Help with First Vacation Rental Purchase please

[Bob Gillar]

I have wanted to purchase a beach home for quite a few years and I've gotten quite serious the past few months.  I've visited the areas where I'd like to purchase and am still searching though do have 2 current top contenders.  

While I can qualify for the mortgage needed for either home, the reality is that I need my costs offset by rental income. 

I have a large family and would like to use the home for a week or two as a way to gather the family and rent the remaining weeks. 

Are there any rule of thumb items (or I welcome more specific formulas/computations) that I should use in the process of screening and selecting a home?  I'm purchasing through an agent so I know they will have information from the previous owner's renting habits.  

As this vacation home will be out of state I will be paying a company to rent and maintain the home.  

This may be a personal choice but just thought I'd include this:  One house I'm considering is right on the beach but in a small town without a boardwalk or many shops or kids activities.  The other is 3 blocks away from the beach but in a larger (though still small) town with many family activities and shops.  They are larger homes (4&5 bedrooms).  The one on the beach is slightly cheaper.  In the experience of vacation property owners here, do one of these homes have more appeal than the other to renters or as an owner?

I didn't know how much or little to write so please ask questions and I'd be happy to answer.  

Thank you all in advance. 

Bob

[Andrew Johnson]

Bob Gillar Whether you like them or not, investigate homes that are managed by a couple of different PM companies in the area. If you Google the addresses or home "name" (a lot of beach homes have these) you'll be able to see if they are professionally managed and by whom. I'd be looking at 2 key things to start: 1.) PM fees (could range from 20% - 40% depending on the market), 2.) Occupancy rate. The T12s should outline all of this (and the expenses) as well as often denoting who has already made reservations for 2017. The trailing T12 could be 80% and as easily be 50%. What I found was larger homes will commando a disproportionately higher rent during the peak season for family destinations and drastically underperform during the off season (snowbirds don't want a 4-5 bedroom house so sometimes it's not even a price issue). Assume that your occupancy rate will be worse as you haven't built up a list of pre-bookings or people that come annually. If the T12s don't have it, also get insurance quotes well in advance (hint: they can be a eye opener).