Author Topic: Investing in a vacation rental  (Read 2172 times)

rkbabang

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Re: Investing in a vacation rental
« Reply #20 on: August 14, 2019, 10:20:10 AM »
I own a cleaning company.  We clean many vacation rentals in SW Florida.  It is very seasonal here.  One thing that an owner of a vacation rental needs to consider more today than 5 years ago, is regulatory risk.  Many communities or towns are passing by-laws that restrict or control short term rentals.  Who wants to buy their dream home next-door to a rental that has new guests every 3 days, 5 days, 7 days, etc.?  Those tenants tend to really 'enjoy' their vacation and it also puts a lot of stress on the house.
Some by-laws will create short term rental 'zones' that may not permit short term rentals, or none less than 7 days or none less than 30 days, etc.  Just something to consider before you buy and something that could affect the value of your investment after you purchase it.  Local permanent residents will put pressure on the local gov't to implement and enforce short term rental by-laws.  Not many people want their next-door neighbor's house to that will basically become a hotel.  For my business, the short term rental market is amazing and the owner always has a spread between what they collect for a cleaning fee and what they payout to the cleaning company/person.

That is something to look out for.  I don't know if Alton would kill the goose that lays the golden eggs like that, but you never know.   Tourism is how the town survives.  Half of the houses in town are not lived in by full time residents.  Alton is half rental cabins/houses, vacation homes, and seasonal people.

According to wikipedia: "As of the census of 2010, there were 5,250 people, 2,145 households, and 1,511 families residing in the town. There were 4,281 housing units, of which 2,136, or 49.9%, were vacant. "


SharperDingaan

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Re: Investing in a vacation rental
« Reply #21 on: August 15, 2019, 02:11:33 PM »
A few take-aways, as we have relatives involved in the business.
We own 5% of modest guest houses in both Paris (France) and Serville (Spain).

It's a lot of work, and your 'projections' are almost always over-optimistic.
If you bought wisely, made truly value-additive improvements, and held on to the property for a decade - you may well be OK; but this ISN'T most people. You'll need cleaners, weekly maintainance, handy man/women, a marketer, maintenance capex, and the ability to tolerate extended periods of 'no rent'. The more you can 'spread the load/risk', the easier a time you will have.

Be clear on your objective.
To get the most out of the property, you need to be using it part of the time that it is empty, and that use is not 'free'. You're also there when it isn't a popular time to visit, so it also has to be a place you'd like to live in - not just visit. Paris in early January is wet and cold ... but if you like culture, and french cuisine .... it's not a disaster. 

Net-net you will most likely come out at a financial wash.
Transaction fees, and cummulative minor capex will erase much of your potential capital gain. Additionally, most of your annual P&L share will be lost to the cost of traveling to/from, and your expenses while on-site. The primary benefit will be that while on-site, your costs were covered. In our case, we get to go to, and stay in both Paris and Serville for a few weeks every year, for an extended period, at essentially a net cost of zero; while protecting the purchasing power of our money. The aim is to enjoy what you have, not try to make more.

Everyone is different, but it's not as easy as many would like to think.
Best of luck to you!

SD



Orchard

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Re: Investing in a vacation rental
« Reply #22 on: August 16, 2019, 05:00:29 AM »
Thanks for your wise and honest input SD.

rkbabang

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Re: Investing in a vacation rental
« Reply #23 on: August 16, 2019, 10:53:37 AM »
A few take-aways, as we have relatives involved in the business.
We own 5% of modest guest houses in both Paris (France) and Serville (Spain).

It's a lot of work, and your 'projections' are almost always over-optimistic.
If you bought wisely, made truly value-additive improvements, and held on to the property for a decade - you may well be OK; but this ISN'T most people. You'll need cleaners, weekly maintainance, handy man/women, a marketer, maintenance capex, and the ability to tolerate extended periods of 'no rent'. The more you can 'spread the load/risk', the easier a time you will have.

Be clear on your objective.
To get the most out of the property, you need to be using it part of the time that it is empty, and that use is not 'free'. You're also there when it isn't a popular time to visit, so it also has to be a place you'd like to live in - not just visit. Paris in early January is wet and cold ... but if you like culture, and french cuisine .... it's not a disaster. 

Net-net you will most likely come out at a financial wash.
Transaction fees, and cummulative minor capex will erase much of your potential capital gain. Additionally, most of your annual P&L share will be lost to the cost of traveling to/from, and your expenses while on-site. The primary benefit will be that while on-site, your costs were covered. In our case, we get to go to, and stay in both Paris and Serville for a few weeks every year, for an extended period, at essentially a net cost of zero; while protecting the purchasing power of our money. The aim is to enjoy what you have, not try to make more.

Everyone is different, but it's not as easy as many would like to think.
Best of luck to you!

SD

Thanks, SD for taking the time to provide your input based on experience.