BRIDGEHAMPTON, N.Y. (TheStreet) -- Joe Farrell built himself a $59.5 million Sandcastle in the Hamptons, but nobody wanted to play in it.In one of the best Hamptons stories of the summer not to stem from a P. Diddy party, the Bridgehampton, N.Y.-based builder and the Corcoran Group real estate firm put his 31,000-square-foot, 11-acre Sandcastle estate -- with bowling alley, squash court, rock wall, skateboard half pipe and children's play room with DJ booth and karaoke equipment -- on the market to deafening silence. Undaunted, Farrell initially balked at offering up the home for the summer -- reportedly to the Jonas brothers -- before agreeing with an Eastern European businessman to a two-week, $425,000 rental. By comparison, the five-bedroom oceanfront mansion in nearby Wainscott that once hosted Lindsay Lohan's family fetches $350,000 for the entire summer. "With that kind of money for two-weeks' rental, I'd rent it every year -- booms or busts," Farrell says. "I don't care how much money you have, that's a lot of money and it pays all my bills for the year." Farrell's approach is gaining popularity, as luxury homeowners across the U.S. are renting their vacation homes and, in some cases, their primary residences, just to make ends meet. According to vacation rental company HomeAway, 54% of property owners who use the site say they need to rent out their properties more than they had in the past to cover costs. HomeAway also found that 8% of the 6 million to 7 million existing vacation homeowners in the U.S., or roughly 500,000 owners, plan to start renting within the next year. Of that 500,000, 19% said the economic downturn had forced their decision.
Meanwhile, Craigslist spokeswoman Susan McTavish Best says vacation rentals have tripled on the site. Though less than 10% of the leisure travel market stays in a rental instead of a hotel or a resort, that number could rise as more prominent properties hit the rental market. "There are a lot of people who extended themselves to buy vacation properties, never intended to rent them out, and now they find themselves in a position where rental makes financial sense," says Brian Sharples, CEO of HomeAway. "We're going to see a lot of newer, higher-end properties hit the market with amenities like swimming pools and tennis courts that are going to compete with resorts." The "billionaire approved" ski-in Deer Field Estate in Deer Valley, Utah, near Park City -- with 15,000 square feet, private ski gondola, 14-seat theater, 10-car garage, eight fireplaces, seven bedrooms, daily maid service and $15,000- to $25,000-a-night price tag -- could serve as a resort unto itself. Meanwhile, international properties like the 11-bedroom Cen Cre villa in Eygalieres, France, with tennis court, private pool and practice golf range, can be had for $19,000 to $45,000 a week. Though vacation rental companies like HomeAway and Escapia tend to lean more heavily on $1,500- to $2,500-a-week properties, five-figures-a-week luxury properties are in ample supply on both companies' sites. In many instances, as was the case in the Hamptons this past summer, owners choose not to advertise the cost of their opulent offerings. "There were a lot of $200,000 to $300,000 rentals this summer that you weren't hearing about," Farrell says. "The prices on good houses may have been off a little bit, but they all rented."
If you're a homeowner wondering whether to rent your sweet vacation spot or ride it out, the answer may depend on your location. In Florida, where 62,401 foreclosure filings last month placed the state second behind Nevada in foreclosure broker RealtyTrac's rankings, the threat of investors turning vacant housing into a glut of vacation rental properties courts disaster. However, in a luxe locale like Aspen, where broker Tom Carr of Leverich and Carr says home sales are projected to fall from $2 billion in 2008 to less than $1 billion this year, rental provides an income option for home sellers who refuse to come down on their prices. HomeAway's Sharples doesn't blame the owners, but says potential buyers are also looking to rental potential to take the bite out of premium purchases. "The realtors that I've talked to in Aspen have all figured out that the best way to sell vacation real estate is to add a rental component to their pitch to potential buyers," Sharples says. "They never used to do that, but the majority of the buyers they're talking to want to know something about the rental potential to hedge their bets." -- Reported by Jason Notte in Boston.