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Vacation home as an investment
Posted on 2/7/22 at 8:34 am
Posted on 2/7/22 at 8:34 am
Im watching markets like Gatlunburg and Pigeon Forge that have cabins on AirBNB that gross 15% yearly of purchase price.
I've considered the beach, but TN seems more year round...
If you can buy a vacation home in a rapidly appreciating area and have property managers manage it entirely, whats the downside other than market instability. They all cash flow positive, even with prop management.
Id bet my life properties appreciate 10% in the next year, specifically in this area.
Why dont more people do this? Considering how easily these are financed, seems like an easy way to cash flow, own an appreciating asset with little personal funds involved (20% purchase price)...
What am I missing?
I've considered the beach, but TN seems more year round...
If you can buy a vacation home in a rapidly appreciating area and have property managers manage it entirely, whats the downside other than market instability. They all cash flow positive, even with prop management.
Id bet my life properties appreciate 10% in the next year, specifically in this area.
Why dont more people do this? Considering how easily these are financed, seems like an easy way to cash flow, own an appreciating asset with little personal funds involved (20% purchase price)...
What am I missing?
16
Posted on 2/7/22 at 8:39 am to blueboxer1119
People I know who do this for beach condos generally say it’s a pain in the arse. Many places have added additional taxes for AirBnB type rentals and management companies charge 15-20% for cleaning and checking in. Things are regularly broken. You won’t make as much money as you think.
Posted on 2/7/22 at 8:42 am to blueboxer1119
My buddy got into Gatlinburg before everyone started pouring in.
He is grossing almost six-figures a month off 15 cabins.
Really is amazing.
He is grossing almost six-figures a month off 15 cabins.
Really is amazing.
Posted on 2/7/22 at 8:42 am to blueboxer1119
quote:
What am I missing?
It's never as simple as it seems on face value. Biggest thing is just don't get overleveraged. If nights rented basically come to a standstill, make sure you can still pay for the property.
Posted on 2/7/22 at 9:17 am to blueboxer1119
We own 7 units on 1 property, and self-manage locally.
A few things to consider.
1) As somebody who is always looking for new properties in new markets, the places you are referencing have drastically appreciated since 2020/start of covid. A lot of it due to people buying up in the smokies for the exact reasons you mentioned. But now many of these places are priced as the real estate assets + the business opportunity if STR.
2) Management companies for STR’s, in the low end, are usually 20%, up to 40%. We’ve never used a PM, but I’d imagine if you go with the lower priced option, you also get what you pay for. We go into our calendar and adjust rates all the time, negotiate long-term stays with traveling hospital staff/remote workers during the off-season, and it’s great. A PM company is not likely doing this for you. They are not focused on just your property.
3) when you go the STR route, it is not longer just real estate investing. It is a business, highly concentrated in customer service + managing your real estate asset.
Are you also factoring in capital expenditures? In the last 12 months, we’ve had to put in a new fence around the property, new mini-spilts in 2 of the units, and most recently discovered mold problems due to old construction building practices (I also used to build custom homes), and are going to have to redo all the siding on one building.
And yes, there is a lot of leg work with you keeping on top of your PM. They will accidentally miss cleanings at times, you will need to be on your phone checking that the cleaners have arrived as they are supposed, etc etc.
There are good and bads with STR guests. If they’re a nightmare, you can kick them out. Prepare to issue refunds and get bad reviews. Or you can let them stay, and they’ll be gone in a few days. But they may trash your property. All are scenarios possible with long-term tenants too, but they are less profitable, and could require bigger legal hurdles to get the removed.
Join some Facebook groups, specifically for the areas you mentioned - Avery & Luke Carl’s “Short term rental, long term wealth” for market info. Julian Sage’s “Host Nation” & Bill Faeth’s “Build short term rental wealth”. There will be tons of info, and a A LOT of nightmare scenarios (95% of which I have not encountered with over 1000 guests). You’ll have to sift through the complaining, the idiots, and rationalize that some people don’t understand this is a business, and they were just never cut out to be business owners, especially in the customer service sector.
A few things to consider.
1) As somebody who is always looking for new properties in new markets, the places you are referencing have drastically appreciated since 2020/start of covid. A lot of it due to people buying up in the smokies for the exact reasons you mentioned. But now many of these places are priced as the real estate assets + the business opportunity if STR.
