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Message
MTB Advice - considering lake house
Posted on 6/13/23 at 9:17 pm
Posted on 6/13/23 at 9:17 pm
The wife and I have some spare cash and are considering a lake house. House would be primarily a rental but available to use. It’s on a lake we’ve rented at before and really like. Also, the price is good for today…but obviously high. Scares me that this feels like a peak in both prices and rates.
We have 9 years left on primary residence mortgage- probably about $450k in equity. Have a paid for condo worth about $150k with $1300/mth rent. One car note…no other debt. Two kids…one 15 and the other 13 so college is looming.
We have plenty to close the deal but my concern is the note would put a real strain on the monthly expenses unless we offset with rent and I’m the sole provider. It’s a cash flow issue. Other properties on the lake rent spring through fall really well for $400-$500/night average due to lake life in summer, good fishing in spring and close to a major university for home games in fall. Other similar houses rent consistently per VRBO and AirBNB. We would need to upgrade the doc and add some kayaks and stuff eventually to increase rentability.
I’m conservative by nature and don’t like depending on rental income to keep us in the black. Even after closing and estimated cost to get the place ready…we could sit on it for over a year before it would become a problem…but I don’t want to burn through cash paying the bank.
Questions
What am I missing?
What would be my best source for borrowing $400k?
Am I scared money or thinking clearly?
We run the condo through an LLC and would do the same with this.
I expect to get a good depreciation and would think I can expense items for the house as they’re needed for rent. New floating dock will cost a load but not sure how much and that would be year 2.
Smart guys on this board so curious of your thoughts.
Edit: we found a mgmt company that can handle all of the rental bullshite. Eats into profit but property is 2.5 hrs away so initially this seems like a good play.
We have 9 years left on primary residence mortgage- probably about $450k in equity. Have a paid for condo worth about $150k with $1300/mth rent. One car note…no other debt. Two kids…one 15 and the other 13 so college is looming.
We have plenty to close the deal but my concern is the note would put a real strain on the monthly expenses unless we offset with rent and I’m the sole provider. It’s a cash flow issue. Other properties on the lake rent spring through fall really well for $400-$500/night average due to lake life in summer, good fishing in spring and close to a major university for home games in fall. Other similar houses rent consistently per VRBO and AirBNB. We would need to upgrade the doc and add some kayaks and stuff eventually to increase rentability.
I’m conservative by nature and don’t like depending on rental income to keep us in the black. Even after closing and estimated cost to get the place ready…we could sit on it for over a year before it would become a problem…but I don’t want to burn through cash paying the bank.
Questions
What am I missing?
What would be my best source for borrowing $400k?
Am I scared money or thinking clearly?
We run the condo through an LLC and would do the same with this.
I expect to get a good depreciation and would think I can expense items for the house as they’re needed for rent. New floating dock will cost a load but not sure how much and that would be year 2.
Smart guys on this board so curious of your thoughts.
Edit: we found a mgmt company that can handle all of the rental bullshite. Eats into profit but property is 2.5 hrs away so initially this seems like a good play.
This post was edited on 6/13/23 at 11:03 pm
7
Posted on 6/13/23 at 9:19 pm to SquatchDawg
The best time to buy real estate is 20 years ago.
The second best time is, now.
The second best time is, now.
Posted on 6/14/23 at 5:21 am to SquatchDawg
quote:
property is 2.5 hrs away
Door to door?
Seems doable for a weekend place.
If you want it, buy it.
You can rent it up to 15 days a year without reporting income.
Can you work remote?
Posted on 6/14/23 at 8:21 am to makersmark1
I’m not worried about reporting income because it will need to rent most of the summer.
Posted on 6/14/23 at 10:33 am to SquatchDawg
Really bad time to borrow right now. That’s the only drawback I see. I just bought a camp 6 mos ago. Used underperforming market money though.
Posted on 6/14/23 at 10:40 am to SquatchDawg
I bought a lakehouse a few years ago. No regrets. It stays rented thru airbnb most weekends except winter. We stay there a couple of times/month mid-week when weather is nice.
Strongly considering buying another on opposite end of our lake. Looking at it next week.
Paid cash for first one, but will get a mortgage for 2nd one. The numbers cover mortgage, utilities, taxes, and insurance.
We carry a significant amount of liability insurance in addition to property insurance. We keep plenty of liquid assets to cover maintenance stuff, ie purchased HVAC for the existing one this year.
