I get the basic idea behind the 1% rule and I’ve read quite a bit about real estate investing (although I haven’t jumped in yet). Mostly it seems fairly straightforward to calculate the estimated return on a pure long-term SFH rental/investment property.
However, I’ve recently been trying to convince my parents to not buy a time share in a trendy vacation spot. I think they have the right attitude about time shares, at least, they know they’d lose money, they view it more as a prepaid vacation (they like to vacation in this one spot almost exclusively and have been doing it for years and plan to continue that), and they’d hope to rent our their prime time weeks and only stay in their offseason weeks. I still think it’s a dumb idea.
At first I looked at investment properties to go 50/50 with them but I have a hard time estimating how the return works out to be a good investment. (Vacation rentals seem highly variable as-is, and this is a ski town which seems about as bad as farming or something for guessing how you’ll do any given year - good snow years, maybe ok, bad snow years, terrible.)
My parents are interested in living in the vacation rental for long stretches of time in the offseason when it’d otherwise be vacant (they’d have the freedom to come and go if someone booked it for an extended period in the offseason so we’d hopefully get some of those). They’d also be willing to pay quite heftily for the time they’d stay there in the off season (taking what they currently pay for a 5 star hotel and “paying” rent into our 50/50 property during those times). Even so, I don’t see other renters+their rent paying for much more than the mortgage, and all the fees, utilities, etc. (although it looks like it may be able to cover those items). They likely won't be paying their portion into it for the full 15 or 30 years of the mortgage though, so at some point I'd need to re-evaluate selling or rerunning the numbers with actual rental data.
Once the mortgage is paid off I can see the return generating some cash, but nothing until then. My dad thinks appreciation is a reasonable play although I'm trying to take the view that an investment property shouldn't depend on appreciation to be a good property. I don’t see it being a very good deal but I also want to convince my parents to stay out of time shares, and breaking even on something we own instead of flushing money into a time share also seems like a better idea.
Does anyone have any advice for this and/or estimating the rental numbers more accurately (especially vacancy in a specific vacation town - I can lookup what units sell for/rent for, but I’m not sure how to tell how much of the time they’d be rented)?