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Old 01-12-2013, 08:49 PM
 
116 posts, read 170,631 times
Reputation: 54

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The rent or buy vacation home question? We have been in siesta key for the past week and will be here until the end of the month. One of our goals is to determine if there is a place we would like to spend jan-march each year. We are retired and escaping the cold months (live in st. Louis) is very appealing. So far we really love siesta key. We have spent a little time in Venice, long boat key and Anna Maria island. A couple of years ago we spent two weeks in Fort Myers Beach and also checke out Naples. Of all the places I think siesta key would get the nod especially if money is not in the equation. We are renting a 4 bedroom house about 1.5 miles from the main public beach. We paid $4,000 for the month and I believe February and March would be $5,000 per if we had made that commitment. Our preference is a house, minimum 3/2 because we have a dog and most condos are nor dog friendly and also to entice our adult children to visit. So, if we rent the cost would be $15,000 each year. It causes me to wonder if buying makes sense. I would be comfortable paying $500,000 and would not need a mortgage. If the house was available for rent 9 months of the year would it be likely to generate revenue to cover the expenses i.e. taxes, insurance, utilities and maintenance? If so, then it could be worthwhile. By not paying $15,000 for rent we would be earning a return of 3%, not great but better than the 1-2% we are getting now. I think it is possible to buy for $500,000 but I am concerned it might not be in a desirable location to attract renters i.e close to the beach and village. And, at that price there might be a lot of expensive updating and deferred maintenance. My guess is that renting is the more sensible option but would appreciate hearing from anyone who has pondered this question.
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Old 01-12-2013, 09:06 PM
 
Location: Fort Lauderdale, Florida
11,937 posts, read 11,519,128 times
Reputation: 26984
Quote:
Originally Posted by jsup View Post
The rent or buy vacation home question? We have been in siesta key for the past week and will be here until the end of the month. One of our goals is to determine if there is a place we would like to spend jan-march each year. We are retired and escaping the cold months (live in st. Louis) is very appealing. So far we really love siesta key. We have spent a little time in Venice, long boat key and Anna Maria island. A couple of years ago we spent two weeks in Fort Myers Beach and also checke out Naples. Of all the places I think siesta key would get the nod especially if money is not in the equation. We are renting a 4 bedroom house about 1.5 miles from the main public beach. We paid $4,000 for the month and I believe February and March would be $5,000 per if we had made that commitment. Our preference is a house, minimum 3/2 because we have a dog and most condos are nor dog friendly and also to entice our adult children to visit. So, if we rent the cost would be $15,000 each year. It causes me to wonder if buying makes sense. I would be comfortable paying $500,000 and would not need a mortgage. If the house was available for rent 9 months of the year would it be likely to generate revenue to cover the expenses i.e. taxes, insurance, utilities and maintenance? If so, then it could be worthwhile. By not paying $15,000 for rent we would be earning a return of 3%, not great but better than the 1-2% we are getting now. I think it is possible to buy for $500,000 but I am concerned it might not be in a desirable location to attract renters i.e close to the beach and village. And, at that price there might be a lot of expensive updating and deferred maintenance. My guess is that renting is the more sensible option but would appreciate hearing from anyone who has pondered this question.
One of the great realtors on this board will chime in but let me just input a few things here.
I
Firstly, don't count on that rental income until you have it in hand. And if you do rent it, don't count on pocketing the entire amount unless you rent it on somewhere like www.VRBO.com.

If you do that, it brings me to the fact that then you are responsible, in St. Louis when the AC goes out at three in the morning in the middle of July. Or when the house goes unrented and someone leaves a faucet on and floods the house.

Don't count on getting a monthly rental May through October. Weekly is more like it which leads to an incredible amount of wear and tear on the home. I would be surprised if you got any monthly rentals except from Thanksgiving to New Years.

Since this will not be your primary residence, your property taxes will be very high. Somewhere in the range of 2 percent of the purchase price per year.

Also, while a half million sounds like a lot to spend on a rental home, that will not get you very near the beach which is the most desirable area to rent. The houses closest to the ocean rent first. During slow times your house may not rent at all.

My family has a bunch of vacation rentals and these were just a few things off the top of my head I could think of. Good luck!

Last edited by blueherons; 01-12-2013 at 09:16 PM..
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Old 01-12-2013, 09:07 PM
 
Location: North Port, FL
137 posts, read 306,350 times
Reputation: 87
I think one of the biggest challenges you would have is finding someone to rent for 9 months and not be able to live there during January-March. Most people either want an annual lease, or a seasonal lease, like you, for January-March. You'd be looking for an off season renter, April through December, which I think would not be so easy to find.
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Old 01-13-2013, 08:37 AM
 
116 posts, read 170,631 times
Reputation: 54
Thanks blueherons and stepHome 41, very solid points. Renting certainly limits the risk. At least the cost is known compared to various potential cost surprises.
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Old 01-13-2013, 12:01 PM
 
Location: Sarasota/ Bradenton - University Pkwy area
4,054 posts, read 6,202,907 times
Reputation: 4666
Quote:
Originally Posted by blueherons View Post
One of the great realtors on this board will chime in but let me just input a few things here.
I
Firstly, don't count on that rental income until you have it in hand. And if you do rent it, don't count on pocketing the entire amount unless you rent it on somewhere like www.VRBO.com.

If you do that, it brings me to the fact that then you are responsible, in St. Louis when the AC goes out at three in the morning in the middle of July. Or when the house goes unrented and someone leaves a faucet on and floods the house.

Don't count on getting a monthly rental May through October. Weekly is more like it which leads to an incredible amount of wear and tear on the home. I would be surprised if you got any monthly rentals except from Thanksgiving to New Years.

Since this will not be your primary residence, your property taxes will be very high. Somewhere in the range of 2 percent of the purchase price per year.

Also, while a half million sounds like a lot to spend on a rental home, that will not get you very near the beach which is the most desirable area to rent. The houses closest to the ocean rent first. During slow times your house may not rent at all.

My family has a bunch of vacation rentals and these were just a few things off the top of my head I could think of. Good luck!

Great post! You've covered pretty much everything I tell customers interested in buying a home to use as a vacation home/seasonal rental.

For rentals in the "off season" months May - November, the short term rental rates typically run slightly above 1/2 of the amount you would see on winter seasonal rates.

For out of state owners, it makes more sense to have a local management company handle the rentals for you for the reasons blueherons gave, as well as potential storm damage should we get hit by a tropical storm or worse (doesn't happen very often, but it does happen).

You will also need to factor in for wind and flood insurance.

Before buying a vacation home on Siesta Key or any of the other barrier islands, I would suggest picking out a couple of homes for sale that appeal to you, then talk to one or two insurance agents regarding a ballpark figure on insurance rates. I would also suggest talking to one or two of the larger property management companies that handle seasonal rentals regarding fees they charge, rental rates, expected vacancy rates, etc. Whether you decide to buy or continue renting, at least you'll have a much better understanding of the costs associated with buying and maintaining a barrier island vacation property.
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Old 01-13-2013, 07:19 PM
 
116 posts, read 170,631 times
Reputation: 54
All excellent advice. Using rough expense numbers and given the probability of uneven revenue I am losing interest fast.
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Old 01-14-2013, 07:47 AM
 
Location: Michigan
37 posts, read 69,497 times
Reputation: 36
Yeah I agree. Sounds like you want to use the place during the most important time to rent it out. It's kind of contradictory if you ask me.
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