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Vacation rentals

Old 06-04-2011, 10:39 AM
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Default Vacation rentals

So the wife and I were thinking about becoming landlords. I really don't want any full time tenants though. Since we have been looking at houses to rent in northern MI for a little getaway, that seemed like a nice option to do. The wife has found some beautiful log cabins on lakes. Granted they are out of our price range (I'm kinda cheap) the wife found out how much the property sold for online. They were bought for nice money (affordable) and it would be nice to have a place up north to get away from time to time. Most all of them are booked solid for the entire summer and come snowmobile season, they fill up as well.
I was wondering if anyone here has any rental properties, particularly vaction rentals? Pros, con's? It would be nice since most people rent for a week at a time so I don't have to worry about everyone gutting the place and having people evicted. Plus, having income coming in even if it makes the monthly bills or close to it, I have the initial investment.
From what I've been seeing on initial cost and income generated, Four months of renters pays the bills for the entire year and that includes having a company come in and manage it and clean it.
Comments?
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Old 06-04-2011, 10:44 AM
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Your last sentence did the trick. So long as you have somebody up there to manage, clean and handle money, it's a simple investment that affords you some free rental when you go up there, and the tax deduction is nice, too.

Go for it.
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Old 06-04-2011, 03:51 PM
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If you are going to rely on rental income to pay for the property, I would not do it. You are "hoping" that you rent it enough to make your payments. What happens when you don't. My wife and I looked at vacation property a couple of years ago and after figuring out how much we would actually be able to use it, how much it would cost, taxes, maintenance, etc.., we decided to rent when we wanted a vacation. This saves us a ton of money and allows us to go to different places. Just my .02 worth.
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Old 06-04-2011, 05:00 PM
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Originally Posted by DFreedom View Post
If you are going to rely on rental income to pay for the property, I would not do it. You are "hoping" that you rent it enough to make your payments. What happens when you don't. My wife and I looked at vacation property a couple of years ago and after figuring out how much we would actually be able to use it, how much it would cost, taxes, maintenance, etc.., we decided to rent when we wanted a vacation. This saves us a ton of money and allows us to go to different places. Just my .02 worth.
Now, that was my original thoughts on the subject. However, looking at the houses that are being rented and how much they went for on the market, it made more sense. Tell me that you wouldn't want a 2 story 3,000 sqft log cabin with an indoor pool and jacuzzi, natural stone fireplace on a lake? The property sold for just over $220,000.
The cost for a 3 day rental for the place was $700. My main objective wasn't to use it as our main vacation every year. It will be used as a get away for a weekend or a week. There are alot of people that have places up north just as a cottage. If I have the opportunity to buy a house that we love and have the payment made for us and not sitting vacant most of the year, why not? Even if it didn't completely pay for itself I have the investment. I was just looking for feedback from anyone that has something like this.
I had a great uncle that had a place in the upper pennisula right on lake huron. Absoluetly great. I loved going up north to visit him. Granted it was out in the middle of nowhere, you had to drive 5 miles on a dirt road before you even hit houses, but it was great. Wake up in the morning and it was quiet. The deer was just outside of the door. The view couldn't be beat.
Kids could go out and play and go for a walk and not worry about twisted freaks. Skunks, yes, pedophiles, no. It's nice to go up and have a relaxing setting with family and forget about everthing that is going on at home. Just like a mini vacation when ever you need it.
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Old 06-04-2011, 06:27 PM
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Originally Posted by bamaboy473 View Post
...., and the tax deduction is nice, too.

Go for it.
Careful with this part. I would've thought so to, but if a married couple makes more than $125K (I believe) you dont' qualify for the deduction.

We have that situation on a condo we own in Florida.
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Old 06-04-2011, 07:19 PM
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I did it. It worked for a while but when the rental company changed hands the wear and tear factor went thru the roof.

