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Buying a vacation home as a rental property (1 Viewer)

Otis said:
Why?  Just less headache/less risk?  I like the idea of it one day being paid off and ultimately being a good investment.  Not the right way to look at it?
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I just look at the upkeep cost of two houses and being nailed down to 2 locations.  I'd prefer to rent capability and go somewhere different on an annual basis (or whatever).  

My thoughts are tilted a bit as I figure I'm 80% to FU money status and I have little interest in another debt load.

ETA another thought here.  People don't realize how much they change over time. Article. I'd prefer to plan for flexibility rather than tie myself down.

 
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You're limited in regards to tax deductions if you are using it as a vacation home too.

And why the Hamptons? Status/look at me schtick? Have you done research on if ocean front properties there appreciate more or faster than other ocean properties?

 
Sand said:
I can't think of a scenario where I'd buy a second house rather than rent.
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Have one and couldn't do without anymore. Not Otis sized of course. Split with family so no dicking around with having to rent it out as someone is always using it. Renting it would be a nightmare. 

 
eoMMan said:
You're limited in regards to tax deductions if you are using it as a vacation home too.

And why the Hamptons? Status/look at me schtick? Have you done research on if ocean front properties there appreciate more or faster than other ocean properties?
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Has nothing to do with status. It just happens to be the closest decent beach homes to where I live. I'd much prefer half the status and half the price, but the drive from LI to the jersey shore is a major major PIA. 

 
AL f'n lol.

Montauk recently enacted strict vacation rental ordinances. Keep in mind that local government will always have an eye on rentals. 

Go for it man, you only live once. I'm bullish on Eastern LI. I'm in Stony Brook. I'd do it and look to retire that way. Get the kids off and live there forever. That's dream living.

 
Sand said:
I can't think of a scenario where I'd buy a second house rather than rent.
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Market bottom, motivated seller, waterfront property, in a place where I want to retire was my scenario.  Not only do I not regret it, I think it was one of the better purchases I've ever made. 

 
Grace Under Pressure said:
AL f'n lol.

Montauk recently enacted strict vacation rental ordinances. Keep in mind that local government will always have an eye on rentals. 

Go for it man, you only live once. I'm bullish on Eastern LI. I'm in Stony Brook. I'd do it and look to retire that way. Get the kids off and live there forever. That's dream living.
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Actually part of the potential plan -- have the option to eventually sell the main house (where we pay high taxes for good schools) and retire out there, close enough to all our kids hopefully, but get to wake up each morning to the atlantic ocean?  Man, that's good stuff.

 
Cliff Clavin said:
Have one and couldn't do without anymore. Not Otis sized of course. Split with family so no dicking around with having to rent it out as someone is always using it. Renting it would be a nightmare. 
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I don't know what you guys are thinking re: "Otis size."  I'm not looking at mansions.  More like 4BR or so places with a tiny slice of oceanfront property.  I won't be hanging with Puffy and J-Lo.

 
Otis said:
Why?  Just less headache/less risk?  I like the idea of it one day being paid off and ultimately being a good investment.  Not the right way to look at it?
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I've looked at it for several years, ultimately deciding to invest the money into my primary residence.

I rent vacation homes 3-4 times per year. They're all half mil to over a mil in value.  All the private party owners I rent from want to sell me their homes. They all tell me the rents don't cover the cost of ownership. 

You'd be better off buying a duplex or small apartment where your monthly rents would be positive cash flow. Build that portfolio up and someday if you want to blow money go buy a fancy vacation home.

 
Otis said:
I don't know what you guys are thinking re: "Otis size."  I'm not looking at mansions.  More like 4BR or so places with a tiny slice of oceanfront property.  I won't be hanging with Puffy and J-Lo.
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Otis doesn't do small and logical for purchases :shrug:

 
Doctor Detroit said:
Market bottom, motivated seller, waterfront property, in a place where I want to retire was my scenario.  Not only do I not regret it, I think it was one of the better purchases I've ever made. 
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I'm right there with you except we couldn't afford waterfront. No nightmare rental stories. Our management company handles it all. A paid off retirement home that someone else is paying for? Best investment I've made.

 
Grace Under Pressure said:
AL f'n lol.
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You may laugh, but the beaches are massively better than anything in the NE.  Better weather.  Much cheaper - buyer's market.

I own ~6% of a house down there.  (I'd sell it if I ever came to own it - much rather a mountain cabin).

 
I would avoid Westhampton Dunes like the plague.  Cramped together houses with no property that resembles city waterfront properties is not my thing, but I would stay away due to the strong chance the whole place is destroyed in a hurricane or strong northeaster.