2) Management companies for STR’s, in the low end, are usually 20%, up to 40%. We’ve never used a PM, but I’d imagine if you go with the lower priced option, you also get what you pay for. We go into our calendar and adjust rates all the time, negotiate long-term stays with traveling hospital staff/remote workers during the off-season, and it’s great. A PM company is not likely doing this for you. They are not focused on just your property.
3) when you go the STR route, it is not longer just real estate investing. It is a business, highly concentrated in customer service + managing your real estate asset.
Are you also factoring in capital expenditures? In the last 12 months, we’ve had to put in a new fence around the property, new mini-spilts in 2 of the units, and most recently discovered mold problems due to old construction building practices (I also used to build custom homes), and are going to have to redo all the siding on one building.
And yes, there is a lot of leg work with you keeping on top of your PM. They will accidentally miss cleanings at times, you will need to be on your phone checking that the cleaners have arrived as they are supposed, etc etc.
There are good and bads with STR guests. If they’re a nightmare, you can kick them out. Prepare to issue refunds and get bad reviews. Or you can let them stay, and they’ll be gone in a few days. But they may trash your property. All are scenarios possible with long-term tenants too, but they are less profitable, and could require bigger legal hurdles to get the removed.
Join some Facebook groups, specifically for the areas you mentioned - Avery & Luke Carl’s “Short term rental, long term wealth” for market info. Julian Sage’s “Host Nation” & Bill Faeth’s “Build short term rental wealth”. There will be tons of info, and a A LOT of nightmare scenarios (95% of which I have not encountered with over 1000 guests). You’ll have to sift through the complaining, the idiots, and rationalize that some people don’t understand this is a business, and they were just never cut out to be business owners, especially in the customer service sector.
Posted on 2/7/22 at 10:22 am to blueboxer1119
You have to be an owner in the market before the hysteria starts - otherwise it is a PITA.
Posted on 2/7/22 at 10:27 am to I Love Bama
quote:
He is grossing almost six-figures a month off 15 cabins.
Hot damn. OT Baller right there.
Posted on 2/7/22 at 1:52 pm to blueboxer1119
quote:
Why dont more people do this?
Because, this isn't always the case
quote:
If you can buy a vacation home in a rapidly appreciating area and have property managers manage it entirely, whats the downside other than market instability. They all cash flow positive, even with prop management.
If this were true, these cabins would never sell and they would just be handed down from generation to generation.
If you are looking for a vacation home that gets rented out while you aren't there; be prepared for it to not be as easy as your post lays it out to be. This is the avenue we are looking at with the intent to eventually convert it to a 2nd home at retirement. Just haven't figured out where we want to invest (probably 5-7 years from pulling the trigger)
Posted on 2/7/22 at 9:18 pm to Fbohn1
quote:
Bill Faeth’s
He has found Gulf Shores, and I’m his agent.
He sends every person in his group our way.
Dude has made me a ton of money on past three years, as we’ve written close to $200k annually from his group.
Super sharp guy.
Posted on 2/7/22 at 10:00 pm to blueboxer1119
I’ll let you know how it’s going so far…bought a house on 30-a back in April 2021. There isn’t much off-season down there now (it’s becoming more year round). I’m just now getting it ready to rent which is fine as I knew it was going to take awhile with contractors, supplies, etc. it’s got to be 100% ready before we rent it and will probably let some people stay in it first to get some initial reviews.
We paid about $410/sf and houses on the same street are going for over $1,000/sf so it’s more than doubled in value in 10 months.
Property Management is close to 23% but we are using a lady that’s been doing STR for her properties and is starting her own company to manage others at 15%. We’ll see how it goes but I should gross 15% of purchase price. My place should keep appreciating as well but it’s an insane market down there right now.
We paid about $410/sf and houses on the same street are going for over $1,000/sf so it’s more than doubled in value in 10 months.
Property Management is close to 23% but we are using a lady that’s been doing STR for her properties and is starting her own company to manage others at 15%. We’ll see how it goes but I should gross 15% of purchase price. My place should keep appreciating as well but it’s an insane market down there right now.
This post was edited on 2/7/22 at 10:08 pm
Posted on 2/8/22 at 1:50 pm to Serraneaux
quote:
We paid about $410/sf and houses on the same street are going for over $1,000/sf so it’s more than doubled in value in 10 months.
