Author Topic: Family owned vacation property– get out now or take a chance?  (Read 3032 times)

little_brown_dog

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My parents are in their mid 60s. Years ago, they bought a vacation home in a popular vacation spot with their sibling. The home has since doubled in value but the family isn’t using it often at all. The sib wants to sell but my parents are unsure. They want to see if they can rent it out because there is no way you can get a property like this today for so cheap. To do this they would need to buy out the sib’s half of the property (about 80K) with a loan because they don’t have the capital to buy in cash outright.

Things get complicated from there – while I’m sure we could definitely secure vacation renters given the popularity of the area, I have no idea if we would be able to break even. My parents would need to take out another loan to buy out the sib’s half (while covering the remaining mortgage of $32K), and then there are HOA fees, maintenance/cleaning fees, increased utility expenses, etc. DIY property management and cleaning is not an option because the home is quite far away from all of us (4+ hour drive one way), my parents are older and don't want the responsibility, and us kids have young families/demanding careers. I know it isn’t the mustachian way, but I really don’t see this working well if we don’t partner with a property management company. 

Ontop of everything else, the property would need a bit of a facelift to make it a competitive rental. We can do some of this ourselves, but we would still need to invest in some upgrades like a few appliances and new flooring. So let’s estimate that when all is said and done, the property needs $15K worth of work to get it rental ready.

While nice in theory, this plan scares me. My parents told me they would really need the place to pay for itself because they can’t cover a 2nd mortgage. I know very little about their finances except that they are concerned about their retirement funds. None of us kids have the capital or inclination to buy out the other half of the property, so another loan is the only way to go. At the same time, it seems like such a waste to advise them to walk away from a valuable property that can be bought so cheaply.

Thoughts?

TrMama

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Re: Family owned vacation property– get out now or take a chance?
« Reply #1 on: July 09, 2015, 10:30:56 AM »
Your post is chock full of red flags. Sell. Sell now while the place is presumably "in season". If your parents sell, they'll pay off the mortgage AND add to their retirement savings AND have one less big thing to worry about.

AustinKat

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Re: Family owned vacation property– get out now or take a chance?
« Reply #2 on: July 09, 2015, 10:45:46 AM »
Yup, sell. Do your parents fully understand all the costs involved, with real numbers? If the property is anywhere near the ocean, insurance is only going to go up.

GizmoTX

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Re: Family owned vacation property– get out now or take a chance?
« Reply #3 on: July 09, 2015, 11:27:43 AM »
SELL. Take the money off the table before the place deteriorates any further. What they purchased it for doesn't matter in the decision, other than the nice appreciation. The parents don't have the money to fix it up for rental, let alone buy out the sib's share, who is also aging & could use the proceeds. Notice that the sib isn't offering to buy out your parents, either.

Zamboni

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Re: Family owned vacation property– get out now or take a chance?
« Reply #4 on: July 09, 2015, 11:39:49 AM »
Sell



Sell



Sell



From what you write, they don't have the money or the inclination to make it work going forward. Vacation properties are often terrible investments, and I suspect this one is no different.

snogirl

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Re: Family owned vacation property– get out now or take a chance?
« Reply #5 on: July 09, 2015, 11:43:29 AM »
sell
you can rent a vacation property from now on anywhere you want!

lizzzi

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Re: Family owned vacation property– get out now or take a chance?
« Reply #6 on: July 09, 2015, 12:07:50 PM »
Sell. SELL. Did I mention you should sell?  My s-i-l was in a somewhat similar situation with a property 15 hours drive from where he lived. The vacation house/rental for business was in a pleasant vacation area, but nothing but work and expense, despite a property management firm and an old friend who was his partner in the property. S-i-l lost a good deal of money when he let the friend buy him out...but it was well worth it to be done with the exhaustion, travel time and expense, irritating holiday renters' demands, and the hemorrhaging out of money on this place. It was on Cape Cod, which is a nice place to go...but his owning a house and trying to make money on vacation rentals just didn't fly.

lizzzi

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Re: Family owned vacation property– get out now or take a chance?
« Reply #7 on: July 09, 2015, 12:09:29 PM »
Forgot to say that your and your parent's situation sounds even worse. Unload that place. (Or tell them to.)

Goldielocks

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Re: Family owned vacation property– get out now or take a chance?
« Reply #8 on: July 10, 2015, 08:31:31 AM »
If you had started this with " I talked with a local property manager and saw the high rents and returns he was consistently able to get.. ". It may have been different.  Too many unknowns, and you need to base your payback on the current home value, not what you paid.

Sell.

waltworks

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Re: Family owned vacation property– get out now or take a chance?
« Reply #9 on: July 10, 2015, 09:51:37 AM »
Even if you could make money, which it sounds like you can't - this sounds like a recipe for family strife. Just sell the place.

-W