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I was thinking of purchasing a property as an investment, mainly to use as a weekly rental.
Right now I live in Providence RI, but I will be moving to Charlotte NC in a few months.
I wanted to buy something either in New England, or possible on the NC shore.
Where is a good place to purchase a vacation rental property? Has anyone done this before? I wanted to know where the best places to buy right now are.
I have a rental property near Lake Tahoe. It started as a vacation rental with the thought that we wanted it to be available for our own use. The problem with that is we rarely use it, and when we do it has to be cleaned before the next renter for $175.
We switched over to a full-time rental which is getting us about twice as much money, lower property management cots, and savings on utilities. I don't think I'd do a vacation rental again unless I really used it frequently. Use the extra cash from a long term rental to rent a hotel for a day or two when you go.
I have a rental property near Lake Tahoe. It started as a vacation rental with the thought that we wanted it to be available for our own use. The problem with that is we rarely use it, and when we do it has to be cleaned before the next renter for $175.
We switched over to a full-time rental which is getting us about twice as much money, lower property management cots, and savings on utilities. I don't think I'd do a vacation rental again unless I really used it frequently. Use the extra cash from a long term rental to rent a hotel for a day or two when you go.
Thanks for that information.
What is the difference between a full time rental and a vacation rental?
I don't see how one would save on utilities and cleaning fees. Wouldn't you need to pay both whenever someone uses the property?
What is the difference between a full time rental and a vacation rental?
I don't see how one would save on utilities and cleaning fees. Wouldn't you need to pay both whenever someone uses the property?
With a full time rental, you usually rent it to just one renter for a much longer period of time, usually at least a year. The renter pays the utilities, and cleans it. Just like any other full time rental property. A vacation rental is usually for very short term stays, usually just a few days at best. It's almost treated like a hotel. The renter doesn't pay utilities and you have to clean between each person that stays there. You have to hope you keep it booked enough to cover your expenses.
In Destin, Fl. there are a ton of people who buy 'investment condos' that they rent-out through property management companies during 'Snowbird season' and parts of the April-September vacation period. The Property Management company typically handles rental, clean-up, listing, collections, ... and will do repairs and maintenance for a fee. Many of them make $30-$50K per year on these rentals and still have a place where they can stay ... when they decide to use it themselves. Most maintain an 'Owner's room or storage area' where they can keep personal possessions they don't want to 'rent out' and pay their own HOA fees, utilities, etc.
Other investment-owners (often those planning to retire in a few years, yet wanting to take advantage of today's lower prices), will rent/lease their place to longer-term renters. They charge less for rent and can either work with a Realtor/Property Manager ... or handle listings, repairs, etc. themselves (more difficult from a distance).
Of course, many folks in this area (and others) simply buy/own a vacation place ... and then use it or loan it to friends whenever they wish --- and don't bother renting-it out at all.
This isn't really 'rocket science' and the real question is probably not 'how' to buy/rent a property, but, in more clearly defining your personal objectives and then figuring-out which of the 'hows' (plus location, costs, etc) work best for you. For example, if you are buying the place as an investment, should the initial price OR near/long-term ROI, OR immediate cash-flow be your primary objective? Additionally, you will find that owning a place that is nearer to where you live gives you better control over the property and costs. -----Simply wanting to buy/own a low-cost 'weekly vacation rental as an investment' is probably too vague to produce successful results.
You've got to be careful to identify your goals and expectations; ie, an "investment property" is one that yields a positive cash flow, positive ROI, or has reasonable expectation of appreciation in excess of inflation so that at a forseeable time in the future can be sold for a net profit.
When you look at a weekly vacation rental property in New England while you are living in NC, that puts you into the absentee owner category. You'll be needing some form of on-site local property management and cleaning/maintenance services. Expect to pay anywhere from 15-25% of the gross rental income for the site management and additional fees for the cleaning at each rental turn-over (for example, $175 as mentioned by others), plus the maintenance costs of the property to keep it in rental-ready condition. With property taxes, possible HOA fees, and insurance (it's not a residential property anymore, it's a rental property ... ask your insurance agent about the differences in coverages), it's a bit more expensive than the costs of your personal residence.
As well, expect that your rental may be seasonal but the property management company may have a monthly minimum fee for keeping the property in inventory, which may greatly exceed your gross income in some months. That's negative cash flow, and you've still got utilities and maintenance expenses. If the place sits vacant for an extended time, it will need a cleaning prior to the next weekly rental.
If you are looking at a weekly rental property closer to home, ask yourself who is going to do the maintenance/upkeep, and the cleaning for each rental turn-over? Who is going to take care of the marketing/bookings, who is going to collect the funds/deposits, who is going to do the pre and post rental inspections? This all takes time and effort if you do it yourself, and having only one property to do if it's some distance away can become quite a burden, especially if there's a short time between turn-overs.
Many outfits are in the business of condo's and townhome vacation rentals where the opportunity presents to have the personal use of a vacation place offset by the net rental income in excess of the property management and overhead/expenses. But the only justification for such places typically is the attraction of a discounted or low cost personal use of the place. Don't count on it being a paying proposition unless you can get a place for a price far back of the FMV and the rental rates and occupancy are strong.
Few folk that I know of have made any money in these types of properties unless they bought in many years ago when prices were a fraction of today's marketplace. Don't forget that long term capital gains tax comes into play when you sell to capture the appreciation.
