Author Topic: Rental Property Evaluation  (Read 5214 times)

Jakerado

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Rental Property Evaluation
« on: February 24, 2016, 10:03:28 PM »
Looking at possibly buying a rental property (vacation rental) and I was hoping for thoughts on if it seems like a good idea, and any costs I've forgotten:

First the costs:
Cash in: 250k
Mortgage payment: 31k/yr
HOA: 0
Taxes: 6700/yr
Utilities (heat/sewer/electric/trash/water/internet/tv): 12k/yr
  Breakdown:
    Sewer+water = 150/mo
    Heat: Currently 250/mo avg
    Electric: Currently 250/mo avg
    Internet/TV: 300/mo (guess on the high side)
Management fee: 25%
Unanticipated expenses: 15k/yr (otherwise known as extra cash flow if they don't come up, being conservative the first year)
Anticipated maintenance: 5k/yr
Snow Removal: 1k/yr
Insurance: 2k/yr
Total Costs(w/out mortgage): 41k + 25% of gross income
Places to trim: The heat+electric of ~600/month is insane at the moment. I'm betting there are some big gains to be made there by insulating and figuring out what's eating all the electricity (has gas heat).

And the plus side:
Expected rent: 1k/night
Minimum days rented for acceptable return @1k/day: ~100 days / ~14 weeks
Expected vacancy rate: 70%
Expected yearly gross income@70% vacancy: 100,000
Management fee: (25,000)
Total: 75,000

And the plus and minus together:
Total Cash: 75000
Costs: 41,000 + 25,000 = 66,000
Net income: 9,000/yr
Equity: ~10,000/yr

My thoughts:
I tried to estimate the costs to be not in my favor everywhere (rounding 250/mo up to 300/mo) and build in a healthy "I have no idea what I'm doing and screwed up majorly" buffer of 15k/year (or, just over 1000/mo). I plan to eventually(within 10-15 years) pay off the mortgage on this place and then keep it around if it does well, or sell it off if the vacancy rate or per night rate end up unfavorable. It is in an area I would like to retire to eventually, so owning a property there is a desirable thing for me, though it's far more property than retired-me would need. (It has a space that can be converted to an in-law style unit after I retire and I can leave the main house vacant for rentals)

I called around to several property management firms to ask how much they'd estimate the place is worth, so far I'm getting numbers around 800-1k/night. That said, I could be way off on those. I'm currently waiting for people to get back to me about how it's currently doing. The place comes furnished, so I avoid a huge up front cost buying furniture.

One more negative, the place needs some work. Not a total rehab, but the current owners are running it into the ground, and putting in the bare minimum. I can do a bunch of that work myself, but it would require taking vacation time from my fulltime job to be able to do it. If I hire a handyman, I'm looking at ~40/hour.

I plan to do a run through with a contractor and have them estimate how much various things would cost to fix, and a run through with a property manager to see what my "consumables" would cost to get it up and running (new beds/sheets/towels/etc).

Is there anything else I'm missing? Does this seem like a decent deal?

EDIT:
Bumped insurance from 1k/yr to 2k/yr, since I haven't yet called an insurance agent for an accurate quote.
« Last Edit: February 24, 2016, 11:40:01 PM by Jakerado »

Goldielocks

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Re: Rental Property Evaluation
« Reply #1 on: February 24, 2016, 10:11:18 PM »
For a rental property, you are missing a lot of the costs to run it, I think..

Linens / laundry / cleaning alone are very expensive, even if just done at end of the week / move out.   For $1k a night, I assume you are including bedding and such?

Wear and tear is much, much higher with a rental, and you need to keep it looking at its best to attract top dollar.  Maintenance on a vacation home outside city limits can be a lot more cost, too, due to distance and things like septic fields that you maintain.

The rental at $1k per night -- my guess is that this is seasonal and / or weekends.   Mid week and slower seasons you will get less and have higher vacancy.  The exception, of course, is a year round destination like Hawaii.  But even a place like Vegas has a high and shoulder season.

I think you need more research into the business side costs of a  vacation rental....? 

Jakerado

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Re: Rental Property Evaluation
« Reply #2 on: February 24, 2016, 10:18:06 PM »
Linens / laundry / cleaning alone are very expensive, even if just done at end of the week / move out.   For $1k a night, I assume you are including bedding and such?