 
Grace Under Pressure said:
AL f'n lol.

Montauk recently enacted strict vacation rental ordinances. Keep in mind that local government will always have an eye on rentals. 

Go for it man, you only live once. I'm bullish on Eastern LI. I'm in Stony Brook. I'd do it and look to retire that way. Get the kids off and live there forever. That's dream living.
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go patriots, I mean Seawolves!

fyi, patchogue is the place to be now, amazing transformation.

 
Sand said:
You may laugh, but the beaches are massively better than anything in the NE.  Better weather.  Much cheaper - buyer's market.

I own ~6% of a house down there.  (I'd sell it if I ever came to own it - much rather a mountain cabin).
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I can't speak to AL, but what beaches around here have you been to?

 
baymen said:
I would avoid Westhampton Dunes like the plague.  Cramped together houses with no property that resembles city waterfront properties is not my thing, but I would stay away due to the strong chance the whole place is destroyed in a hurricane or strong northeaster.
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What kind of feedback do you have about the other side of the bay?

We're kinda interested in Quogue/Westhampton... Not now, but maybe in the next few years... I have zero interest in the kind of house Otis posted - stacked on top of other similar houses, not even enough space for a pool, overpriced. You want a nice house there, you're starting at like $5-$6, ridiculous!

http://www.zillow.com/homedetails/32739256_zpid

This is perfect IMO. Yard, pool, tennis court, lots of space, and privacy. I can drive 5-10 minutes to the beach if that's what I'm in the mood for that day.

 
fantasycurse42 said:
What kind of feedback do you have about the other side of the bay?

We're kinda interested in Quogue/Westhampton... Not now, but maybe in the next few years... I have zero interest in the kind of house Otis posted - stacked on top of other similar houses, not even enough space for a pool, overpriced. You want a nice house there, you're starting at like $5-$6, ridiculous!

http://www.zillow.com/homedetails/32739256_zpid

This is perfect IMO. Yard, pool, tennis court, lots of space, and privacy. I can drive 5-10 minutes to the beach if that's what I'm in the mood for that day.
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East Quogue is different than the Village of Quogue.  You would be going to town beaches which would take about 15-20 minutes to the closest one in Hampton Bays.  Property taxes outside of the incorporated villages is much higher as % of the home's value.  I lived in Southampton Village for the past 15 years and recently moved back to Hampton Bays as I am preparing for retirement.  Taxes are ridiculous so I am going to sell and buy in the Village of Quogue and cut my property taxes by 2/3's with the same value home and get access to the village beaches.  The linked house looks a little overpriced to me and an acre with a pool and a court is tight.  I have 2 acres and it would be tight for me.  East Quogue has some very nice neighborhoods with old houses that would have room for a pool and a short walk to the bay.

I do believe that the Hamptons west of the canal are decently valued compared to east, but the market has been so red hot out here that a bubble could pop.  Hampton Bays and East Quogue do have a chance of being Brooklynized though over the next 10-20 years.

 
Like @tommyboy I often rent multi-million dollar chateaus, sometimes I even feed the slaves they provide.  Sure I only throw them the grizzle, but they're used to that.  :thumbup:

 
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From personal experience, bad financial move unless you are buying low and intending to sell before the next crash.  You can rent someone else's home much cheaper.  People have hit most of the key points here but the one that was missed is that you'll be spending all of your vacation fixing up crap people have broken or just general maintenance.  Main residence can already be a pia but at least you can do some of those chores in the evening.  Nothing like going on vacation and spending half the day driving to Lowe's getting crap to fix the broken screen door for the tenth mfing time.  You can almost count on a return trip to Lowes to get something you forgot or to get a replacement item because they sold you a pos that someone else already returned.  If you rent it, count on touch up paint every year.  If you're on the beach have fun getting up the sand tenant's drug in.  The cleaning company only does light cleanings and does mess with stuff like the used rubbers under the bed or chunks of harden food that adorn most of the dishes/silverware.  That's OK, Mrs. Otis needs something to do while she's not shopping for replacement furnishings.

 
Getzlaf15 said:
Thinking about buying a water front/view condo in Dana Point to VRBO/AirBnB.

We'd use it several weeks a year, but the rents are very nice and could lead to a nice profit.  Was surprised how low the VRBO fee was.Just started the research.
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Would be interested to see your research.  I'm looking to possibly buy a fixer to move into and then rent out the primary I've been living in for a few years.  

