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Vacation Home/Rental
Old 09-08-2012, 09:40 AM   #1
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Vacation Home/Rental

1 month prior to Hurricane Katrina, we purchased a townhouse in Gulfport, MS. The plan was to offer it as a vacation rental for most of the year, which should have covered almost all of the expenses and allow us to use it when it wasnt rented. Then Katrina hit, we werent in a flood zone so no flood insurance, although that wouldnt have mattered, we only owned the property for 29 days.

Anyway, the property was repaired (6 inches of water causes a lot of damage), and we converted it to a long term rental.

Unfortunately, we paid $170K for it and would be lucky to get $90K for it and owe $125K.

It has been vacant since April. We can cover the expense, but doing so takes away our ability to fund IRAs.

Since we are upside down, we are considering the following short term options:
1. Continue to rent it as a long term rental (assumes the management co can find a tenant)
2. Use it ourselves (would require that we furnish it $10K expense) we are already covering the carrying cost...


Long term
1. Sell it the minute we can break even on the mortgage, undertsanding we will lose $$.
2. When we FIRE (approx 13 years) convert it to our primary residence, live there for 2 years minimum (we like the area), then sell if we choose to.

It seems obvious that we should keep it and live there when we FIRE, BUT we have had tenants that have caused damage, and there is always the chance of another hurricane (now fully insured $4.5k a year, a $3K increase after Katrina). Isaac didnt cause any damage . The neighborhood isnt as nice as it used to be, most of the units are rental properties, and some of the tenants leave a bit to be desired..(not sure if I will want to live there in 13 yrs)

Thoughts, other suggestions?
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Old 09-08-2012, 11:10 AM   #2
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I am surprized "Mail the keys to the bank" is not on your list. Not something I would do ... but it happens every day. How much are long term rents VS vacation rents.

Batten down the hatches for a long slog. My guess is it'll be a decade or more before this beast flips right side up.

FWIW our vacation rental grosses 33-35k/yr ... could never hit those numbers in a long term contract. Irene hit us for 9k in damage but did nothing to the tourist season. Why not try the vacation rental?

Another option is what I call "Motel Alternative". Renting furnished. The condo I did this way rented for roughly double the longterm rate and ran about 85% occupacy. Catoring to business people, divorsees, people between home sales .... anyone who needs a furnished aptatment.
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Old 09-08-2012, 11:34 AM   #3
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Quote:
Originally Posted by tryan View Post
FWIW our vacation rental grosses 33-35k/yr ... could never hit those numbers in a long term contract. Irene hit us for 9k in damage but did nothing to the tourist season. Why not try the vacation rental?
tryan,

Would you be willing to share a bit more? Where is your vacation rental located? What type of structure is it (single family home, condo, townhouse, etc.)? How many bedrooms/baths?

omni
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Old 09-08-2012, 01:50 PM   #4
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It's water front on a small lake in southern vt ... SF, 3 bedroom 2 bath.

Key is dual "peak" seasons (lake in the summer, skiing in the winter). Always amazes me when people try the vacation rental thing with a 2 or 3 month "peak season". Really hard to justify when you can't use it the only time worth being there.

We keep season passes to the ski Mt nearby and block out about 4 weeks/year
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Old 09-08-2012, 07:53 PM   #5
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I thought about turning in the keys, but wont do that unless I HAVE to. Will ride out the storm. A neighbor in the complex isnt having any luck doing vacations rentals. Had not considered renting it furnished, but will look into that. Thanks!
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