Vacation/ rental home Recommendations - Airbnb, VRBO

[globalmax]

We live in Chapel Hill. We have an option to invest $500K to $600k on real estate. One option could be to buy a condo/apartment type locally here some where where there is a demand and expect an yearly rental of $30K.
Another option we are thinking of was to buy a vacation home cabin/cottage type which can be occasionally (2-3 times weekends in 1 year is what we may use) and rent it out rest of the time through Airbnb, VRBO etc provided we can expect a similar yearly rental income of approx $30K.

Ideally vacation home within 3-4 hours of driving in the mountains is we would prefer. However year around usage and rental income will be first priority

Any recommendations as to where to start looking? Prefer mountains not beaches?
Any other pointers from anyone with Airbnb, VRBO kind of rentals?

Thanks in advance

[Owen Wister]

In my opinion and experience, doing short term rentals absolutely requires you to live very close to the rental in order to operate successfully. It can't be done properly and you can't meet your tenant's needs if you are 2 hours away. And its virtually impossible to find anyone (especially a real estate management company) that will be as responsive to emergencies as you.

[michgc]

When buying a property for investment, a starting rule of thumb is to aim to get a cap rate of 1% per month (12% per year). So on a $500K property, that means you should aim for $5000 per month in rent or $60,000 per year. So a return of $30,000 is about half that (6%/year) which is not good.

If you are buying a vacation property then buy a vacation property, don't think of it as an investment.

Lastly, you need to decide if you want to invest in real estate whether you want to have a traditional renter (1 year or more) or do an AirB&B which is quite different. Having an AirB&B is more like the hospitality industry. You need to have supplies in the house such as toilet paper, soap, and dish detergent. You need to supply menus to nearby restaurants, have a cleaning service between each guests, leave instructions for the AC, how to run the dishwasher, etc. It is much more involved, and the payout should be significantly higher than a traditional rental.

I listen to a financial podcast called "Afford Anything" by Paula Pant. She is great and very detailed and has dozens of episodes talking about real estate. The topics I mention above are based mostly on years of listening to her. I highly recommend it! I suggest you do a lot of research before diving in.

[don6170]

Originally Posted by Owen Wister

In my opinion and experience, doing short term rentals absolutely requires you to live very close to the rental in order to operate successfully. It can't be done properly and you can't meet your tenant's needs if you are 2 hours away. And its virtually impossible to find anyone (especially a real estate management company) that will be as responsive to emergencies as you.

A friend of mine here in Raleigh has had a different experience. About 10 years ago, he bought a place in the mountains. He did go through a couple management companies early on, but since then, he said it was been a great (and profitable) experience.

My Dad had duplexes for decades. I think the "living in the area" is much more important for longer term rentals.

[ucctgg]

Originally Posted by michgc

When buying a property for investment, a starting rule of thumb is to aim to get a cap rate of 1% per month (12% per year). So on a $500K property, that means you should aim for $5000 per month in rent or $60,000 per year. So a return of $30,000 is about half that (6%/year) which is not good.

If you are buying a vacation property then buy a vacation property, don't think of it as an investment.
.

That rule of thumb was true ten or twenty years ago, but not now.

[michgc]

Originally Posted by ucctgg

That rule of thumb was true ten or twenty years ago, but not now.

You can get 5% parking your money in nearly risk-free CDs and with no effort, why wouldn't this be true now? If anything, with high interest rates, your expected return on real estate should be even higher.

[globalmax]

I agree on the low returns on rental home. Even relatively low risk money market accounts give 5 plus% returns.

At the same time, on a $500K condo or rental home in Triangle area, monthly rental will be less than $3000 per month. With Taxes, Insurance etc, you get approx 5% returns

Anyone with AirBNB and VRBO experience as rental home owners? Which areas has potential but drivable ( 3-4 hours) from here

[twingles]

You also need to talk to your insurance agent about insuring it. You either live in it or it's a rental - the insurance is different depending on the usage. And please don't think you can insure it as your dwelling and if your Air BNB renters set it on fire you'll just say you were there - trust me your adjuster can spot the red flags a mile away.

[globalmax]

Airbnb, VRBO rentals are so common, I am sure insurance shouldn't be an issue

Which areas has potential for AirBNB, BRBO kind of rentals with drivable ( 3-4 hours) from the Triangle area?

[goldenage1]

Originally Posted by globalmax

.....Which areas has potential for AirBNB, BRBO kind of rentals with drivable ( 3-4 hours) from the Triangle area?

Perhaps you should be asking this question in the Western NC sub-forum to see which areas get questions, or at least reading through that sub-forum. There are people who would want to rent near a ski slope, such as in Maggie Valley. Others would want to get away from the heat of the summers. I recall people from Atlanta asking abour a summer week-end retreat. I suspect others would like to experience the urban attractions in Asheville, or try out Hendersonville as a place to retire.