 
I don't personally own vacation properties but I do know a few people that do.  I can tell you that none of them have turned any sort of profit on any of them.     Tenants that live in a home for 1+ years are going to respect the place they reside far more than people crashing somewhere for a week.     Revolving people into a property for a week or two at a time is a recipe for a property getting damaged/destroyed in an accelerated rate.  You'll have booking fees, marketing fees, cleaning crews to deal with--all sorts of added expenses that will cap your upside.   My advice is to purchase a property in a place that you enjoy and to initially market it as a full time rental (1+ year leases).  Use the rent money to pay down your mortgage as much can as possible and to build more equity in the property.  Once you have that added equity after a few years--then maybe re-finance--lower your mortgage payment so that you if you do decide to go the "vacation rental" route that you need fewer reservations to create positive cash flow.   Do not purchase a vacation property thinking that you will break even or make money from the start.  

 
Do a group buy with friends/associates. Would rather deal with the issue that arise over that than with renters. Would get the equity and a vacation home to use for all the time you need.

 
BassNBrew said:
From personal experience, bad financial move unless you are buying low and intending to sell before the next crash.  You can rent someone else's home much cheaper.  People have hit most of the key points here but the one that was missed is that you'll be spending all of your vacation fixing up crap people have broken or just general maintenance.  Main residence can already be a pia but at least you can do some of those chores in the evening.  Nothing like going on vacation and spending half the day driving to Lowe's getting crap to fix the broken screen door for the tenth mfing time.  You can almost count on a return trip to Lowes to get something you forgot or to get a replacement item because they sold you a pos that someone else already returned.  If you rent it, count on touch up paint every year.  If you're on the beach have fun getting up the sand tenant's drug in.  The cleaning company only does light cleanings and does mess with stuff like the used rubbers under the bed or chunks of harden food that adorn most of the dishes/silverware.  That's OK, Mrs. Otis needs something to do while she's not shopping for replacement furnishings.
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what are your thoughts if I pay cash for a place?

 
Getzlaf15 said:
BassNBrew said:
From personal experience, bad financial move unless you are buying low and intending to sell before the next crash.  You can rent someone else's home much cheaper.  People have hit most of the key points here but the one that was missed is that you'll be spending all of your vacation fixing up crap people have broken or just general maintenance.  Main residence can already be a pia but at least you can do some of those chores in the evening.  Nothing like going on vacation and spending half the day driving to Lowe's getting crap to fix the broken screen door for the tenth mfing time.  You can almost count on a return trip to Lowes to get something you forgot or to get a replacement item because they sold you a pos that someone else already returned.  If you rent it, count on touch up paint every year.  If you're on the beach have fun getting up the sand tenant's drug in.  The cleaning company only does light cleanings and does mess with stuff like the used rubbers under the bed or chunks of harden food that adorn most of the dishes/silverware.  That's OK, Mrs. Otis needs something to do while she's not shopping for replacement furnishings.
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what are your thoughts if I pay cash for a place?
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I got a place to sell any cash buyer.

I've got some super rich acquaintances that make Otis look like the night shift cashier at the local 7/11 and all of them complain about paying for a home they never use and the maintenance issues.  The only people I know happy having multiple homes are retirees that are using them and not renting them out.

 
Been to beaches on the eastern end of LI, along with all of the gulf coast beaches.  Florida blows them all away.

If I could swing it I would get a place in Sanibel / Captiva, FL.  About 10-11 hours for me, and a tad farther for Oat.

http://www.zillow.com/homedetails/11515-Andy-Rosse-Ln-Captiva-FL-33924/58171905_zpid/

Crap why did you make me look http://www.zillow.com/homedetails/506-Useppa-Is-Useppa-Island-FL-33924/2098900429_zpid/

Oh and yeah AL coast is trashy lol http://www.zillow.com/homedetails/30631-Peninsula-Dr-Orange-Beach-AL-36561/2108675760_zpid/

 
BassNBrew said:
I got a place to sell any cash buyer.

I've got some super rich acquaintances that make Otis look like the night shift cashier at the local 7/11 and all of them complain about paying for a home they never use and the maintenance issues.  The only people I know happy having multiple homes are retirees that are using them and not renting them out.
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We have a modest vacation home and I absolutely love it. We don't rent it out though.  The thought of strangers using our toilets and barebacking it in our bed skeeves out my wife.  (Yes, we go to hotels - it's somehow different to her when it's your own home.)

 
bigbottom said:
We have a modest vacation home and I absolutely love it. We don't rent it out though.  The thought of strangers using our toilets and barebacking it in our bed skeeves out my wife.  (Yes, we go to hotels - it's somehow different to her when it's your own home.)
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Like a fancy car, if you enjoy it and have the coin, go for it.  That said, except in rare instances, it's not a wise investment.  Much like a boat, it's better to have a good friend that owns it and invites you along often.