Wear and tear is much, much higher with a rental, and you need to keep it looking at its best to attract top dollar.  Maintenance on a vacation home outside city limits can be a lot more cost, too, due to distance and things like septic fields that you maintain.

The rental at $1k per night -- my guess is that this is seasonal and / or weekends.   Mid week and slower seasons you will get less and have higher vacancy.  The exception, of course, is a year round destination like Hawaii.  But even a place like Vegas has a high and shoulder season.

I think you need more research into the business side costs of a  vacation rental....? 

Seasonal, it should have the winter and summer seasons, with spring and fall being the slow seasons. I'm assuming 70% vacancy/30% occupancy over the entire year. I don't have a reliable way to estimate the cost of linen replacements at the moment, since I haven't run a vacation rental before, but I do plan to talk to a few property management companies and see what they estimate my costs will be. In the numbers above I built in an extra 1250/mo / 15k/yr for expenses to cover places where I have no idea what the costs are. (the 5k/year is basic house maintenance, cleaning gutters, new roof, new furnace, etc) As I get better numbers I'll fine-tune that. The cleaning fee is paid by the renters.

The sewage/water numbers are accurate (I called the utility company already to ask)
« Last Edit: February 24, 2016, 10:21:50 PM by Jakerado »

Jakerado

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Re: Rental Property Evaluation
« Reply #3 on: February 26, 2016, 03:11:36 PM »
So a few small updates:
My estimated income may have been high at 100k, reducing that to 85k to be more realistic. Insurance is around 5k/year, so dropping my "unexpected expense" budget and upping my "insurance" budget, and swapping the 1k/year from unexpected to replacing towels and such (okay, probably a crazy-high number) gives me:

Unanticipated expenses: 12k/yr (otherwise known as extra cash flow if they don't come up, being conservative the first year)
Insurance: 5k/yr
Anticipated maintenance: 5k/yr
Replacement for linens: 1k/yr

And the plus and minus together:
Total Cash: 63000 (85k less 25% mgmt fee)
Costs: 41,000 + 25,000 = 66,000
Net income: (3,000)/yr
Equity: ~10,000/yr

That's close, and if my unanticipated expenses came down by 5k (so 9k instead of 12) it'd still be neutral not counting the equity. It's looking like a bit less of a good deal now, though.

What is a good estimate for "shit this thing isn't doing nearly the business I wanted it to, get me out of here" costs? I know, a real estate crash would eat away at the profits (or a vacation market crash), I'm more looking at typically, if you buy a house this year and decide in 3 years that you want out, what's a good estimate for your losses? Obviously unless things went to hell and you have bigger problems your value doesn't go to 0, but it also hasn't had enough time to appreciate much, so you're probably looking at losing real estate agent commission (call it 6%) and...what else? Does roughly 10% of the purchase price seem like a good estimate for losses if selling within 3 years? 20%? (I know, no one can predict the future, the market could drop out like it has done in the past...)


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Re: Rental Property Evaluation
« Reply #4 on: February 26, 2016, 07:21:40 PM »
The likely reason the current owner is running it into the ground is that s/he is losing money.  They are trying to offload this dog on the next sucker.

Why would you consider buying a property that is cash flow negative going in?  And then ask how much you would lose in selling costs after a couple of years?  Just say no to this deal now and look for an investment that will be profitable.

Jakerado

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Re: Rental Property Evaluation
« Reply #5 on: February 26, 2016, 08:16:29 PM »
It's cashflow negative if it only does 85k/year. It's cashflow positive if it does 100k/year. I'm considering it because I'm thinking I might be able to get it closer to 100k/year than 85k/year. If I'm wildly wrong and it actually only does 35k/year, I'd want out before my losses add up too much. It's a gamble, and I'm trying to estimate how much I could lose if I guess wrong.

I've talked to three property management firms. One of them said comparable houses did 75k this year, and estimated 30% vacancy (that vacancy rate sounds stupid-low, so I'm not sure I believe them). One estimated 80-120 nights at 800/night. One said comparable houses did ~130k this year, and they thought this would easily bring in 100k. The realtor thought no problem getting it to 100k+/year in a few years (but how much can I trust the realtor?)

Unfortunately, there's no such thing as a guaranteed return in the area. The prices are about 20-30% too high for that (and if the prices were lower, the income would be lower). This only came up on my radar because it's half as expensive / sq ft as it should be. I do expect to retire to the area, and I'm not opposed to taking a small loss/gamble if it could result in me having my retirement home now.