PS: reading the post above claiming "many make $30,000 to $50,000" per year, it's a laugh. Ain't gonna' happen unless you've got a 3bd/2ba premiere beachfront property down there to get that type of gross rental income, before property management expenses, taxes, HOA/condo fees, assessments, utilities, insurance Check the current sales prices for these places, typically 1,800 to 2,200 sq ft ... running between $850,00 to $1.2 mil. Call your banker and ask what the downpayment is gonna' be and what your PITI is for such a loan; the rules are very different for a non-owner occupied rental property vs your low money down/cheap interest rate for a primary residence.
Looking at the rental rates for a typical property in that category in Destin FL:
2013-2014 Rental Rates
You’ve worked hard. You’ve earned your vacation. You deserve the luxury amenities that the Gulf Coast has to offer. The Islander has what you want.
Gulf View West
Vacation at the Gulf View West Side at the Islander where the sunsets are spectacular and the view of Lake Christina with the pelicans, great blue herons and other waterfowl is unrivaled. Spend your mornings watching the fishing boats heading out to sea from Destin harbor and see their return in the evening through the East Pass. Wildfowl, sunsets and fishing boat traffic provide an unparalleled panorama from your own lanai!
Gulf View West
Daily $136
$156
$240
$167.15
$96
Gulf View West
Weekly $952
$1,092
$1,680
$1,170.05
$672
Stays For 3 Days or Less
Gulf View West
Daily $170
$195
$300
$208.94
$120
The bottom line is that you couldn't gross $50K off one of these units if you had 100% occupancy for a given 52 weeks. Take off the management fees, cleaning and maintenance fees, PITI, and overhead expenses and this place will cost you for your personal use opportunity ... which is most likely to happen during the low season time frames. The variation in rates reflects the different levels of accomodations for two per night, ranging from their property's low end condo's up through their "gold" level units, top of the line.
I've bought units and SFH's in resort area properties years ago when they could be had for low 6-figures and are now worth 7+ figures, and the mortgages all paid off. With all the expenses, property taxes, insurance, and local property management ... I don't get $50,000, let alone $30,000 NET income from these properties per year. You'll not buy these places at current FMV's and get a positive cash flow, nor do I foresee a significant capital appreciation in the near term. You'd buy into these areas only if you were affluent enough to afford the ownership for your intermittent use or you were retiring to these locales for a primary residence.
FWIW, my in-laws bought many time-share condo's around the USA in golf resort locations. For years, they were able to use the places at essentially minimal cost for their golfing weeks (two weeks annually at each location, one week in high season, one in off season). Now that they can't use the places, they offered to gift them to us. We looked at the negative cash flow on all of them and turned down their generous gift; we're not golfers and would never use the places, nor could we sell them for any net gain in today's marketplace. We'd still have the taxes and fees to deal with, and they aren't met by the rental income that might come in from renting them out during our weeks of interval ownership.
IMO, if you want a vacation property to use, you're better off to rent or lease what you want when you need it, or stay at a condo hotel. If you are looking at real estate investment property, be very careful about what you're buying and get a P&L worked up before you invest any money. [/color]
Have you ever used a service like VRBO.com? (I'm not sure what their fees are like for owners.) I start by looking at rates per season in the areas you're potentially interested in. Some owners utilize the calendar and you can see their bookings. Cleaning fees range from as low as $50-200. This can make a big difference for the affordability factor for short term stays. But, you can set it up any way that suits your fancy--minimum 3 days, minimum 7 days, minimum 1 month, etc. One of the properties I stayed in was handled directly by the owner, who I never met in person. I signed a contract, sent a deposit, cleaning fee and payment via credit card (maybe Paypal?) and I accessed the unit by an electronic passworded door. VRBO provides insurance for both parties in the transaction. The guests are expected to clean up after themselves like in a timeshare--carry trash out, clean dishes, etc. Any unusual extra cleaning is taken out of the deposit.
Hi, You can also check out previewstay website that offers vacation homes and rentals. Moreover if you are seeking to purchase any condo/single family home anything; they offer a stay before you actually buy it. You will find further details on the website itself .
I can offer first hand experience. I own and manage for others vacation rental condos on the central east coast of Florida. I rent between 32 and 42 weeks per year in most of my units. If the owner uses the unit a lot obviously occupancy suffers. It is entirely within reason for a self-managing owner to make a net income after all expenses (taxes, cleaning, condo fees, utilities, insurance) but before debt service of $12,000 to $20,000 annually from a unit that is selling right now in the low $200s. They also get the opportunity to use their unit some themselves. Aggressive self-managers can make more. Those who use a property manager like me will pay 18% to 30% off the top, so, they'll net less.
I would imagine properties in regions that actually have winters to get far less occupancy and income. Don't really know.
I'll just add the experience of some close friends, who bought a vacation home in an area popular with tourists, about an hour and a half from where my friends live. They decided to rent the place on a short-term basis to tourists during the season, and use it themselves the rest of the year, or whenever it wasn't rented. They planned to do the bookings, cleanings, etc., themselves, rather than hire a company to do it.
To the husband, the vacation home was an investment, and he treated it as such. It was all business with him. To the wife, however, it was her second home, and she couldn't get over the way the tourists treated what she perceived to be her home. She'd get very upset if the tourists broke something, or left the house a mess after their stay. She never could get to the point of feeling the way her husband did -- that it was just a business.
They ended up selling the property a couple of years after they bought it, because of the wife's unhappiness.
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