Investing in Vacation Property?

[Free Thinker]

Does anyone know anything about investing in rental property at a resort? Know anyone who did and made a profit? Or is it a bad idea? DH and I are planning a summer vacation, and I looked on www.vrbo.com which I found the link here long ago and remembered thinking what a great idea it was! So, I found several condos and cabins in the area we are wanting to stay in that are owned by individuals, and set up thru the resort to take care of the actual "work" behind having a vacation rental property. We decided on one and I called to book it yesterday ($40 cheaper per night thru the ind. vs. thru the resort!). The lady who owned it is in California!!! (I"m in MO) and she bought it sight unscene, but has visited and told me all about the cabin, ect. She has a business set up for it (IOW, I write a check not to her but to her company), and she has other rentals as well. So, this is an investment business for her.

So, about an hour after I got off the phone w/ her I Just HAD to call and see what these units sell for, and I frankly was amazed, they were mUCH cheaper than I expected! About $235,000 for a 2BR fully furnished, that rents for $219 per night, and the owner gets 55% of that, resort gets 45%. They rent for about 9 months out of the year, and the rates are lower in the winter months. So, we could technically pay some down (say the $35,000) and borrow the rest so that the $$ it makes is pretty much making they payments, and in aboutt 10 years we will own it, plus it will be worth more. I am having the guy send me more info to make sure I have all of the info right. This unit should make about $25,000 per year, and go up as the rates go up. The resort takes care of booking (and I can book it myself as well, or thru VRBO), cleaning, ect. but I am sure there will be other maintenence costs as well. I need to find all of the info out for sure, electric, insurance, ect. and run the numbers to see how long it will take for this investment to pay off/make a proffit. DH thought I was crazy for suggesting such, but now he is interested, and wants me to run the numbers.


SO, anyone have any vacation rental property like this? Know anyone who does? Is it a good investment? I will be calling my acct. after the 15th to ask him some questions about it (waiting for after tax season!)

[CityChic]

Vacation Rental property can be good investment. You just have to make sure you are willing to make it your full time job. Between furnishing, renting, cleaning, appliances, giving directions, taking reservations, etc. it is a lot of work!

I do accounting for a woman who owns 3 vacation style homes in Chicago. They are all duplex or more and they are beautifully done! She is booked through the end of the year already and is doing more than breaking even after her first year of ownership on her newest building.

HOWEVER, she recently quit her full time job in order to do this!

[SleeplessMommy]

In Big Sky, MT we stayed at a hotel where the 1 room units were being converted to something like you described, where units are individually owned, and rented though a management company. This was for a business trip (DH). What a great place to visit!

We are not in the market, and don't ever expect to be in the market. Some points to consider about Big Sky - some may apply to your situation:

• owner is not allowed to make any changes to the unit (furniture, etc)
• if you wanted to live there year round, it would not work (due to their policies)
• At Big Sky, they are still making more units. Land supply is basically unlimited. Builder will continue to make units until supply exceeds demand
• newer units will have more "high end features", making older ones less desirable. Anyone want a 1970's "A" frame ski lodge?
• management company takes 40% of rental income
• occupancy rate is going to be much less than 100%. the off season is very long
• global warming is expected to shorten the ski season (already has in some areas)
• fixed annual maintenance fees. $$$
• if you wanted to get a mortgage to buy the unit, you would probably pay a higher rate than you would far a residence - affecting your cost of ownership
• realtor commissions are 10% on some types of properties.

If by any chance you are looking at a coastal property on the East Coast or gulf area of the US, keep in mind these could be destroyed in a class 5 hurricane. Right now, the US government is bailing out homeowners and investors via government subsidised insurance ... but in some places private homeowners insurance is getting very hard to find.

Sorry to have unmitigated lack of enthusiasm... maybe someone else will have a different opinion? If you do go ahead with something like this, be sure to look into buying an existing unit (from an owner) before buying direct from the management company. You need to know what the resale opportunities and costs are.

[KnittingShaker]

Unless you're planning to buy outright, good luck getting conventional financing for it.