The current owners have it paid off, so I'm pretty sure it's not cashflow negative for them.  But yeah, given that 100k is on the high side for one property management firm, and not even in the ballpark for another, I'm leaning towards passing on this unless the owners get desperate and are willing to drop their price another ~20%
« Last Edit: February 26, 2016, 08:27:43 PM by Jakerado »

clarkfan1979

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Re: Rental Property Evaluation
« Reply #6 on: February 26, 2016, 11:31:42 PM »
It's ok to buy a cashflow negative house if you have reason to believe that you can turn it around. If it's cash flow negative, you have negotiation power for a good deal. Its the same as getting a good deal on a failing business. Michael Jordan bought the Charlotte Bobcats/Hornets when it was losing 20 million a year. He got a great deal and then turned it into a profitable business. Now he is the first 1 billion dollar former athlete. Magic Johnson bought the LA Dodgers, which was making money. He did not get a deal so his return is lower and not a Billionaire.

My only criticism is that if this is your first deal, it would be a difficult task to turn something around. You typically need some experience before you buy something that is failing.

Jakerado

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Re: Rental Property Evaluation
« Reply #7 on: February 27, 2016, 05:17:11 AM »
I do have another option...am I right that there's no way to make this place work at anything near its current level of business/price?
House cost: 550k
Insurance: 3k/yr
HOA: 1200/yr
Maintenance: 2500/yr
Currently does: 22-25k/yr (after PM fees)
I don't know when the owners are using it atm, if they're using it during popular times it could easily turn around and sell more. A PM firm manages a unit next to this one, a bit more updated, but the same size, and says they can bring in ~40-50k gross on it.

Without taking costs into account, that'd give me a ~4% ROI, but maybe it'd be a better first deal since it should be easier to stomach the ~1-5k loss/yr if I fail to turn it around...

arebelspy

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Re: Rental Property Evaluation
« Reply #8 on: February 27, 2016, 05:59:30 AM »
These are not good investments based on numbers.  This is speculation based on hope.

Run.

:)
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Jakerado

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Re: Rental Property Evaluation
« Reply #9 on: February 27, 2016, 08:00:15 AM »
Hah! I don't plan to run away entirely...it's not all hope, after all. I'm not counting on some kind of magical appreciation to bring me money. I do have a plan for how to turn the first house around...namely, offer it for ~10% under similar houses, improve the interior so it looks like a 5* hotel instead of a 2* motel, and make sure I build a connection with my guests. The current owners use a not-so-good PM firm, have let it go to shit, and don't really seem to want to be in the business. It seems like they wanted a passive 'buy house, get money' deal, and I know that's not possible.

Both are fine investments if I didn't have to hire a PM firm, since that'd make the net 25% better. This is not my first rental property, but it is my first vacation rental. The numbers are easier with long term tenants by far. Something I don't understand is that there's a severe shortage of long term rentals in the area, but a house that sells for 550-650k would only rent long term for 1300-1500/mo.

That said, at the current costs and expected income...it doesn't work out.  My decision is to offer about 20% under ask and see if I get a bite. If not, I do plan to walk and wait for a better deal or a real estate market crash.

arebelspy

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Re: Rental Property Evaluation
« Reply #10 on: February 27, 2016, 08:07:10 AM »
Here's something you learn with real estate investing... the asking price is completely irrelevant.

My decision is to offer about 20% under ask and see if I get a bite.

What makes 20% under the asking price a good number?

Calculate your own value for the property*.  Base your offer on that.  Whether it's 10% of the value or 110%.  Don't just do what many beginners do and base your offer off the asking price and think "if I can get 20 or 30% off that, it's a good deal!"  That doesn't make it a good deal.

Good luck!


*Show your work.  ;)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Jakerado

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Re: Rental Property Evaluation
« Reply #11 on: February 27, 2016, 08:48:13 AM »
20% under ask on the 550k puts me at 440k, which, using the 25k number gives me a 5-7% cap rate. that's good enough for me to be comfortable with the risk, and that will cashflow using the above calculations with a bit below avg ROI. My long term investments are currently at ~5%/yr over their lifetime, and this would be branching out into a different market with similar returns.

On the other place, 20% under drops the mortgage payment to 27k/yr so adds back 4k/yr. I screwed up the cashflow calculation above and double counted the PM fee. The danger of not labeling everything ;) that should have read costs: 41k, income: 63k, net 22k. With a 20% drop that gives me net 26k.

