Author Topic: If you have a vacation rental home, please come in  (Read 1773 times)

bkmnky72

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If you have a vacation rental home, please come in
« on: January 07, 2017, 04:21:53 PM »
1.  How often do you go to your vacation home for personal use?
2.  Did you pay cash for your 2nd home?  If not, how much (% or $) did you put down?  How much is your mortgage?
3.  Do you have a property manager?  How much % do they charge?
4.  Did you buy all new furnishings or  just buy 2nd hand/previously owned furniture?
5.  How many bedrooms and bath?
6.  Is it by a: lake/ski resort/ocean/beachfront/city/tourist town?
7.  Does the average annual rent normally cover the expenses?
8.  What were your selection criteria for picking this particular home v. the rest of the available homes in the market?

Lots of questions but these should get me started.

SeattleCPA

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Re: If you have a vacation rental home, please come in
« Reply #1 on: January 08, 2017, 11:58:11 AM »
Used to have a nice golf course bungalow in Palm Springs... (Got a GREAT price on a bank repo at absolute bottom of great recession...)

Here are my two hopefully useful comments:
1. Do the accounting to come up with an effective nightly rental rate and see if what you pay to own is really worth it. (Er, we sold our place partly because when we did the math, it was heartbreakingly bad because we couldn't use place as much as we had planned. Just an easy example and NOT my real numbers: If place costs $30K and you use 30 nights, that's a $1000 a night and you go "ah geez..."
2. We never rented our place out, but people do do that... we see clients doing this all the time... and often with pretty good results. It's not uncommon to find a rental pool arrangement means you get very economical "vacation lodging." Like Thrifty Scot type pricing.
« Last Edit: January 08, 2017, 11:59:46 AM by SeattleCPA »

bkmnky72

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Re: If you have a vacation rental home, please come in
« Reply #2 on: January 09, 2017, 08:30:02 PM »
Thanks.  We're buying in to a property that averages $15k-$17k a gross year for the size, which basically pays for the mortgage ($1,100) and expenses.  Our prime neighborhood I'm more optimistic that it will bring in $20k gross.

We may bring in family or friends who'd want to share in the costs, but that can be a back-up plan.

There's also a back-up plan of renting long-term but basically would only pay for the mortgage (about $1,200), not the expenses; the downside of that is that we don't get to use it for our own enjoyment.



SeattleCPA

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Re: If you have a vacation rental home, please come in
« Reply #3 on: January 12, 2017, 05:18:51 PM »
You might want to google on "Sec 280A" and then also on the phrase "mixed use dwelling"... those are the search terms that will get you resources the describe how the tax accounting works for short-term rentals you use a bit personally.

couponvan

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Re: If you have a vacation rental home, please come in
« Reply #4 on: January 12, 2017, 06:49:45 PM »
PTF, as I have a second property we are considering renting in the future - renting it wouldn't have been considered before MMM - now I am considering it. (DH is not mustachian.) I will answer the questions as best I can.

1.  Owned for 5 1/2 years - we go 1-2X per month (long weekends in the winter), 3-4 weeks in the Summer (Memorial Day week, 4th of July week, Last week of July, and One week mid August). We also do a few other 3 day weekends in the Summer.
2.  Put 20% down, 4.6% interest rate. Completely paid off last April. Currently cash flowing a basement remodel this Spring.
3.  No (but I'm sure we would if we rent it).
4.  Craigslist for most other than mattresses....those we got new ones at our regular house and took the old ones out there.
5.  4 bedrooms/2 bathrooms
6.  Lake community
7.  Annual expenses - $7,500 including boat, boat dock, club fees (many amenities).  Future rents only expected to cover 1/2 of expense.
8.  It was a foreclosure - less than the price of a car $55K...and came with 2 buildable lots.  The house had previously sold for over $160K.  It has required $25K of renovations. Expecting another $15-20K for the basement renovation which we will cash flow. Recent appraisals are $145K for the house, and $10K for each of the lots.
9. Distance from main home is 1 hour and 45 minutes with a bathroom break.

For what it's worth, I feel like so far ours has been a money pit.  When you consider the $7,500 annual expenses (=$40K of carrying costs for the past 5 1/2 yeras) and all the sweat and tears that have gone into the place (and it still needs more work).  But we look forward to this being our eventual "FIRE house" in 4-6 years and at that point $620/month for housing sounds extremely affordable as a main home and hopefully $300/month after rentals, so we are  keeping it for now. We plan this for our FIRE home for the first 10-15 years of early retirement - after that being closer to better medical facilities will be more important.

AM43

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Re: If you have a vacation rental home, please come in
« Reply #5 on: January 17, 2017, 12:25:55 PM »
1.  How often do you go to your vacation home for personal use?
2.  Did you pay cash for your 2nd home?  If not, how much (% or $) did you put down?  How much is your mortgage?
3.  Do you have a property manager?  How much % do they charge?
4.  Did you buy all new furnishings or  just buy 2nd hand/previously owned furniture?
5.  How many bedrooms and bath?
6.  Is it by a: lake/ski resort/ocean/beachfront/city/tourist town?
7.  Does the average annual rent normally cover the expenses?
8.  What were your selection criteria for picking this particular home v. the rest of the available homes in the market?

Lots of questions but these should get me started.



1. Owned our vacation home for 4 years now. Visit about 2-3 times in winter season to ski, 1-2 times in spring and maybe 2 weeks in summer.
2. Used combination of cash and mortgage.
3. No property manager as I have little to no trust in them, but our cleaning people have ability to take care of little things if there is a problem.
4. All furnishings from Craigslist. You wont believe how much of nice furniture for sale for fraction of the cost.
5. 5 bdr, 2 full bath. When we purchased it, it was 3 bdr, 2bth. We knew we wanted to rent it out, so we built 2 more bedrooms.
6. Lake front house with beautiful views in ski resort area.
7. It covers all expenses and pays for itself and our primary home.
8. We knew we wanted lake front with dock and boats in ski resort area.  We bought it cheap because it needed a lot of work and we saw potential to make it 5bdr, which is a big deal if you want to rent it out.


bkmnky72

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Re: If you have a vacation rental home, please come in
« Reply #6 on: January 18, 2017, 10:58:49 PM »
It covers all expenses and pays for itself and our primary home.

Thanks.  That's impressive. 

bkmnky72

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Re: If you have a vacation rental home, please come in
« Reply #7 on: January 18, 2017, 11:05:25 PM »
We plan this for our FIRE home for the first 10-15 years of early retirement - after that being closer to better medical facilities will be more important.

Thanks.  I think this is what we plan to do too.