries – but what really happens? VRS commissioned a study to determine exactly that; “How promptly do both typical owner-operated and RMs respond to rental inquiries?”

The average response time in the study was 8.73 hours. Less than 25% of the responses were within the ”golden” 1-hour window, the period of time regarded as most valuable to convert rental inquiries into rental income (and of course, what impression your prospective guests will have of their future experience). Surprisingly, nearly 1/3 of inquiries received no response! Not only is the initial response time important, it is obviously important to follow-up with the prospective guest. In this study, less than 5% of inquiries received a follow-up email beyond the initial email. In a time when every rental inquiry is an opportunity to generate rental income, every inquiry should be coveted.

There was a large disparity between responses from RMs and Owner-managed properties. RMs either responded promptly or did not at all. 38% of RMs responded within 1 hour, while an equally large group (36%) of RM’s sent no response, and unbelievably, only 2% of RMs sent a follow-up email. One clear difference from RM and Owner-managed responses: RM responses typically included an invitation to view other similar properties they manage

The results of this study overwhelmingly indicate that; low time-to-response, persistence in follow-up and focus on renting only your property rather than a “rental pool” are basic requirements to successfully differentiating your property from the competition and increasing rental revenues.

This much is very clear: to the extent potential rental guests typically book vacation properties that meet their requirements and responses are promptly and professionally managed, higher conversion rates and rental income should predictably follow.

Rapid Response is a core business practice at VRS. Our focus on connecting rental customers and owners “one-on-one” through technology infrastructure and lead management operating systems facilitate rental inquiry responses within 30 minutes. Rapid Response results in significantly higher inquiry conversion rates and rental income for our customers. VRS passes along the savings we’ve created in our business model to our customers, resulting in up to 65% increases in net rental income. VRS provides complementary rental income comparison audits upon request. VRS Rental Management Plans under our low fixed monthly fixed-fee program are just $130.00 per month for a 2-bedroom property.

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If you could keep as much as 65% more rental income without sacrificing on service - why wouldn’t you?

If you could hire a professional vacation rental management company to end the inconveniences and hassles - and pay an affordable fixed monthly fee for services - why wouldn’t you?

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