 It also lets me go as low as about 60k gross to break even, though that's not my goal.


arebelspy

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Re: Rental Property Evaluation
« Reply #12 on: February 27, 2016, 08:51:08 AM »
gives me a 5-7% cap rate.

That's a huge range, and indicates to me your numbers aren't nearly firm enough.

Quote
that's good enough for me to be comfortable with the risk, and that will cashflow using the above calculations with a bit below avg ROI. My long term investments are currently at ~5%/yr over their lifetime, and this would be branching out into a different market with similar returns.

I'd imagine this has a lot more risk, and concentration, than your current investments.

I mean, do what you want.  I'm just saying, this doesn't look like an investment from where I'm sitting, and if you're desperate to invest in real estate, there are a lot better deals out there.

Good luck!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Jakerado

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Re: Rental Property Evaluation
« Reply #13 on: February 27, 2016, 09:25:27 AM »
Thanks :) I say 5-7% because I don't know the vacation rental market. The numbers I'm getting from property mgmt firms are kind of all over the place. If I use the 550k place, and get it for 440k, that's 5.6% before anything I'm covering out of pocket, after mgmt fees. If I do better (for the past 3 years it's gone up 10-30%/yr in business in a crappy vacation environment) that pushes me towards a 7% cap rate. If I self manage (which I won't do until I retire) that gives me ~25% more.

With a non vacation rental I'd want a 10% cap rate to even look at the place, closer to 14% to start getting interested. Unfortunately there's nothing in that range near me. I'm in a very high COL area, and the normal rules make everything seem like a bad investment. Probably because it is, but I do want to own in the area eventually. I'm currently sinking ~6k/yr into hotels, which is part of my motivation to buy, though I'm not including it in the numbers because guests come first so I might still have to do the hotel thing. But it does mean I'm willing to take a slightly lower cap rate.

iamlindoro

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Re: Rental Property Evaluation
« Reply #14 on: February 27, 2016, 09:48:53 AM »
With a non vacation rental I'd want a 10% cap rate to even look at the place, closer to 14% to start getting interested. Unfortunately there's nothing in that range near me. I'm in a very high COL area, and the normal rules make everything seem like a bad investment. Probably because it is, but I do want to own in the area eventually.

There's no reason you have to invest in your local area if everything there is a bad investment. It is possible that you would be better served by making wise investments in markets where they *do* make sense and buying in this particular market later.

I'm currently sinking ~6k/yr into hotels, which is part of my motivation to buy, though I'm not including it in the numbers because guests come first so I might still have to do the hotel thing. But it does mean I'm willing to take a slightly lower cap rate.

I would be very, very wary of this kind of rationalizing. It sounds a lot like your emotional bias towards the area is clouding your objective view of the quality of the investment. I think that part of being a wise investor is recognizing when our judgment is compromised and taking a step back.

From a Mustachian perspective, is the $6K/year level of spending really necessary?  We were abroad over a month of last year, staying in hotels and AirBnB everywhere we went, and we spent about 1/3rd of that.  May I ask, generally speaking, where this property is located?

Jakerado

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Re: Rental Property Evaluation
« Reply #15 on: February 27, 2016, 10:54:23 AM »
Quote
From a Mustachian perspective, is the $6K/year level of spending really necessary?  We were abroad over a month of last year, staying in hotels and AirBnB everywhere we went, and we spent about 1/3rd of that.  May I ask, generally speaking, where this property is located?

I spend about 30/35 nights in the area, along with 2-3 week long trips with family. (So 55-60 nights) Cheap hotels run 150-250/night, the family trips are min 250/night. If I'm traveling solo I can do a sno-park as was suggested in a previous thread, but that doesn't help the family trips. And before anyone suggests it: no, I can't move to the area full time. Well, I can, but it'd mean having to find a new job and taking a 40-50k/yr salary hit if I'm lucky.

Another Reader

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Re: Rental Property Evaluation
« Reply #16 on: February 27, 2016, 12:11:48 PM »
My guess is you are looking at a place in a ski vacation location, probably Colorado.  You emphasize how much revenue has gone up in the last three years in a "crappy vacation environment."  I haven't seen much of that crappy environment in any vacation locale in the last three years.  I have seen occupancy and prices soar to all time highs in many locations.  However, as any hotel operator will tell you, the high occupancy rates and revpar are not sustainable over the long term.  If you buy on current numbers, you will be in a loan work out with the bank in five years.  With a house, there is no loan work out, you give them the keys.

