Vacation home & short-term rental

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CloneGuy8

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This isn't something I'd do for a couple years, but someday I'd like to buy a vacation home on the beach (somewhere in Florida probably; love California but real estate on the beach in CA is not in my price range). The idea would be to hire a property management company and have it rented out as a short-term rental on sites like airbnb, and then be able to use it a couple times a year. Does anyone have experience doing this? Do you make enough off short-term rentals to pay the mortgage? Does having a property management company take care of the headaches of owning property in another state?
 

MeanDean

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Jan 5, 2009
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Clarence IA-Jensen Beach FL
There are some properties like that, but most of the residential properties I looked at before buying have strict rental regulations. The residents who live there full time do not want short term rentals and the problems they can bring (noise, damage, crime). Thus most have a minimum rental period allowed.

Our condo the minimum you can rent a unit out is 3 months. Some are 2 months. I don't know any less than 2 months. This works well as most renters view the peak season as Jan, Feb and March. Some go 4 months and stay through April. Others will do more in the Fall, but most don't want to come down until after Christmas.

There are management teams associated with realtors that match the client with the owners, but most of the rental agreements are managed by the condo managers.

And yes, you could try to work outside the system but be aware that condo owners know pretty much who does and does not belong and will bust someone who doesn't follow the rules.
 
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2forISU

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Oct 8, 2008
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This isn't something I'd do for a couple years, but someday I'd like to buy a vacation home on the beach (somewhere in Florida probably; love California but real estate on the beach in CA is not in my price range). The idea would be to hire a property management company and have it rented out as a short-term rental on sites like airbnb, and then be able to use it a couple times a year. Does anyone have experience doing this? Do you make enough off short-term rentals to pay the mortgage? Does having a property management company take care of the headaches of owning property in another state?
I have looked into this and it depends on the area. The following site is a good starting point for analysis on what you could expect on rental returns. I was also curious about tax write-offs, depreciation, etc)
http://blog.airdna.co/buy-vacation-home-properties-2017/

Couple other links that I have stumbled across:
https://www.forbes.com/sites/ellenp...rties-in-2018-will-surprise-you/#450b26cf3f4b
https://www.usatoday.com/story/trav...20-best-places-buy-vacation-rental/405016002/
 
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cycloneworld

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Mar 20, 2006
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In general, it is better just to pay for a place for the couple of times/weeks you'll be there than deal with short term rentals 50 other weeks (if allowed, as others have said) - unless you have another end goal in mind like permanent retirement, etc.

Owning rental properties (even with a property manager) is not a hands-off experience. If you know that going in and are okay with it, that's great. But I've seen too many people (and bought some of their properties) think of real estate as passive income when its really not.
 
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southernfriedCY

Active Member
Feb 11, 2009
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I have one in a small town here in Iowa. I have it rented pretty solid from April through Dec. Does it make me any money? On paper (tax form), not much. Does it pay for itself? So far (after 4 years), yes.
 

volclone

Active Member
Apr 11, 2006
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I've done weekly rentals of oceanfront properties along the NC coast for 20 years...there is a reason (financial) that I rent. A friend of mine owns a beach property--here is what he says:
1) Most property management companies also are rental listing companies--many will require you to list your rental only with them if they also manage the property. Also, few houses are rented for less than a week at a time.
2) You will have the property largely rented between Memorial Day and Labor Day....other times are hit or miss entirely. Don't count on rental income to cover your mortgage, maintenance, etc.
3) Maintenance is double or triple what you would have on a home on the mainland due to the effects of the salt air. For example, the air conditioner will last only 5-7 years before it rusts out. Painted surfaces on the exterior need to be addressed every 12-24 months, etc.
4) Unlike California, anyplace on the eastcoast is just one good hurricane away from not being there.

I could go on, but buying at the beach is more about a lifestyle, I wouldn't make the decision based on any sort of financial benefit.
 

BigBake

Well-Known Member
Mar 17, 2006
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Same topic but different area, what about lake property?

- This would be my first rental property but expect and don't mind a certain level of work to be expected. Targeting a condo for this very reason to cut down on outside maint concerns.
- yes, short season is understood, but based on what I see places rented for even over those 3 months it seems like some good money is avail.
- Long term goal in 5 - 10 years would be to move there permanently or sell it and get a house on the lake for the empty nest years.
 

maureenowaters

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Sep 3, 2019
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Dubai
I love the idea. But guys, I have a question how do the locations affect the renting prices? As I see, the price is different location wise.
 

dmclone

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Oct 20, 2006
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There are so many variables based on location and price of homes. The more I research, the more I think it would just be best to be the renter and not the owner.