Don't do it if you are going to stress out over it. Either at purchase or later. You can always sell it later if you find it causes stress. Value of first one is up at least 30-40% in just a few years. Lake property values seem to only go up. The insurance and liquid assets keeps our stress low.
Good luck.
Strongly considering buying another on opposite end of our lake. Looking at it next week.
Paid cash for first one, but will get a mortgage for 2nd one. The numbers cover mortgage, utilities, taxes, and insurance.
We carry a significant amount of liability insurance in addition to property insurance. We keep plenty of liquid assets to cover maintenance stuff, ie purchased HVAC for the existing one this year.
Don't do it if you are going to stress out over it. Either at purchase or later. You can always sell it later if you find it causes stress. Value of first one is up at least 30-40% in just a few years. Lake property values seem to only go up. The insurance and liquid assets keeps our stress low.
Good luck.
Posted on 6/14/23 at 11:05 am to KWL85
The more I’m looking into it the rates on a investment property/2nd home are looking too high and pushing the debt service to a point that would be uncomfortable. Plus houses ALWAYS cost more money than you expect.
Posted on 6/14/23 at 11:18 am to SquatchDawg
Would not do it with these interest rates if you need the rental income to comfortably cover the note. We have a condo that we rent out but that’s because we only use 2 months out of the year. Don’t need the income to make it work but is a perk.
Posted on 6/14/23 at 6:02 pm to SquatchDawg
Ok. So I won't be one to try and talk you into it. My comment about stress drives many of my decisions. Don't try to invest in something if it is going to stress you. True that there are always additional costs. Have owned quite a few investment properties over the years and additional costs on every one. That is part of most all rental investments and should be factored in to the decision. If this deal isn't right for you, move on but stay open minded with an investment mindset until you find ones you are comfortable with. Spend less than you make until you find your next investment.
A comment to those that advise waiting because of rates. My experience is if buying in an area that generally appreciates (ie lakehome), then waiting to buy is a mistake. The prices of homes in good areas go up more than the increased cost of financing. That has been a fact for me repeatedly over the years. And you can always refinance if rates change enough for that to make sense. I am a TCO focused person and a buy and hold type. Waiting has generally backfired on me.
A comment to those that advise waiting because of rates. My experience is if buying in an area that generally appreciates (ie lakehome), then waiting to buy is a mistake. The prices of homes in good areas go up more than the increased cost of financing. That has been a fact for me repeatedly over the years. And you can always refinance if rates change enough for that to make sense. I am a TCO focused person and a buy and hold type. Waiting has generally backfired on me.
Posted on 6/15/23 at 6:43 am to SquatchDawg
With these rates and it not being a strict investment you can easily afford, I would be very careful. It sounds like you have a particular property in mind?
Have you looked at almost similar properties and looked at realistic rental returns? I would do that first, and be honest and go low on your projections.
Lastly, if it’s a house you will use and love and it be a ‘vacation’ place for you and not a job then I’d consider that more. If you love being there with your family that’s going to make more sense then just buying a lake house as a side hustle that isn’t making any money.
As a guy that rents short term rentals, I would strongly consider any improvements you think it needs done NOW. Having it done right to start off will help it rent better. Getting great reviews and return guests from the beginning is very important over trying to battle some bad reviews over items you knew needed worked on.
Have you looked at almost similar properties and looked at realistic rental returns? I would do that first, and be honest and go low on your projections.
Lastly, if it’s a house you will use and love and it be a ‘vacation’ place for you and not a job then I’d consider that more. If you love being there with your family that’s going to make more sense then just buying a lake house as a side hustle that isn’t making any money.
As a guy that rents short term rentals, I would strongly consider any improvements you think it needs done NOW. Having it done right to start off will help it rent better. Getting great reviews and return guests from the beginning is very important over trying to battle some bad reviews over items you knew needed worked on.
This post was edited on 6/15/23 at 6:44 am
Posted on 6/15/23 at 7:21 am to SquatchDawg
quote:
will need to rent most of the summer.
You could enjoy the summer there too!
Would you be able to carve out a few weeks for yourself and family in the summer?
Posted on 6/15/23 at 7:23 am to SquatchDawg
quote:
We have plenty to close the deal but my concern is the note would put a real strain on the monthly expenses unless we offset with rent and I’m the sole provider.
Nope. I wouldn’t want to take on that stress.
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