I sold it at the peak of the market after buying it near the bottom. Net result was a 200% profit. Reinvested (required) in a commercial income property that has done very well allowing a new custom built home 5 miles away from the first one being paid for by the income plus paying the note on the comm property.
The new house will never see a renter in my lifetime.

I'd do it again only if I was local and the stars aligned perfectly. I would not rely on others like I did in the past.

It worked well for me as the house was prime waterfront that was very well maintained by me in the spring and fall. Stunning house on a great private lot on a dead end.

Proper set up with an LLC, insurance, skills to keep it up without paying someone else, and a very good accountant are a must IMO. I'll be the first to admit very good luck didn't hurt.
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Old 06-04-2011, 07:39 PM
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Originally Posted by DFreedom View Post
If you are going to rely on rental income to pay for the property, I would not do it. You are "hoping" that you rent it enough to make your payments. What happens when you don't. My wife and I looked at vacation property a couple of years ago and after figuring out how much we would actually be able to use it, how much it would cost, taxes, maintenance, etc.., we decided to rent when we wanted a vacation. This saves us a ton of money and allows us to go to different places. Just my .02 worth.
Never been a landlord of any sorts BUT the people I know who have said most of the time it was hassle... seems like good advice above..
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Old 06-05-2011, 09:21 AM
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Originally Posted by msheppard13 View Post
Careful with this part. I would've thought so to, but if a married couple makes more than $125K (I believe) you dont' qualify for the deduction.

We have that situation on a condo we own in Florida.

Yep starts phase out at 125 and gone at 150, MFS NO DEDUCTION FOR RENTAL LOSSES

My parents did this YEARS ago and it has turned out great for them. At one time they had two houses at Isle of Palms,SC(right out of Charleston)
They did sell one back in late 86, huge capital gain tax change and closed by end of year, and kept one house.

They have never used a rental agency and lot of the same people go each year however about all the rent will cover is taxes, insurance and maintenance. They did purchase when property was very low and, Mom told me their payments on first house were $62 per month and scared them to death--keep in mind this was early 70's and at that time IOP was pretty much a deserted island for the most part till Wild Dunes was developed in early 80's.

Property values went through the roof but have dropped a lot in last couple of years.

On our house, since it is rental and considered commercial property, taxes are over $7k per year and couple years ago insurance companies pulled out of commercial rentals and insurance is now over $4K a year and this is with $35K deductible for hurricanes(regular homeowners is $1K). This has really caused my Mom to want to sell it but she really does not need the money and the rent does take care of taxes/insurance and most maintenance costs--We do a lot of the maintenance our selves.

I really do not see how in today's market someone could buy a house and let the rent pay for it, Ours stays booked from Memorial day until Labor Day and I only take 1 week and lot of times like this year I will go somewhere else and that gives her another week of rent(yes I do try and pay for my week when we go but she will not take it). She also has quite a few weekends she rents it during spring/fall and a couple of weeks at that time of year as well but that is just gravy, she has to count on summer vacation rental to cover expenses

Now one huge problem I have had with my Mom and she has started listening to me is that she has always rented it WAY TOO CHEAP, last few years we have got her to increase weekly rental rates but she likes to know who is in our house and she is very picky who she rents to.

I have a couple of clients that have bought houses in local mountain areas and they seem to rent enough to cover all expenses and payments on houses but I think in all honesty mountain houses have a longer rental season and that helps

I would not buy the house you are talking about unless I could make the payments without straining your budget, in all honesty it should pay for itself for the most part from what you have described but one thing is for sure in that nothing is guaranteed.

With our house we only take weeks, other than me, that can not be rented since my Mom is retired(Dad died last fall) they would always go for the month of May and come home once renters started coming in. Since my sister has since retired she and my Mom will go when house is vacant and I will go Labor Day weekend and Admiral will take a couple of weekends in Fall and Spring to go

Another thing to consider is that when we go I always seem to end up doing some minor repairs/maintenance on the house but my nephew lives in that area and will take care of things most of the time

Good luck and like with all rental property the goal is for OTHERS to pay for the property for you
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