For example, last week we stayed 3 nights in a VRBO in Palm Springs, CA. I would guess the house was probably worth around $500k(1,700 sqft and huge pool). The nightly rate was around $250/night. From November to April it's $350/night. The owner lives in Palm Springs and owns 4 of these in the area.

Lets make some assumptions:
2,500/month P&I (30yr mortgage)
$900 Taxes
$200 Insurance
$200 Month Pool Maintenance
$250/month VRBO cost
$500/month cleaning
$200/month utilities
$500/month up-keep
Time??

So about $5,250/month cost. $63k year

Now lets say that it's rented 365 days a year at $300 Avg. About $110,000 potential
80% occupancy $87,600-$24,600 profit
60% occupancy $65,700-$2,700 profit
50% occupancy $54,700-$8,300 loss

My guess is that from November to April they have at least 90+% occupancy. My guess is that from May to October it's around 30%. When we were driving around Palm Springs (118 degrees) it was a ghost town but it sounds like once October hits, it becomes crazy busy.



We also stayed 4 days in a house in San Diego via airbnb. It was sort of a duplex and the place we stayed in was probably 400 sqft max. On the plus side it was in a great area, very clean, and cheap. My guess with the prices in San Diego is that this house(whole duplex) probably cost around $500k.

Lets make some assumptions:
2,500/month P&I (30yr mortgage)
$900 Taxes
$200 Insurance
$200 Air bnb costs
$500/month cleaning
$100/month utilities
$500/month up-keep
Time??


So about $4,900/month cost. $59k/year

Now lets say that it's rented 365 days a year at $225 avg (both units combined). About $82,125 potential.

90% occupancy $73,900-$14,900 profit

Looking at their calendar and knowing San Diego, there is no way that occupancy is less than 90%.


Both owners of these properties live in this area and manage these properties themselves and both own multiple properties so I assume they make good money on them. If you take this same scenario and add in a property manager at 10%, you may be lucky to break even. Then you have to consider things like appreciation of the property. So many different factors to consider and I could be 100% off on costs.
 
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maureenowaters

New Member
Sep 3, 2019
5
0
1
30
Dubai
There are so many variables based on location and price of homes. The more I research, the more I think it would just be best to be the renter and not the owner.

For example, last week we stayed 3 nights in a VRBO in Palm Springs, CA. I would guess the house was probably worth around $500k(1,700 sqft and huge pool). The nightly rate was around $250/night. From November to April it's $350/night. The owner lives in Palm Springs and owns 4 of these in the area.

Lets make some assumptions:
2,500/month P&I (30yr mortgage)
$900 Taxes
$200 Insurance
$200 Month Pool Maintenance
$250/month VRBO cost
$500/month cleaning
$200/month utilities
$500/month up-keep
Time??

So about $5,250/month cost. $63k year

Now lets say that it's rented 365 days a year at $300 Avg. About $110,000 potential
80% occupancy $87,600-$24,600 profit
60% occupancy $65,700-$2,700 profit
50% occupancy $54,700-$8,300 loss

My guess is that from November to April they have at least 90+% occupancy. My guess is that from May to October it's around 30%. When we were driving around Palm Springs (118 degrees) it was a ghost town but it sounds like once October hits, it becomes crazy busy.



We also stayed 4 days in a house in San Diego via airbnb. It was sort of a duplex and the place we stayed in was probably 400 sqft max. On the plus side it was in a great area, very clean, and cheap. My guess with the prices in San Diego is that this house(whole duplex) probably cost around $500k.

Lets make some assumptions:
2,500/month P&I (30yr mortgage)
$900 Taxes
$200 Insurance
$200 Air bnb costs
$500/month cleaning
$100/month utilities
$500/month up-keep
Time??


So about $4,900/month cost. $59k/year

Now lets say that it's rented 365 days a year at $225 avg (both units combined). About $82,125 potential.

90% occupancy $73,900-$14,900 profit

Looking at their calendar and knowing San Diego, there is no way that occupancy is less than 90%.


Both owners of these properties live in this area and manage these properties themselves and both own multiple properties so I assume they make good money on them. If you take this same scenario and add in a property manager at 10%, you may be lucky to break even. Then you have to consider things like appreciation of the property. So many different factors to consider and I could be 100% off on costs.
You make my sense. Thanks for creating such a beautiful idea.
 

SEIOWA CLONE

Well-Known Member
Dec 19, 2018
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Most of the people that buy rental homes are either doing it as a long term investment, that they hope will double or triple in price down the road. Or its a future retirement home that they can use now for getaways, while still bringing in money to help with the mortgage.

If you are planning on buying and making money on it, short term, you really have to be in the area, so you can run the day to day bookings, cleaning etc. If you have someone else doing it, it really cuts into your money flow. If this is your plan, your rental better be in a very desirable location.