Read up on hotel operation and valuation and income/expense benchmarks if you can't find any well-written books or articles on vacation rentals.  These are businesses as much as they are real estate investments.  The principles are the same.  In your shoes, I would focus on creating the additional income to rent your vacation lodging with some other investment or side gig.  Less risk, more stress-free vacation.


Jakerado

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Re: Rental Property Evaluation
« Reply #17 on: February 27, 2016, 01:20:16 PM »
It is a ski area, yes. The past 3 years have seen occupancy down -- for one of the properties the lift it was next to didn't even open due to terrible conditions. This year it has been way up, with almost every hotel and Airbnb in a 30 minute drive booked solid with no vacancy every Saturday. That's obviously unsustainable so I'm ignoring this year's numbers and working off the last 3 ;)

I'll look into margins and articles on hotel businesses. I can find a lot of articles saying 'vacation rentals never make sense' which I have a hard time believing, and the one 'here's how I did airbnbing my place' in 4 parts. None that give me a good idea what to expect, aside from cap rates of 6% are really amazingly good for a vacation rental. (Avg seems to be 2-3%)

Another Reader

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Re: Rental Property Evaluation
« Reply #18 on: February 27, 2016, 01:34:58 PM »
The drought in California is an example of another unpredictable factor, certainly.   In your shoes, I would find a way to make extra income to pay room rent during the good years rather than take on the headaches of owning a business where I had very little control over the business conditions.  Invest your money in a better piece of income producing real estate and spend some of the net income on the ski slopes.

arebelspy

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Re: Rental Property Evaluation
« Reply #19 on: February 27, 2016, 01:58:43 PM »
Invest your money in a better piece of income producing real estate and spend some of the net income on the ski slopes.

Bingo.  Buying a vacation home for partial personal use and partial renting out is almost always much worse than owning something that's a good rental, and then using the profits to rent out a vacation home.

If you, instead of settling for a 4% ROI on your 550k (a hoped for 4%, if the property management can get that), you got a place that gave you an 8% ROI, that'd give you an 44k net cash flow per year instead of 22k.  An extra 22k could buy you a nice vacation for a few weeks and leave you with thousands of dollars left over to reinvest and compound.
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Jakerado

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Re: Rental Property Evaluation
« Reply #20 on: February 27, 2016, 03:33:13 PM »
I'll investigate the market near where I live better to see if there's any kind of a deal, but 1 bed apartments go for ~1 million and rent for ~3k/mo. I don't trust investing in a place I can't visit to make repairs / maintain the house.

arebelspy

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Re: Rental Property Evaluation
« Reply #21 on: February 27, 2016, 03:37:36 PM »
I'll investigate the market near where I live better to see if there's any kind of a deal, but 1 bed apartments go for ~1 million and rent for ~3k/mo. I don't trust investing in a place I can't visit to make repairs / maintain the house.

You live near that ski place, to be going to make repairs?

There may just be nothing that makes sense, financially, near where you live.  If that's the case, and you refuse to learn about investing elsewhere, where it does make sense, then making no investment (or rather, putting the money in a different investment, but making no real estate investment) is better than making a bad investment.  The opportunity cost, especially compounded over decades, is likely hundreds, of thousands of dollars.

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Re: Rental Property Evaluation
« Reply #22 on: February 27, 2016, 04:27:17 PM »
You mentioned you own other rental property, how has that performed?  Is the property in the $1 MM for a one bedroom neighborhood?  If you live in one of the highest priced markets, my guess is at least subconsciously you factor in appreciation.  Most buyers in those markets are used to seeing appreciation higher than inflation.  I know I have to be careful not to consider appreciation when I look at markets outside the SF Bay Area. 

Vacation property markets are very volatile.  If you really want to own something in your favorite ski town, wait until the economic cycle turns.  There will be a rush to the exits to get out, and you will have your pick at reasonable prices.  Buy it with the income from other properties or assets you have accumulated in the meantime and buy it primarily for your family.  If you can AirBnB it, great.  Otherwise, use it for yourself and your family, and all of the new friends you will have because you own a vacation property in a great ski area.  If/when you get tired of it, sell it when the market is strong and reinvest the profits in something else.  I know people that have done this more than once at Tahoe, very profitably.

