Beach Condo/Townhome Investment Property?

Insurance? Taxes? Property management? Cleaning? (These two on top of the maintenance you mentioned, which should cover CapEx and general usage repairs).

A $250k vacation home, I'm guessing you'll be lucky to rent it for $20k a year. If it rented for more, it would sell for a lot more. You'll be very very lucky to find a rental that grosses 10% a year of the sales price.

I manage some rentals myself, we average about 265 nights a year fwiw. But all properties are prime locations. A $250k beach house I'm guessing is far from a prime location. Nightly rates don't really matter honestly, if its only $250k then they are a dime a dozen as tons of people could afford that.

Vacation rentals, especially those that rent well, get a lot of wear and tear. Carpets only going to last 3-5 years, furniture and mattresses will get worn out faster, etc.

Don't forget all of your utilities, which will add up. If the place doesn't have a pool, which likely at $250k it doesn't, then its not going to rent well at all for a vacation rental. A beach house without a pool is not going to rent. Given, pools are expensive and expensive to maintain.

OP I've thought about this too though. You can 1. Possibly have "your own place" to vacation and 2. Perhaps a paid off condo/home to retire to. However you'd be limited basically to one location, when you retire in 20-30 years the place will likely be super oldand outdated, etc. So I've come to the conclusion, based heavily on what others have stated through my research, that if you want to do real estate, do it in residential/commercial(not vacation rentals) and then either use that money to vacation wherever you want. Or sell your rentals down the road and buy a retirement home:cheer:

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Owning a second home in another city is a huge headache

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Have friends that own a mountain cabin, about 8 hour drive from where they live. They rent it, but it always falls short of covering their annual expenses. They feel obligated to spend all their vacation time there even though they would like to go some where else, and their vacation time there is usually spent taking care of repairs and maintenance.
I rent a beach houses or condo at least once a year, the greatest part of that is when I walk out on the last day, and the door locks behind me that is the last time I have to think about the place until I decide to rent again.

How much did you plan for Managment?

I think 200 days for a seasonal beach home is top precintile. Probably only renting 15 days on off months.

Your Principal and interest should be 1400 at 5% which is a really good rate for a second home. Another 200 for prop taxes 400 for hoa. Not sure on insurance 100-200 a month. 200m repairs/ maintenance. So could be more like 2400.

Average rate could be lower $180 and OR 55% so $3011-2400 = $611 cash flow, this is not including management which usually charge 25% of nightly rate, and that would put you at a negative CF.

Vacation homes should only be purchased during market downturns at .60/$1.

Think about it as if we were heading into another recession. Would you be able to keep the house with significantly less rental income? Could you personally cash flow the house and expenses for 12 months?

Most people can’t and that’s why you got some smokin deals in ‘08. People on the other sides of those deals lost their rear end. You don’t want to be that guy.

I’d at least double your maintenance costs from a non Beach house. The salt air and sea spray doesn’t play nice with a home.

Also, you’d have to furnish it nicely enough to be a desirable rental. Renters will constantly break or walk off with things from the home. They probably wear your home and furniture twice as fast as you would.

Another thing you didn’t mention is the turn/cleaning service that will be required. Depending on the square footage, that could be a several hundred dollar monthly expense.

Another thing to consider would be if you were able to get a long term renter over the winter months. You could consider renting to a retired couple who wants to get out of the cold during the winter months for a reduced rate, then you’d have 3 of your lowest occupancy months covered.

It’s a good way to eventually outright own a house at the beach but it’s not without risk or a pain in your arse.

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jmarto1

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there's some real world advice!
How many days a year are you renting out?
Are you self managing?
When you are there are you disappointed with the wear and tear, and feel like you have work to do?

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I’d at least double your maintenance costs from a non Beach house. The salt air and sea spray doesn’t play nice with a home.

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If you're in a complex it will be covered in your HOA. You'll find most damage is from sand and oils

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Also, you’d have to furnish it nicely enough to be a desirable rental. Renters will constantly break or walk off with things from the home. They probably wear your home and furniture twice as fast as you would.

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I have had items stolen but my management company handles the heavy lifting in getting paid or the item back. It's a good idea to shop deals or refurbish second hand furniture.

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Another thing you didn’t mention is the turn/cleaning service that will be required. Depending on the square footage, that could be a several hundred dollar monthly expense.

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The guest pays for this and the management company tacks on a little extra. I do not pay at all for the cleaning the guests incur.

Baldona brings up a key point about being beachfront. they are building a good bit right now and are running out of direct beach access property


ETA: This is to give an idea of the market. I purchased my condo about 1.5 years ago for $150k. It is a 1 bed/2 bath that is in very good condition and was ready to rent before I did any work or upgrades. Two units in my complex, same floor plan, not quiet as nice as mine were just sold for $177k and $189,900