question about vacation rental condo

[clarkfan1979]

I was just offered a job at Kauai CC and will be moving to Lihue, HI in August. We will probably rent a 2 bed/2 bath condo near the college to start. However, once I am settled, I am going to start looking into different situations of possibly buying.

We will be in Denver during winter break December 10 - January 10 and during summer break May 6 - August 20.

I found a vacation rental condo complex on the beach that is selling 1 bed/1 bath condos (650 sq. ft.) for 52K - 60K. The reason that they are so cheap is because the HOA is 1300/month. The HOA is 1300/month because they provide a full service of renting your place out when you are gone. I am sure they get some sort of commission for every transaction, maybe 30%?

The math is pretty good on this hypothetical because a regular 1 bed/1 bath condo would rent for about 1300/month. However, a regular condo would not be on the beach. I'm pretty sure that you won't be able to legally sublet an apartment, but it could be done on the down low.

If we bought a vacation rental condo, we would be able to rent it out about 135 days a year. If we rented it out for 150/night and got 40% occupancy, we would be looking at about $8,000/year of income and I think some tax write-offs. After a 30% commission, it would be $5600/year.

If we had 60K in the stock market and hoping for an 8% return that would be $4800/year.

I'm not really looking to make a profit, just subsidize my housing expense if it makes sense. Would it be worth it to purchase? I would guess that I would be 75% occupancy during winter break, but probably around 25% during summer break, for an average of 40%.

I know that it's typically a losing situation for people who only vacation at their vacation rental for 2 weeks out of the year. However, we will be living in it for roughly 230 days/year and renting it out 135 days/year. I also think holiday break and summer break are the best times for vacation rentals, so maybe I could do better than 40%?

Anyone have any experience with this? Care to share occupancy percentage or HOA commission for transactions?

Thank you.

[zephyr911]

I was just offered a job at Kauai CC and will be moving to Lihue, HI in August. We will probably rent a 2 bed/2 bath condo near the college to start. However, once I am settled, I am going to start looking into different situations of possibly buying.

We will be in Denver during winter break December 10 - January 10 and during summer break May 6 - August 20.

I found a vacation rental condo complex on the beach that is selling 1 bed/1 bath condos (650 sq. ft.) for 52K - 60K. The reason that they are so cheap is because the HOA is 1300/month. The HOA is 1300/month because they provide a full service of renting your place out when you are gone. I am sure they get some sort of commission for every transaction, maybe 30%?

The math is pretty good on this hypothetical because a regular 1 bed/1 bath condo would rent for about 1300/month. However, a regular condo would not be on the beach. I'm pretty sure that you won't be able to legally sublet an apartment, but it could be done on the down low.

If we bought a vacation rental condo, we would be able to rent it out about 135 days a year. If we rented it out for 150/night and got 40% occupancy, we would be looking at about $8,000/year of income and I think some tax write-offs. After a 30% commission, it would be $5600/year.

If we had 60K in the stock market and hoping for an 8% return that would be $4800/year.

I'm not really looking to make a profit, just subsidize my housing expense if it makes sense. Would it be worth it to purchase? I would guess that I would be 75% occupancy during winter break, but probably around 25% during summer break, for an average of 40%.

I know that it's typically a losing situation for people who only vacation at their vacation rental for 2 weeks out of the year. However, we will be living in it for roughly 230 days/year and renting it out 135 days/year. I also think holiday break and summer break are the best times for vacation rentals, so maybe I could do better than 40%?

Anyone have any experience with this? Care to share occupancy percentage or HOA commission for transactions?

Thank you.

I've seen anything from 22% to 40% for active management of vacation rentals, but that was with NO additional fees. For $1300/mo you should only be paying nominal commission on the actual income.

The IRS rules for vacation rentals that are also for personal use are different than for other rentals, so I'd suggest a thorough reading before committing. If it's turning a profit, the accounting isn't terribly complicated. If you have a taxable loss then it's generally all suspended until sale, which is (for lazy accountants like me) a big ass pain that I don't ever want to deal with.

[waltworks]

It sounds like a scam/disaster. Keep in mind that when you buy a vacation rental, you are paying the price that people who are unconcerned about profit are also paying. People buy vacation rentals because they want a place at the beach. Most of them have no idea that they'll lose money. The ones that figure it out often don't care - it's a place on the beach.

So they are basically never a good deal, and this one sounds sketchy as all get out.

[fishnfool]

On the surface it sounds like a good deal. But do you plan to live out of a suitcase while your there? Or pack everything personal and pay to store it somewhere when you leave?
Personally I would spend at least a year there at your new job, then if you still like island life, think about long term house or condo investment.