 
BassNBrew said:
Like a fancy car, if you enjoy it and have the coin, go for it.  That said, except in rare instances, it's not a wise investment.  Much like a boat, it's better to have a good friend that owns it and invites you along often.
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:bag:

For sure you're right as far as investments go. But it's not an investment, as it generates zero revenue and is really too modest to result in long term gains of any significance. It's simply a place we like to spend our weekends.

 
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bigbottom said:
BassNBrew said:
I got a place to sell any cash buyer.

I've got some super rich acquaintances that make Otis look like the night shift cashier at the local 7/11 and all of them complain about paying for a home they never use and the maintenance issues.  The only people I know happy having multiple homes are retirees that are using them and not renting them out.
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We have a modest vacation home and I absolutely love it. We don't rent it out though.  The thought of strangers using our toilets and barebacking it in our bed skeeves out my wife.  (Yes, we go to hotels - it's somehow different to her when it's your own home.)
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Yeah I know a ton of people who love their 2nd home, and like I said earlier, I wouldn't think of renting mine (although everyone I know thinks it's a super idea!!!).

Find the perfect location, do the research, be patient and wait for the right deal to come along, and know the responsibility you are taking on and it can be a fulfilling experience.  I've had my place seven years and I adore it, and my neighbors who are also part-timers love their places.  But everyone who has visited me there calls the setting "special."  The house is ok, I'm doing a lot of work on it now to improve, and also have ideas for the future...but the location is amazing.  It's very particular though, it was unlike any of the other dozens of houses I looked at. 

People can rent in the Caribbean, Florida, in the mountains, whatever.  I do it myself.  However if you find a place you know would be terrific to spend the rest of your life in, and you get the right deal, then I'm the guy who does it.  I did it, love it, don't regret it, likely never will.  My neighbors feel the same, some have been there for 40+ years. 

 
About 10-12 years ago  I was considering buying a vacation home in Orlando and renting out to offset some of the costs.  I went on a few Florida vacation home owners sites and quickly saw how much of a PITA it was going to be.  Thread after thread of people losing their shirts because the supply of vacation homes in the area made it an extremely cut-throat business, dealing with management companies, expensive HOAs, pool maintenance, pests, etc.  There were some people that were saying they were making out okay but they were busting their butts to do it.

We still were in love with the idea of owning a vacation home in Orlando and so we made a couple trips with a realtor.  There were some really nice places but we saw a lot that  that looked like no one had been there for a while, many looking neglected, needed painted, etc.   Then we went to a Disney Vacation Club tour and were instantly sold because we would be staying on property, didn't have to worry about a mortgage, renters trashing the place, management companies, having to work on maintenance when we went down there, etc. We paid about $20k.

Our budget for the house was roughly 350-400k, which at the time was a nice but modest home (this was right before the bubble burst).  Within a couple years places selling for $400k were selling in the mid to upper 200s.   It has gotten better but I don't think they still have fully recovered.

I am so glad we didn't pull the trigger cause we were close to putting in an offer.

 
ragincajun said:
Been to beaches on the eastern end of LI, along with all of the gulf coast beaches.  Florida blows them all away.

If I could swing it I would get a place in Sanibel / Captiva, FL.  About 10-11 hours for me, and a tad farther for Oat.

http://www.zillow.com/homedetails/11515-Andy-Rosse-Ln-Captiva-FL-33924/58171905_zpid/

Crap why did you make me look http://www.zillow.com/homedetails/506-Useppa-Is-Useppa-Island-FL-33924/2098900429_zpid/

Oh and yeah AL coast is trashy lol http://www.zillow.com/homedetails/30631-Peninsula-Dr-Orange-Beach-AL-36561/2108675760_zpid/
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Sanibel is awesome but wait until they figure out what the long term plan is for the Lake O releases that come down through the Caloosahatchee River. It has made the water up there less than appealing as of late.

I also worry about Sanibel becoming over developed in the next 10 to 20 years as it gets more popular. 

 
eoMMan said:
Sanibel is awesome but wait until they figure out what the long term plan is for the Lake O releases that come down through the Caloosahatchee River. It has made the water up there less than appealing as of late.

