How to turn your second home into a third one. And fourth one. And fifth one…
By J.M. Stewart
There is a new kind of “key party” happening out there. Chances are, you already know someone who’s doing it. Hold on—it’s not what you think. The only things being swapped are the keys themselves. The Home Exchange industry has taken off in recent years, thanks to a combination of factors that have convinced thousands of vacationers to look at their vacation dollars in a completely different way.
Technically, home swapping is nothing new. It has been around for a while. The basic idea is trading vacation time in your home for vacation time in someone else’s. This can be done in a few different ways with different types of properties. In most cases, however, owners of second homes are bartering unused time in their vacation properties for unused time in other people’s second homes. Who wouldn’t want to trade that sparsely used month at the Jersey Shore for a Paris apartment or a hilltop mansion overlooking the Caribbean?
More than 20 home exchange companies have sprung up in the last two decades, which tells you some-thing about which way this industry is headed. Not coincidentally, during that same time the timeshare industry has cratered. A major reason for the rapid growth of home exchange clubs is the Internet, which enables home-swappers to peruse vacation properties, read personal reviews, and upload comments and photos of their own after each stay.
According to Steve Zacks, a principal at 3rd Home, a leader in the luxury segment that features over 1,700 residences with an average value of $2.25 million, “There is complete transparency in the program.” The company’s web site features comprehensive listings on each home, and guests are encouraged to write a review after each stay—which is then featured unedited on the property page and in the testimonials section.
There are three basic types of home exchanges:
- Hospitality Exchange You stay in someone’s home while the host is there. This might be in a spare bedroom—bed-and-breakfast style—or perhaps a guesthouse. It is an interesting budget option.
- Simultaneous Exchange This is when you literally switch homes—you’re in their home, and they’re in your home at the same time. Companies like IVHE Vacation Home Exchange, in England, function as facilitators. People who like this option find it interesting to vacation in a home filled with someone else’s personal belongings.
- Non-Simultaneous/Non-Direct Exchange You “pool” your vacation home availability with like-minded individuals and then pick the property you want to visit, at a time when you want to travel. It is not your responsibility to find someone who wants to trade with you. This type of service is offered by the elite-level home exchange companies. The vacation properties in pooled exchanges can be valued from $500,000 into the millions, and have club rules, regulations and controls in place to promote a consistent luxury experience.
SO, WHO’S STAYING IN MY HOME?
Good question. Luxury companies vet potential members through referrals and social networking. Every member must comply with the terms and conditions set forth in a company’s guidelines. Non-compliance can result in expulsion. But according to Zacks, “Members pay it forward. It is a private club. Our members, all of whom have their vacation homes in the program, treat each property they visit as if it were their own. Many have created new friends in the process
In less-exclusive simultaneous exchange situations, it is up to the homeowners to work things out. This involves a fair amount of personal contact—and also being comfortable with strangers occupying your primary residence. It’s not for everyone, but for some this is part of the adventure. As one happy swapper says, “When I talk to my exchange partners either on the phone or over the Internet, I just use my gut to get a sense of them. And, I take common-sense precautions, like putting our valuables in an off-limits room when people stay here. My family and I have been doing this for years now, and we’ve never had a problem.”
3rd Home is representative of the high-end home exchange companies in that it only handles second (or third, or fourth) homes. Love Home Swap, by contrast, will work with primary homes, which can involve some tricky logistics. Many companies do a little of both, including IVHE out of England. Others still, like Air B&B, can arrange a room swap. Needless to say, however you go, it is an economical way to travel because you are paying a tiny percentage of typical resort charges or house-rental fees
There is an ancillary benefit of home exchange to surrounding economies: An empty home generates no revenue for nearby businesses, while a home occupied for a couple of weeks by a family that has saved a bundle in rental fees will be a big win for the local shops, restaurants and other tourism-reliant enterprises.
Business is booming in the non-simultaneous exchange sector. Among the many reasons for this growth is that a lot of people built or purchased second homes as investment properties during the real estate boom of the last decade, and now find themselves unable to resell, rent or use the homes as frequently as they had originally anticipated. Or perhaps they have had many years of enjoyment and now are ready for new experiences. Filling those homes with like-minded vacationers—while racking up credits for your own vacation adventures—makes sense. On the flipside, as the person doing the vacationing, you save thousands of dollars in a single trip, and can bring the entire family (and even a couple of friends) to boot. Indeed, in many parts of the world, you might be amazed to find vacation homes with between 5 and 10 bedrooms.
Depending on the company, the cost of vacationing in a fabulous home in an exotic locale averages between 5 to 10 percent of the rental cost were you to go through a local realtor on a short-term stay. In addition, all companies charge some sort of membership fee to be part of the program
Trade to Travel and 3rd Home run on point systems. You get out of the program what you put in. For example, Trade To Travel requires a one-time-only initiation fee of$2,500, but if you make your home available right away (within the first six months of joining), this fee is waived. The more weeks you offer up your house—and the more often your home is used—the more points you accrue. These points are then “cashed in” for a trip. 3rd Home employs a similar kind of credit system that takes into account the value and location of your home, as well as the time of year the home is made available. A high season like Spring Break will garner more credits than a less in-demand time of year. One of the more appealing aspects of this arrangement is that homeowners begin racking up credits the moment unused blocks are deposited into the system, and thus can book their own vacations right away. It’s an economy unto itself.
Timing is everything, of course. If you are considering a home swap, it’s best to plan a trip to, say, Europe at least 3 or 4 months in advance, just to allow yourself the opportunity to pick from a greater variety of locations. Some of the choicest properties come off the board a year in advance. Remember that many of these homes are listed as vacation rentals with local realtors, and the owners of these homes still use them for their own vacation time, so it’s not just home-swappers vying for them. Most companies accept a one-week minimum visit to a home. One home exchange company reported a stay that lasted 6 months. Now, that’s a vacation!
When it comes to luxury properties, there are basically two distinct tastes among travelers. Some want the total residence-club experience, while the more adventurous prefer to go native and fly solo. No problem, several companies cater to both of these personalities. If you’re in the mood for a little pampering, but still want to live like a local, many vacation homes include a staff to cook and/or clean for you. And every home has some sort of local contact or caretaker to answer questions and deal with emergencies. Also, homeowners typically provide a long list of instructions and recommendations for their guests. For those who prefer the top-flight amenities a hotel offers, the higher-end companies have affiliate relationships with residence clubs and developments.
NOT FOR EVERYONE
As appealing as home exchanges sound, they are not for everyone. If you are the kind of person who needs to adhere to a strict timeline with a very specific locale, home exchange programs might not be for you. If you neurose over other people using your things—even if they’re just your “vacation things”—then, again, home exchange may not be a good fit.
However, if you are flexible in your schedule or location, you can go to top-notch destination spots with great frequency for a fraction of the price.
3rd Home, for example, is affiliated with Trump International and includes Trump International Hotel and Towers in New York, the Reefs Club in Bermuda and The Residences at the Chateaux in Deer Valley.
Thanks to home exchanges, enjoying the carefree life of travel and staying in some tremendous properties has never been easier. Pick a club t
o join, list your home, and then start looking for your next vacation destination. Not only will you save buckets of money but, as one homeowner put it, “It feels great to put my empty vacation home to work for me…instead of vice-versa.”