Posted by Wayne-NC on November 08, 2004 at 16:43:23:
Jay, how far from the oceanfront do you call the coast? That is a nice price to pay if the annual lease will cash flow. For example, I live on the coast and the ocean front is a block away. The price difference is about One Million!
Income producing vacation home? - Posted by Katharine (OR)
Posted by Katharine (OR) on November 07, 2004 at 22:54:23:
Hi everyone. Has anyone ever bought a rental vacation home? I live in Oregon and have always wanted to have a house at the beach. The only way I think this could be “cost effective” for me is if I could rent it out as well. Is there a market for these kind of properties (I am sure location has something to do with it…) and has anyone ever purchased one with enough cashflow to pay the mortgage pmts. Any other information, ideas, etc. is greatly appreciated. Thanks, Katharine
Re: Income producing vacation home? - Posted by John (OR)
Posted by John (OR) on November 08, 2004 at 13:55:20:
Katharine,
It is pretty much true that any desirable area will not cash flow. Too
many buyers who want to use it (at least part time) for personal use so
will subsidize the cost of ownership beyond what a rental only
situation would justify.
If you buy in the right location you will be happy in a few years when
the values tend to drift up and you can then rent for a more reasonable
amount relative to the cost of ownership.
Overall a vacation home is a bad deal on a cash flow basis and it might
be a bad deal as an investment in general. Second homes tend to suffer
more then primary residences when the market is soft. If you are going
to buy do so when the economy is not good and second home sellers
can not find buyers.
John
Re: Income producing vacation home? - Posted by Jay(OR)
Posted by Jay(OR) on November 08, 2004 at 11:46:19:
Hi Katharine, I have also looked into buying a house at the coast. The only solution I have come up with to have the home pay for itself is to rent the house out to a tenant long term and when they move is the time you get to use the house. At least that’s what I am planning on doing. If your schedule doesn’t allow such flexibility, then try buying a duplex and only rent out 1 side to a longterm tenant. The good part about some parts of the Oregon coast is that the prices haven’t increased as dramatically as other places. You can still find houses for $70,000. Well, good luck!
Re: Income producing vacation home? - Posted by Wayne-NC
Posted by Wayne-NC on November 08, 2004 at 09:20:51:
I live on the Mid-Atlantic as well right in the middle of vacation homes. We have a little more “shoulder” season here for more rental income but it is lower than summer. As stated above, most loose cash flow on their properties here too due to the cost of purchase so the rental income becomes a good subsidy, however, where most people made up for the lost cash flow is in appreciation which has been tremendous at worst. Don’t expect that to last forever. Secondly, they were able to use their beach home any weeks that they reserved. It was almost like a very expensive timeshare to them. The bottom line here is if you can afford the NET loss on your purchase, then go ahead and enjoy your beach home. Compare that to renting. I have a friend who just purchased several lots on the Oregon oceanfront and 1 oceanfront home where he lives. (He said he may sell for $1.5 mil, Wow) A little research on your part and you may find it as a comp. He moved from here. He said that there is very little available. You know what that does. I am currently looking for one in Kauai, Hawaii. I have one in Largo, Florida near Clearwater and it breaks even. There is a way to increase cash flow on those properties if you are willing to take a small risk. Buy mortgage notes with the equity that obviously pays more that your borrowing costs. That is my current strategy.
Re: Income producing vacation home? - Posted by David Krulac
Posted by David Krulac on November 08, 2004 at 06:23:16:
I don’t know Oregon. On the Mid-Altantic coast the season for beach houses is Memorial Day to Labor Day or 12 weeks. The rest of year is slim to no pickings, and slim left town. you have to make a year’s income in 12 weeks. Check with owner’s in the area you want to buy. realtors will be more optimistic than owners. Sellers will be optimistic too. Talk to non-selling owners.
also there are 3 different tax status (stati)? with the IRS. If you rent 14 days or less you don’t have to declare the income. But in most cases 14 days doesn’t make the property a psoitive cash flow.
imo most people expect the venture to be more profitable than it is and most owners lose money. but you could be the exception.