As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.
One day I think it might be fun to go to Lollapalooza, the major music festival held each August in Chicago’s Grant Park. The four-day festival attracts some of the world’s biggest acts each year.
The thing that stops me from doing it is the fact that tickets go quickly and inexpensive lodging could be a bit hard to find with that many people. When it comes to tickets, there’s no substitute for a quick clicking finger. In terms of lodging, there may be some things you can do in order to take in this event or any major happening without breaking the bank.
We’ll go over the causes of this phenomenon of sky-high prices for accommodations. Then we’ll go over how you can hack the system. Finally, if you like the vibe of a place enough to spend a lot of time there, we’ll help see if it makes sense for you to get a second home.
Cashing in on Tourists
Many people like to rent a house to stay in and act as a home base when they go to major multiday festivals. Datafiniti is a data analytics firm based in Austin, Texas. Austin is home to many festivals throughout the course of the year, but by far the biggest is South By Southwest (SXSW), a celebration of the newest and hottest happenings in music, film, technology and interactivity. The 10-day festival brings 500,000 people within the city limits each March.
The folks at Datafiniti decided this was the perfect opportunity to dig into the data and answer a question: How much do large-scale events and festivals like SXSW increase short-term rental prices?
What they found might pain your pocketbook. The median price per night for a short-term rental in Austin for the period between October 2015 and September 2016 was $200 per night. However, during SXSW in mid-March 2016, the average rental price spiked to nearly three times the average.
The phenomenon isn’t unique to SXSW. When Super Bowl 50 was played, rental prices spiked 222% in the San Jose and Santa Clara, California areas. Those looking for lodging during the NCAA’s College World Series and the U.S. Olympic Swimming Trials saw the median rental price in Omaha, Nebraska skyrocket by more than 300%.
Some of this is no doubt explained by supply and demand. There’s just a lot more people looking for a room. Still, landlords may have a different incentive to charge big money for rent around festivals and other premier events that owes its creation to the first major golf event of the spring.
A Break for Tax Masters
If you’re a golf fan, you know that every year seasoned veterans like Phil Mickelson join young hopefuls like Rickie Fowler and Rory McIlroy at the picturesque Augusta National Golf Club in Augusta, Georgia. As golfers and spectators descend on the golf mecca, people find that their houses are quite in demand all of a sudden. The happening gave birth to its own IRS provision, sometimes referred to as the “Masters Rule.”
Dating to the mid-1970s, section 280A(g) of the IRS tax code states that if your home is rented for less than 15 days per year, you wouldn’t include that in your taxable income.
This means that if there’s a big event coming to town, a homeowner can rent out their primary or vacation home, go to a hotel and rake in the cash tax free. This can provide a strong motive to up the price if you count on it to supplement your annual income.
With that said, there are things you can do in order to secure cheaper rental accommodations if you want to go to an event.
Accommodations on the Cheap (or at Least Cheaper)
If you’re looking to attend any kind of festival or major event, there are a few things you can do in order to secure lodging that’s at least a little bit less expensive. It all comes down to effective planning.
Book in Advance
If you know you’re going to be going, making your reservations early can help you save money instead of waiting until a month or two before and paying top dollar. Hotels and landlords may spike pricing as it gets closer to the event.
Be Willing to Travel
You may find that it’s cheaper to rent somewhere an hour away from the epicenter of the action. It’s still within driving distance, but much cheaper than the hotel a block away.
Of course, you have to treat this a bit like a high school story problem. If you rent a place further away, you need to factor in transportation. Don’t forget to include the cost of a car service or a rental.
If you’re willing to give up a little personal space, you may be able to find a roof to sleep under that’s more economical.
According to the Datafiniti study, the properties that had the biggest spikes in rental prices had three or more bedrooms. This makes sense, as people often travel with their friends or family. However, if you can get by with two bedrooms instead of three, it could save you a significant amount of money.
Buying Your Own Place
If you’re just going for one festival, it doesn’t make sense to make a major investment. However, major metropolitan cities like Austin and Chicago have multiple attractions and events going on throughout the year. And Augusta definitely has great golf.
If you like the vibe of the place and could see yourself spending more time there, it might make a lot of sense to go ahead and get a second home if you can afford to do so.
There are definitely some budgeting considerations when it comes to getting a second home. You have to make sure you’ll be able to handle two mortgage payments. You also have to make a higher down payment. This helps assure investors that you have the resources to handle a second home because if you get in financial difficulty at some point, you’ll make your payment on your primary home first. With that in mind, it makes sense to get a preapproval so you have a realistic price target.
If you’re thinking about a second home, we’d be happy to help. You can get started online or call one of our friendly Home Loan Experts at (800) 785-4788.
Do you have any tips on finding lodging in cities around big events? Share them with our readers in the comments. Happy travels!
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.