Vacation Rental Valuation

[Samir Solanki]

Wanted to run some numbers by the vacation rental gurus on this site. What are your thoughts?

I’m looking at a potential vacation rental property and would like to see if this is a good deal. It has been challenging finding guidance on how to appropriately value these types of properties. Maybe I’m not looking in the right place?

Purchase price: $201,000

If this were a long term rental then monthly rent would be $1,200 (terrible, I know)

However, as a vacation rental it would bring in around $2,700/month based on the average occupancy and nightly rates in that area.

Assuming 20% for management

10% for maintenance

Roughly $400/month for utilities/internet/entertainment (Netflix, Hulu)

This brings the net to $1,490/month.

Minus mortgage, taxes and insurance of $1,250 (I’m doing 10% down)

My net income monthly would be around $240.

I am overestimating insurance and taxes.

I would purchase this as a second home so the interest rate with no points would be 2.875. My family will be using it on and off throughout the year. Possibly 2 weeks out of the year at the most.