NJ Beach Vacation Rental Property

[Lance Chappelle]

First off, this will be my first post on BP and I am totally new to the real estate investment world.  My wife and I are looking to purchase a beach house on Long Beach Island New Jersey in the foreseeable future.  Long Beach Island has been a vacation spot of ours most of our lives, and we want to be able to own a house that our family can spend quality time together at.  Our only way to make this happen since LBI is an expensive market to get into is to purchase a property, rent it out in the summer so that rental income can cover the mortgage/taxes/expenses for the year, and then enjoy it in the offseason.  

There are a few complicated aspects though in order to make this work. 

1.  LBI is an expensive market to get into, and rentals are typically weekly.  From the research that I've done, a typical rental season is anywhere between 12-16 weeks so in my analysis I have been running rental numbers for 15 weeks.  The rest of the year will most likely be vacant which is a long time. 

2.  Weekly vacation rentals have variable prices, so early in the summer is cheaper, July and August are the most expensive, and September might rent out for a few weeks.  I have been trying to analyze properties by including an average weekly rental price in my spreadsheet. 

Here are my questions for you all:

1.  With beach houses being in such short supply and prices very high, should we wait a year or two to get into the market?

2.  If we are simply looking at this as a way to afford a beach house and pay the mortgage/costs with rental income, should I accept a lower cash on cash return and annual cash flow than a typical rental property would demand? I still include capital expenditures, vacancy rates, and all of the other expenses in each analysis of mine.  But it is very tough to find a property with a respectable annual cash flow worthwhile. 

[Jonathan Greene]

You can't do rental property analysis when your goal is for yourself because the calculations can't take into account your family's enjoyment of the asset, which is worth something. You can use AirDNA to evaluate LBI. Done right, the plan is doable, but the problem is finding a property right now where the price in makes sense as an investment which is where you are stubbing your toe. I would change the mindset to we want to buy a beach house for our family and wow, we can get all this extra money from it (if the financing works on your end).