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?