How would you invest $200k in Florida?

Question

We're from the NorthEast and looking to purchase our first investment property other than our current home. We'd like to use it a few times in the winter (Jan/Feb) and rent it for passive income the rest of the year.

Please advise. We're newbies.

Taylor L. · Answer

Personally - I would first decide if my goal was to become an active real estate investor or to place capital in passive investments and reap the rewards.If your goal is passive investing with minimal hassle, go with a more passive investing method like syndications or (maybe) turnkeys. Turnkeys being more active than syndications, in that you will still be managing your property manager with turnkeys. If you want to go down the rabbit hole and dive into more active real estate investing, then start by reading all the well-vetted information you can get your hands on about real estate investing. BP has many great books, although I don't think there are any specifically about vacation rental investing. Reading beginner real estate investing books not specifically about vacation rentals will still introduce you to things like due diligence, market research, property management (selection and managing), bookkeeping, working with contractors, etc.Kathy Fettke's Real Wealth Network has a lot of great real estate investing education. Here's a good article on Vacation Rental Investing to consider.There's a fairly common saying that goes "Live where you want and invest where it makes sense." I think that applies here too - "Vacation where you want and invest where it makes sense."

Frank Hinck · Answer

@Sneha Patel Campanella4 properties at $200k each, put down $50k / 25% in each. 3 turnkey single family rentals in neighborhoods, and 1 short term rental in a Beach area you want to vacation in so you can use for a month or a few weeks per year. I’d keep them all in the same town/area so 1 property manager can handle all.

Stefan D. · Answer

It sounds like you need to think a little bit more about what you want to do. Do you want to make an investment, or do you want to buy a vacation home for your own enjoyment and use rental income to offset the cost? Both are fine, however, you would use a different framework to think about them. If you want to buy an investment property, you would more or less be property agnostic. Imagine you have two properties that perform exactly identically. They cost the same, they need the exact same amount of work, they were build in the same year, they would rent for the exact same amount, they are in school district of comparable quality, same cap rate, same cash on cash return etc. You probably wouldn’t care very much which one you buy as an investment. If you want to do turn key, you don’t care if the house is in Memphis, Little Rock, or Cincinnati. If you want to do everything yourself, long distance is obviously harder. This is a very different case from buying a personal property that you use yourself. If you want to buy a vacation home by the beach in Florida, you want to buy a vacation home by the beach in Florida, and you care very much about what the house looks like and where it is located. Now, if you want a vacation home to use in the winter and then rent it out for the rest of the year to offset the cost, that is a reasonable idea, however, that is very different from buying a property purely as an investment. From your question, it sounds more like you might want to do the latter. If you decide to do this, keep in mind that you probably could not use the property as a traditional rental since most leases are 12 month long. You could of course AirBnB the property, but be aware that the vacation rental business is much more akin to running a hotel than to a traditional 12 month rental. A long term tenant would never expect their landlord to provide furniture, dish soap, or toilet paper, however, you can’t really do a vacation rental and not have a bed in the unit. You’ll also need to have the unit cleaned after each guest. All of this will require much more hand holding – you need a local cleaner, you need to figure out how to give guests the keys, you need to manage the bookings etc. Alternatively you could just take your $200k and buy a property solely as an investment and then use the investment returns to pay for your vacation in Florida. Like I said, either option is fine, you just need to decide what you want to do and only you can answer which one works best for your family.

Taylor L. · Answer

If that's the route you want to go there are many turnkey guides and thought leaders active here on BP. I have not done turnkey myself so I cannot give personal experience with particular turnkey providers. I can tell you a few to look up though (do your own due diligence of course!) like Norada Real Estate, REI Nation (Formerly Memphis Invest), and Kathy Fettke's Real Wealth Network. @James Wise has a great series on his YouTube channel about what can go wrong when turnkey investors don't do their own due diligence. Be sure to watch that and learn mistakes people have made, so you don't need to make them yourself!

Sneha Patel Campanella · Answer

@Taylor L.Hi Taylor,Thank you so much for you detailed reply and clarifying things for me. Definitely just looking for passive investing like a turn key.