Is it worth investigating in a vacation home/rental property right now.

Best I can find on similar properties is 7-8% ROI

Everything but mortgage deduction.

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vacation home/rental property

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Which is it?

A rental property should only be purchased if the numbers work.

If a family vacation home then that would be up to your discretion.

So I own 1/6th of a 6 bedroom oceanfront house in Sunset Beach, NC. (My sisters and cousins own the other shares).

We all use the house for vacations (almost every year) and we rent it out when the family isn't using it. The rentals cover the taxes, insurance, repairs, maintenance, utilities, rental management, and gives us a tiny amount of income every year. Like $10-20K, split 6 ways after all expenses are paid and funds are set aside for future repairs (roof,AC, water heater replacement etc).

If we had a mortgage, it would not be worth the effort nor would it be profitable since the family takes 4-6 weeks during prime rental season.

The house is close to 47 years old, the lot was purchased for $20K by my father and his siblings. Last year we were offered $1.8 Million cash for the property. Since a sale requires a majority vote, we didn’t take it. The money couldn't replace the sentimental value for 4 of us, me included. The other 2 were pissed but they can go frick themselves.


The point is, the $20K investment was a great one...but not just for the returns.

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Best I can find on similar properties is 7-8% ROI

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So if I buy a $500k condo, and put 100k down. Rent it for 3 years at 45k/year, and then sell it for 750k---how much have I made on my money? To compare to the market you'd have to use the $100k as the denominator bc that's the actual capital in. But didn't I make 3X my money in 3 years?

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I have some extra cash I was curious if anyone has done this recently. We found a really nice place we could use quite a bit during the year. Is the rental income worth the extra hassle I guess is my question.

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Here's #1 pro tip for a vacation rental to make money. DON"T EVER USE IT DURING PEAK SEASON.

Seriously. Everyone starts off this way and then they fall apart and let their daughter use it for her anniversary and then it just snowballs.

I doubt you are getting 7-8% right now on a one off you found without knowing the market, but I could be wrong.

If its a beach home, stay in Late APril/ early may, September, and then use the shite out of it in the winter especially outside of the Holidays. Don't fricking allow a snowbird its not worth it and you can't use it.

Every week of summer on the gulf coast is worth about 5% of your annual revenue. Yes summer is worth about 50%.

I grew up maintaining our family’s rentals. It’s a long term investment where you don’t see return unless it appreciates in value and you sell it, or you pay off the mortgage and the rent checks become income. Your initial mortgage combined with maintenance required and the touch ups/refresh between tenants will require a savings account for the rent you get which should go untouched except for funding expenses of the property. Money will fly out of your arse to pay for sudden unforeseen expenses.

I don’t see how someone can get a mortgage on a rental and start using rent checks off the bat for income to live.

It’s a great hedge for stock market crashes.

Just make sure you have the following on speed dial and establish a rapport:

Plumber
Electrician
Housekeeping service (for turnover)
AC man
Handyman
Sheetrock guy (for busted walls from domestic disputes. I have seen a lot of that including destroyed bedroom doors due to kick-ins)
Painter

If you can do any of this work on your own then more power to you, but I must warn you that it sucks. You see how people live and most renters are disgusting.

Investigating yes, investing probably not at the moment Might want to fix your subject line.

Financially, it is always relative to what else you would do with the money. Nobody can really answer your question as to if it is worth the hassle since everyone deals with hassles differently.

We bought a small lake house about 5 years ago with cash. It has been easy to keep rented on weekends, and we use it mid-week. Actively looking for a 2nd one now. We have a nice lake here that makes it worth it to us. We use it for short mini-vacations. Most of our renters are on short vacations from out of town. Have not had any bad experiences so far, although we replaced HVAC, and upgraded the deck so we have spent some money on it. We have owned a few long term rentals for 20 years, and had more headaches from those than we have seen with short term renters. I like it as a diversification. Real estate in a nice area is usually a good investment. We are in a growing area, so that helps. If your area is close to peaking with prices, then timing could hurt you. A scan of the online sites will show you typical rent prices. Ours stays rented on weekends from April to September, then only occasionally thru the other months.

As another said, you need to be prepared with who to call if issues come up. HVAC and plumber are most likely numbers you will need.