Vacation properties - any experience?

Question

Wanted to see what the experiences have been with investors here who have picked up vacation rentals.  Searching the archives didn't net a whole lot of results.

If you got into vacation rentals was it for the cash flow or to spend time at a place you like at a reduced ( free? ) rate plus potentially enjoy some appreciation?  How was the time commitment aspect of running a vacation destination business?

I know it's property / area specific but in general do vacation properties generally cash flow or is it mostly a break even that allows you to vacation cheaply while vacationers pay your mortgage?

I ask because I've got a specific paradise in mind.

Donna Smolinski · Answer

We use to own a vacation rental in Solana Beach (San Diego). This is a pretty hot vacation spot since you could walk to the fairgrounds & Del Mar racetrack. We got BIG rents in the summer and then snowbirds rented in winter. Spring and fall was the downtime, which we loved because we enjoyed using it in the off seasons. Even with all the vacancy time, we netted about the same as an unfurnished year round rental, but we got to enjoy it, basically at no cost. Eventually, we decided we wanted to make San Diego our home, so we moved into the unit for two yrs to convert it to primary residence before selling. It was a win, win. After two yrs, we sold it and didn't have to pay any of the gain, but of course we still had to recapture depreciation from past yrs.

Anyway... every area will warrant different demands for rent and the need for vacation rentals. If the demand & rents don't seem to pencil out, then see if there is any furnished corporate housing needs in your area. We've done that too, and that also worked out pretty good (not as good as the Solana Beach home).

Anyway... every area will warrant different demands for rent and the need for vacation rentals.  If the demand & rents don't seem to pencil out, then see if there is any furnished corporate housing needs in your area.  We've done that too, and that also worked out pretty good (not as good as the Solana Beach home).

Steve K · Answer

Thanks for your comments Donna Smolinski and Mitch Kronowit.  Pretty wide range of experiences.  My expectations are to be able to pick something up and break even on it with the ability to use it as I desire and in an ideal world bank some nice appreciation.  The end goal is to have a fully paid off retirement second home that someone else has paid the mortgage on.

This also sounds like a very time intensive compared to long term rentals.

The place i'm interested in is in the Bahamas which adds a bit of complexity to the purchase.

Donna Smolinski · Answer

Forgot to ask you, where are you thinking of buying?

Mitch Kronowit · Answer

I wish I had some first-hand experience to share with you, but I don't. What I do have is a good friend who owns an investment condo in a very popular ski area.

Here is what I can share from her experience. She purchased this little chateau in the mountains so she could rent it out for high weekly amounts during the ski season, but still keep it vacant on occasion for her personal use. The problem with this approach is it wasn't really a big money maker (the summer months are very hard to find tenants), but she had a good full-time job and could afford any small losses. After all, she still had a great winter getaway several weeks every season so she could snowboard.

However, when she was out of work, she could no longer afford to do the seasonal vacation rental. Instead she would find a long-term tenant, a local resident of the town, that needed full-time housing. On a weekly basis, her condo had to be deeply discounted from its winter rates, but she would get somebody in there year-round and not lose money on the rental. Alas, she also lost her personal use of the place.

Currently, she enjoying the best of both worlds. She found some wealthy corporate CEO type (who lives near me in fact) who rents the condo year-round, but only uses it part-time, during holidays or last-minute getaways. What's great about the arrangement is while they're not using it, they let my friend us it herself.

So there you have it, 3 different ways of utilizing a vacation rental: Short-term seasonal tenants, long-term local tenants, long-term non-local tenants.

Steve K · Answer

Thanks Steve - I had seen most of those but missed a few of them which had some good insight.  Overall it seems that BP nation isn't that experienced with vacation rentals, but I guess the analysis is just numbers like anything else.

Steve Babiak · Answer

Did you check out any of these threads?

http://www.biggerpockets.com/forums/52/topics/59735-vacation-rentals

http://www.biggerpockets.com/forums/52/topics/73817-any-long-term-buy-and-holders-using-vacation-rentals

http://www.biggerpockets.com/forums/48/topics/12974-vacation-rentals

http://www.biggerpockets.com/forums/52/topics/70618-vacation-property-rental-agreement

http://www.biggerpockets.com/forums/12/topics/18055-rules-of-thumb-for-vacation-rental-properties

http://www.biggerpockets.com/forums/81/topics/13333-vacation-rentals-in-hot-vacation-spots

http://www.biggerpockets.com/forums/88/topics/63248-your-advice-please-landlords

http://www.biggerpockets.com/forums/52/topics/68936-increasing-occupancy-for-vacation-rentals

http://www.biggerpockets.com/forums/52/topics/74934-vacation-property-rental-analysis

http://www.biggerpockets.com/forums/52/topics/67450-vacation-property-rental

http://www.biggerpockets.com/forums/61/topics/73923-vacation-rentals

There were more than that where I looked ...

Steve Luo · Answer

Pick a few your favorite vacation spots and run the number.  You can barely break even in any desirable destination.

Vacation properties - any experience?

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