I get the long term potential, and I am not sure of your renovation costs, but I would unload with a quickness while I could. Hell of a 10 month return.
Posted on 2/8/22 at 4:04 pm to fjlee90
The problem is buying something else for a higher price than I would sell. I don't think the value in this particular area (location is unbeatable-there are only so many houses on decent lots south of 30a) is going to go down as development and renovation is squeezing this area on both sides.
My plan is to hold onto it, rent it out STR, and then in 15 years either tear it down or do a renovation + expansion. The lot is pretty big for down there and can double the square footage at some point.
My plan is to hold onto it, rent it out STR, and then in 15 years either tear it down or do a renovation + expansion. The lot is pretty big for down there and can double the square footage at some point.
Posted on 2/8/22 at 4:31 pm to blueboxer1119
You may be one of the first people to think of this genius plan
Posted on 2/8/22 at 4:47 pm to blueboxer1119
I rent out a house on airbnb in Florida. Its a pain in the arse constantly having to respond to guests, issues, etc, but the biggest thing is you need to be able to trust your cleaners.
Biggest problem I had was finding a company that was reliable and dependable at the start. Once I finally did, its been smooth sailing. I haven't received anything less than a 5* since.
You can automate your messages through airbnb which is nice, but navigating around and figuring out pricing for every week/month of the year is frustrating at times.
Biggest problem I had was finding a company that was reliable and dependable at the start. Once I finally did, its been smooth sailing. I haven't received anything less than a 5* since.
You can automate your messages through airbnb which is nice, but navigating around and figuring out pricing for every week/month of the year is frustrating at times.
This post was edited on 2/8/22 at 4:48 pm
Posted on 2/8/22 at 8:23 pm to blueboxer1119
Ita a good idea if you do your homework.
People downvoting you are just mad they can't do it.
People downvoting you are just mad they can't do it.
Posted on 2/8/22 at 10:30 pm to blueboxer1119
As someone who lives in the area, most of the low hanging fruit is gone. You’re looking at $450+/sq ft for most half-way decent cabin properties. There are certainly still deals out there... just a lot tougher to find. Visitation is off the charts so that has certainly helped area rentals (and in turn valuations).
I’m curious to see what happens as rates start to tick up.
I’m curious to see what happens as rates start to tick up.
This post was edited on 2/8/22 at 10:31 pm
Posted on 2/9/22 at 6:10 am to blueboxer1119
There’s places that were bought 5 years ago that are grossing 30-40% this year OP. There’s places bought this year that will be lucky to gross 5%. It’s a business and an investment, you can’t just buy anything and expect to do well.
The thing with vacation homes is that the ROI is not necessarily related to the purchase price because you have a lot of residential purchases that impact the market.
I’ve seen some numbers from some Texas beach properties that are fantastic because of that reason. If you really want to consider a vacation rental, you should look at lesser known places.
The thing with vacation homes is that the ROI is not necessarily related to the purchase price because you have a lot of residential purchases that impact the market.
I’ve seen some numbers from some Texas beach properties that are fantastic because of that reason. If you really want to consider a vacation rental, you should look at lesser known places.
Posted on 2/9/22 at 7:54 am to Fbohn1
This guy gets it. His post is all you need to read tbh.
We just closed on our third. We self manage. It’s a pain and work for sure. But it’s all a part of wealth building. I own a beach condo, a lake house, and a mountain house now. It is work. I also get huge tax benefits. But again it takes work.
Also, there are pricing softwares that auto adjust prices depending on the date. I pay $10/month/property
We just closed on our third. We self manage. It’s a pain and work for sure. But it’s all a part of wealth building. I own a beach condo, a lake house, and a mountain house now. It is work. I also get huge tax benefits. But again it takes work.
Also, there are pricing softwares that auto adjust prices depending on the date. I pay $10/month/property
This post was edited on 2/9/22 at 7:55 am
Posted on 2/9/22 at 8:03 pm to AndyJ
Can you share the name of the software?
Posted on 2/9/22 at 8:21 pm to Serraneaux
quote:
Can you share the name of the software?
The ones I know of:
Price labs
Wheel house
Beyond Pricing
quote:
AndyJ
care to divulge which mountain town you’re in? Looking at various mountain/ski resort towns all over as our next location. 
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