Jakerado

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Re: Rental Property Evaluation
« Reply #23 on: February 27, 2016, 05:49:38 PM »
Quote
You live near that ski place, to be going to make repairs?
I live ~4 hours away, close enough that I make the trip every weekend in the winter. Previously by bus, but I just bought a (used) car to make the trip easier and cheaper (because I can now carpool it).

Quote
You mentioned you own other rental property, how has that performed?
Taxes: ~300/mo
Utils: paid by tenant
Maintenance: ~100/mo
Mortgage: paid off
Cash Invested: 110k
Insurance: ~100/mo
Vacancy: 0%(been continuously rented with no breaks for ~10 years, new tenant in ~1 day when one leaves)
Income: 1.4k/mo

I used to manage it very hands on (I lived there for ~4 years), it's now run by a close friend who lives in the area in exchange for all of the profits, since I no longer live on that side of the country.
« Last Edit: February 27, 2016, 05:54:03 PM by Jakerado »

iamlindoro

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Re: Rental Property Evaluation
« Reply #24 on: February 27, 2016, 05:51:52 PM »
I used to manage it very hands on (I lived there for ~4 years), it's now run by a close friend who lives in the area in exchange for all of the profits, since I no longer live on that side of the country.

Wait, WHAT?

Am I misunderstanding?  You give him ALL the profits?  Why wouldn't you hire a property manager?

Jakerado

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Re: Rental Property Evaluation
« Reply #25 on: February 27, 2016, 05:56:19 PM »


Wait, WHAT?

Am I misunderstanding?  You give him ALL the profits?  Why wouldn't you hire a property manager?

That's correct. They've helped me out for far more than the ~110k I'm giving up (for example, they offered to gift me a 0% interest loan of 200k towards the purchase of a house out here when I mentioned I was considering buying) The only thing it costs me here is the opportunity cost of the money.

EDIT: I should also add that I'm not exaggerating about the 0% vacancy rate; It's priced under market  in a middle class area with a good school district, and has some unique features that are somewhat rare in that city.

And, you've convinced me that there's no way to make the properties I was considering work out. I could super-lowball the expensive one and it still doesn't work unless I can count on more income than seems likely. The less expensive one only works if I can double what the previous owners did in income (or half the price, which means they'd be selling at a loss so...not going to happen), and I don't think that's likely (it's not as mismanaged as the more expensive place), unless they were using it a good deal and so took it off the vacation market at bad times.
« Last Edit: February 27, 2016, 11:01:51 PM by Jakerado »

arebelspy

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Re: Rental Property Evaluation
« Reply #26 on: February 28, 2016, 01:41:28 AM »

Quote
You live near that ski place, to be going to make repairs?
I live ~4 hours away, close enough that I make the trip every weekend in the winter. Previously by bus, but I just bought a (used) car to make the trip easier and cheaper (because I can now carpool it).

If that's considered close enough for you, I'm sure there's places within a 4-hour radius of you that are much better investments.
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Goldielocks

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Re: Rental Property Evaluation
« Reply #27 on: February 28, 2016, 08:29:15 PM »
Not to harp on linens, etc., but who is doing the clean up and washing of linens?  If property manager, 5-7% would likely not include it.  Cleaning costs on a home would be $250 per move out clean, plus perhaps laundry extra, depending on size and if there is in-suite laundry.

I read that you are looking elsewhere.  I think this is a good choice.  My GP ran a motel for 15 years, and there are a LOT of costs involved in vacation rentals that don't occur in normal tenancy.  You need to have solid numbers and knowledge before jumping in.

Jakerado

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Re: Rental Property Evaluation
« Reply #28 on: February 28, 2016, 09:01:48 PM »
Not to harp on linens, etc., but who is doing the clean up and washing of linens?  If property manager, 5-7% would likely not include it.  Cleaning costs on a home would be $250 per move out clean, plus perhaps laundry extra, depending on size and if there is in-suite laundry.

I read that you are looking elsewhere.  I think this is a good choice.  My GP ran a motel for 15 years, and there are a LOT of costs involved in vacation rentals that don't occur in normal tenancy.  You need to have solid numbers and knowledge before jumping in.

PM fees are 25-35%(the one I was going to use was 25%, but the range is 25-35%) as stated above, not 5-7% ;) regardless, cleaning fees weren't included because they're typically charged as a fee to the guest as part of the booking in the area. The hotel-tax was also not included for the same reason -- it's charged up front as a separate fee.