I also worry about Sanibel becoming over developed in the next 10 to 20 years as it gets more popular. 
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Yeah it's an awesome resort town.  Just looked up the Lake O stuff.  I didn't know about that.  Sucks.

 
Doctor Detroit said:
bigbottom said:
BassNBrew said:
I got a place to sell any cash buyer.

I've got some super rich acquaintances that make Otis look like the night shift cashier at the local 7/11 and all of them complain about paying for a home they never use and the maintenance issues.  The only people I know happy having multiple homes are retirees that are using them and not renting them out.
Click to expand...
We have a modest vacation home and I absolutely love it. We don't rent it out though.  The thought of strangers using our toilets and barebacking it in our bed skeeves out my wife.  (Yes, we go to hotels - it's somehow different to her when it's your own home.)
Click to expand...
Yeah I know a ton of people who love their 2nd home, and like I said earlier, I wouldn't think of renting mine (although everyone I know thinks it's a super idea!!!).

Find the perfect location, do the research, be patient and wait for the right deal to come along, and know the responsibility you are taking on and it can be a fulfilling experience.  I've had my place seven years and I adore it, and my neighbors who are also part-timers love their places.  But everyone who has visited me there calls the setting "special."  The house is ok, I'm doing a lot of work on it now to improve, and also have ideas for the future...but the location is amazing.  It's very particular though, it was unlike any of the other dozens of houses I looked at. 

People can rent in the Caribbean, Florida, in the mountains, whatever.  I do it myself.  However if you find a place you know would be terrific to spend the rest of your life in, and you get the right deal, then I'm the guy who does it.  I did it, love it, don't regret it, likely never will.  My neighbors feel the same, some have been there for 40+ years. 
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Congrats, sounds awesome.

I'm not trying to be negative towards people such as yourself or biggie doing this for the reasons you mention above.  More of a caution flag to people such as Otis that will be relying on the rental proceeds to help carry it.  

 
Doctor Detroit said:
Yeah I know a ton of people who love their 2nd home, and like I said earlier, I wouldn't think of renting mine (although everyone I know thinks it's a super idea!!!).

Find the perfect location, do the research, be patient and wait for the right deal to come along, and know the responsibility you are taking on and it can be a fulfilling experience.  I've had my place seven years and I adore it, and my neighbors who are also part-timers love their places.  But everyone who has visited me there calls the setting "special."  The house is ok, I'm doing a lot of work on it now to improve, and also have ideas for the future...but the location is amazing.  It's very particular though, it was unlike any of the other dozens of houses I looked at. 

People can rent in the Caribbean, Florida, in the mountains, whatever.  I do it myself.  However if you find a place you know would be terrific to spend the rest of your life in, and you get the right deal, then I'm the guy who does it.  I did it, love it, don't regret it, likely never will.  My neighbors feel the same, some have been there for 40+ years. 
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I think budget is important as well.  have had my place in Italy 5 years and I can be argued that it's a bad investment.  but, for a reasonable price, I have a place to possibly retire to and a base for European explorations.  I don't rent it and we can handle it on our own.  right now, we have no car payments, so I kind of consider the place a car payment from a cost aspect.  it's not like we can't sell it if need be, but I don't need income to carry. 

 
ragincajun said:
Oops sorry.

fubar, where are you?  Chance I may relocate to Spanish Fort one day.
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On the opposite end of the state - Huntsville

Godsbrother said:
About 10-12 years ago  I was considering buying a vacation home in Orlando and renting out to offset some of the costs.  I went on a few Florida vacation home owners sites and quickly saw how much of a PITA it was going to be.  Thread after thread of people losing their shirts because the supply of vacation homes in the area made it an extremely cut-throat business, dealing with management companies, expensive HOAs, pool maintenance, pests, etc.  There were some people that were saying they were making out okay but they were busting their butts to do it.

We still were in love with the idea of owning a vacation home in Orlando and so we made a couple trips with a realtor.  There were some really nice places but we saw a lot that  that looked like no one had been there for a while, many looking neglected, needed painted, etc.   Then we went to a Disney Vacation Club tour and were instantly sold because we would be staying on property, didn't have to worry about a mortgage, renters trashing the place, management companies, having to work on maintenance when we went down there, etc. We paid about $20k.

Our budget for the house was roughly 350-400k, which at the time was a nice but modest home (this was right before the bubble burst).  Within a couple years places selling for $400k were selling in the mid to upper 200s.   It has gotten better but I don't think they still have fully recovered.

I am so glad we didn't pull the trigger cause we were close to putting in an offer.
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and that's when I wished we had bought.

 
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