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| On The Road Again |
| THE WALL STREET JOURNAL, September 2002 |
| New programs help ease some of the burdens and cost of owning a recreational vehicle By Kelly Greene When it comes to ideas that sound great in theory but prove tricky in practice, buying a recreational vehicle ranks near the top of the list. Yes, an RV is a great way to see the country, but the initial outlay can easily hit $100,000. And what if you don't plan to live full time in your house-on-wheels? Parking 30 feet of machinery can be problematic, not to mention keeping its myriad gizmos in working order while it sits. Rather than give up your road dreams and sell your RV, there are ways to make your vehicle pay for its upkeep – and maybe even make some money for you. RV owners with hopes of turning their vacation vehicle into an investment vehicle are turning to "leaseback" programs, where you can rent out the vehicle when you aren't using it yourself, or time-share agreements, where a group of investors share the expense. Though these arrangements can help you avoid a money-losing sale of your vehicle, not everyone is cut out for sharing an RV. And owners sometimes don't realize that renting can bring increased wear-and-tear on a vehicle, and with it higher maintenance costs. Renting Out a Dream Under leaseback or "consignment" programs offered by RV dealerships and rental companies, the company typically markets your RV to vacationers as part of its own rental fleet, taking a percentage of the gross in return. Your RV gets a home on the dealer's lot, with a maintenance crew to keep part running smoothly. Benjamin Capozzi, a 70-year-old retiree in Las Vegas, turned over his RV two years ago to Bates International Motor Home Systems, Inc., which is based there and has a rental fleet of 400 at 18 franchises around the U.S. Mr. Capozzi and his wife had spent a few years on the road in a 40-foot coach, taking a nine-month trip from California to New England and back before buying a house in Las Vegas. As part of the move, they traded down to a 34-foot vehicle for shorter trips, but they seldom get the urge to use it. "After we bought a house, it was just sitting in storage," he says. Mr. Capozzi goes to the lot to check on his Fleetwood Vision every four to six weeks, and so far has found it well cared for, he says. It typically gets rented once every three to four weeks, for a week to 10 days at a time. He gets 50% of any rental, which ranges from $1,200 to $1,450 a week, minus the maintenance and insurance. "Some months it makes money, some months it doesn't if the generator breaks, or something like that," he says. "But even if I let it sit out there, that would still go wrong. This way, they keep it running. And if the hefty payments on your RV are squeezing your budget, or you simply aren't using the vehicle as much as you used to, a leaseback might beat a money-losing sale. Sheliah Currie, a fifth-grade teacher who took a sabbatical from a school in Houston with the help of a 33-foot motor home, didn't have much luck selling the vehicle through a classified ad last year. The nibbles she got wouldn't cover her loan. But Bates representatives saw the ad and contacted her. And even though she was skeptical at first, she decided to give rental a shot, and added her vehicle to the fleet nine months ago. Since then, her RV has been paying for itself," she says. Another way around the expense and maintenance headache is sharing ownership through a time-share arrangement. In one model by Roadshare America Inc., West Bend, Wis., a group of RV-owner-wannabees invests in a trust, which then buys an RV and pays its expenses. For example, a $200,000 RV split 10 ways would cost each investor $20,000 for which he or she would get 36 days each year for three years. At that point, the RV is sold, with the owners getting some of their money back. James Dixon, president of Roadshare, came up with the arrangement several years ago when he realized he couldn't afford a luxury coach on his own. He and his wife "like to spend a few months in the winter traveling around, but we certainly don't want to own a motor home that sits around," he says. Bruce and Margot Fonoroff, a retired couple in Potomac, Md., bought five weeks a year in a $200,000 40-foot Country Coach Intrigue. Mr. Fonoroff saw an ad for Mr. Dixon's company in the back of a magazine, and after a year of deliberating, decided to invest. The couple's first trip, last April and May, took them on a 3,300-mile spin through eight Southeastern states, during which they reconnected with friends and family. So far, they have no complaints: The RV is completely cleaned and restocked after each trip. The new ways people are finding to subsidize their motor homes are part of a larger RV craze. Even before Sept. 11, baby boomers and retirees were driving the expansion of the industry; after Sept. 11, sales kicked into overdrive. RV wholesale shipments jumped 14% in the first half of 2002 from the year-earlier period, according to the Recreational Vehicle Industry Association, a trade group in Reston, Virginia. Reservations for rentals with Cruise America Inc. of Mesa, Ariz., the nation's largest RV rental company, were 35% higher in July 2002 than July 2001. The leaseback trend took off in the early 1990s, rental-company owners say. "Back in the ‘70s, RVs weren't expensive enough to lend themselves