Vacation Rental Investing

[sestein1]

I am wondering if anyone invests in vacation rental resl estate for income and appreciation. I am hoping to get some general guidance as well as specifics on the best way to approach it, best locations to invest in, etc.

Some brief background about me. I am 56 and still working in an executive position. Will probably work for about 4 more years in my current job and then will either retire or do some part time consulting or Board work. I should have about 500K per year for each of the next 4 years to invest. I am considering putting about half of it into vacation real estate.

I would appreciate any insights you might have on this.

 

[rodi]

My advice - be careful where you invest. Southern California is becoming very hostile to vacation rental landlords. Here in San Diego they recently passed (again) a law limiting how many vacation rentals - which will be handled via a lottery. Basically cutting 90% of legal vacation rentals. The law is not in force yet - so things could change... and the last time they passed a similar law vrbo/airbnb did a petition drive to challenge it and council dropped it. Orange county beach communities and Santa Monica have also imposed strict restrictions on allowing vacation rental use.

That said - I use vacation rentals and hope that there continues to be a supply for my vacation demand.

 

[ducky911]

I own a vacation cabin, my rental homes in my home town have totally out pace the cabin in value. So make sure your investment is cash flow positive with rents.

 

[JDARNELL]

I have two overnight cabin rentals in a resort area. I don’t manage them myself. Return is descent but right now with prices there is no way I would be buying the same units I have as the return would not be worth it if it was purely an income
Play. Price appreciation has been about 75 percent over the last 2 3/4 years. It seems like a huge melt up with people willing to pay anything. The issue is if I sold them what would
I buy?

 

[Sand101]

Just sold my beach place. Prices were way higher than the cash flow justified and it was a good time to strike.

Now someone else gets to sweat hurricane season.

 

[lordjust]

I am wondering if anyone invests in vacation rental resl estate for income and appreciation. I am hoping to get some general guidance as well as specifics on the best way to approach it, best locations to invest in, etc.

Some brief background about me. I am 56 and still working in an executive position. Will probably work for about 4 more years in my current job and then will either retire or do some part time consulting or Board work. I should have about 500K per year for each of the next 4 years to invest. I am considering putting about half of it into vacation real estate.

I would appreciate any insights you might have on this.

to much work, city laws/codes, HOA's, angry neighbors, not enough reliable staff, fraud and lack of support from the companies that advertise and process credit cards for you the owner. People do not respect properties that are not theirs and its unbelievable how many calls you get just for the TV/Cable. You have to be very selective of your renters and if you pay the management companies they could care less who shows up. As others have said, prices are so high now for property i wouldnt bother currently.

 

[sestein1]

Thanks for the input! I definitely agree that prices are ridiculously high in most places at the moment. Some locations I started looking at in April have appreciated 25% since then (and were already way up to begin with).

Has anyone been successful with other real estate investments?

 

[ducky911]

Time fixes all mistakes in buying real estate.

I'm glad not to be in current buying market, that said, in the past hot markets I did not see real estate decline. But it will slow to a snail pace.

Also buy something you will keep forever otherwise partner Uncle Sam will take his chunk.

 

[JDARNELL]

Thanks for the input! I definitely agree that prices are ridiculously high in most places at the moment. Some locations I started looking at in April have appreciated 25% since then (and were already way up to begin with).

Has anyone been successful with other real estate investments?

Townhouses. You get people that don’t want to live in apt and don’t want or can’t buy single family. A lot of seniors professionals or single divorcees.

 

[OldShooter]

Start with the marketing 4 Ps. Examine whether your idea of vacation real estate managed by others looks like a good one or not.

I successfully invested and actively managed small residential real estate for 25 years but I would not consider it in this environment. Prices too high, government/regulatory burden in cities increasing, politics like eviction freezes too burdensome. 1986 tax reform sucked the juice out of it. ...

Of course YMMV. Real estate won't appreciate long term much faster than household incomes, but with leverage the gains can be very nice. Enough to compensate for the risk and grief? You decide.

 

[Dash man]

I don’t think this is a good time to purchase vacation rentals. I know we could sell our Jersey Shore home for $225,000 more than we could have 18 months ago, or about $775,000. We get $4,150/week for the four weeks we’re renting it this year, which pays the property tax, insurance, landscape maintenance and utilities for the year. We use it or have family or friends use it the rest of the summer season.
Homes are way overpriced. Unless you really want one for your own use they’re not a good investment. They get beaten up by tenants and and things always break.
We are considering not renting many more years, fixing it back up, replacing the furniture and just using it ourselves.

 

[Scuba]

I am wondering if anyone invests in vacation rental resl estate for income and appreciation. I am hoping to get some general guidance as well as specifics on the best way to approach it, best locations to invest in, etc.



Some brief background about me. I am 56 and still working in an executive position. Will probably work for about 4 more years in my current job and then will either retire or do some part time consulting or Board work. I should have about 500K per year for each of the next 4 years to invest. I am considering putting about half of it into vacation real estate.



I would appreciate any insights you might have on this.

We have not made anywhere near the return on vacation rental property as we would have made just investing in equities. If you want a vacation rental so that you can enjoy it yourself as well, and then rent it out when you aren’t using it to help cover some of the costs, that’s one way to make second home ownership more affordable. I do not recommend vacation rentals as an investment, especially now with high prices and hostile regulation.

 

[chassis]

This is covered extensively on this site and bogleheads. The search feature will find it.

Do you have experience being a landlord? Do you want to be a landlord? Do you want to pay a portion of your profits to a property management company? How much of the headache factor are you willing to take on?

Real estate is most successful when done by people whose “thing” it is. It’s not my thing.

 

[ASHORETHING]

Jerry Shore rental/ family vacation house

Prices are very high right now. That being said we bought our shore investment property in 2007 when prices were high. Since then it more than doubled and rents are about 70 percent higher. If you are planning on keeping it long term and using it off season, long term you will do fine.

 

[Sunset]

Prices are very high right now. That being said we bought our shore investment property in 2007 when prices were high. Since then it more than doubled and rents are about 70 percent higher. If you are planning on keeping it long term and using it off season, long term you will do fine.

Until you sell it, then the LTCG will be a big addition to income.
The depreciation recapture will be painful.

 

[tryan]

We picked an area we wanted to vacation. Bought waterfront near a ski area ...so double seasons.

The kids were 5 and 7 ... learned to swim in the lake and ski in the winter. Kids are now 23 and 21. Great memories for them. So it can be life giving.

Rents carried the place when we were not there. Never used a property manager. The place has developed a positive cashflow as it gets much less family use. So it costs nothing to carry.

All that said, the appliances are old and dying ... washer and dryer die within a month of each other. COVID left owners "holding the bag" as booking sites permitted refunds "no questions asked". Been a weird year ... but now people are busting at the seams to get away. Been booking times I never could.

Your results may vary ... but it's worked for us.