to this type of program. But now they are," explains Larry Lenamond, president of American Dream RV's Inc. in Austin, Texas. "It's common place for a baby boomer to spend $100,000 on an RV." Mr. Lenamond says he is seeing more boomers by RVs in their least few years of work, and then rent them out to pay off the loan in anticipation of retirement travels. Still, sharing an RV isn't for everybody, particularly if you think of such a vehicle as an extension of your own home. Internet bulleting boards abound with longtime owners' criticisms of the idea. "The only one that makes money on the leaseback is the dealer," an RV owner gripes in one posting. "You get stuck for the repairs and upkeep." Event the rental companies themselves warn that you should expect extra wear and tear on your motor home's furniture, along with repairs you might not otherwise have to make – when a novice drives off with the TV antenna extended, for example, or rips an awning on a tree branch while maneuvering into a campsite. There are also several financial considerations involved. First: How much do rentals go for where you keep your RV? You can get an idea through the rental dealer locator at www.rvra.org, the Web site for the Recreation Vehicle Rental Association in Fairfax, Va. Next, you have to ask the rental com0pany how large a cut it takes and what the agreement covers. Most firms charge a 50% fee that covers advertising costs, along with the bookkeeping involved in tracking expenses and sending monthly statements along with the check – or a bill. A Bigger Cut There are exceptions for RV owners who are looking for a bigger cut or who just can't part with their vehicle yet. For instance, Kevin Price, the owner of All About Fun RV Rental in San Diego, gives a 70% cut to some of his RV owners – but the company doesn't provide storage for the vehicle. RV owners also are responsible for maintenance, and must do a one-to two-hour orientation with each new renter before handing over the keys. The arrangement widens the geographic area in which he can offer rentals, says Mr. Price, but he acknowledges that the relationship doesn't work for everyone. "The first think I would do is try to talk you out of keeping your coach" at home, he says, "because the repair work is a pain when you don't have your won shop. If you have a broken water heater, and somebody's picking up the RV in four hours, it's tough to get it fixed that fast." You also need an idea of how frequently your vehicles will be rented. While you want to make sure your motor home gets enough action, you also don't want it to rack up mileage too quickly. "You really want to keep it somewhere between 20 weeks and 30 weeks a year on the road," says Mr. Lenamond in Austin. "You've got to have time to maintain the vehicle." He also advises a three-day waiting period to check out renters. Another basic: How much will your insurance bill climb? To rent out your RV, you need commercial coverage. But the details, vary from state to state and company to company. Some dealers require renters to get a rider from their car insurer; others sell it to them directly. The other big cost is maintenance, and that bill typically comes out of your pocket. Most rental companies do the work on site automatically, but ask permission before fixing something that costs more than $100 or so. The bonus is that if you rent out your RV, you get to treat it as a business on your federal income-tax return. That means you can deduct operation expenses, along with the vehicle's rapid depreciation in value. But rental dealers and RV owners would advise you to work out those details with an accountant. If you personally use the vehicle for more than two weeks a year, tax rules limit the amount of deduction you can take to the amount of rental income you receive. In other words, you couldn't write off a loss. Lastly, many rental dealers are particular about the size, age and mileage of the RVs they'll accept in their fleets. Some, like Adventure RV Cos. In Indianapolis, require you to bury your motor home through them (at a discount). So if you're considering buying an RV with a leaseback in mind, make sure there's a dealer nearby who will take it. Also, make sure you will get to use your RV when you need it. Many dealers limit your use or require you to make reservations well in advance. A Fleet of One's Own In the end, it's tough to know whether you'll make money on such a deal, though it's likely that rental could help cut your monthly payments. Kevin Regnier, a computer salesman in Indianapolis, has put three RVS in Adventure RV's program in the past two years, keeping one close to home in an Indianapolis fleet, and the other two in Portland, Oregon. Why three RVs? First, it was for "income diversification – it's a way to make a little more money outside the stock market," Mr. Regnier says. Second is "the ability to have an RV available to use when we want to use it." So far, "I've never taken a penny out of my pocket for any of these," he says. He has used the Indianapolis coach to take his wife and three children to Minnesota, Tennessee and Florida. Mr. Regnier plans to sell his oldest RV this fall, and that will be the first test of whether he can make any money on a sale. "So far, the cash flow has been good," he says. "But if we lose a little money, we still had three great family vacations." |
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