Beach Vacation House

[Dan Cioaca]

Investment Info:

Single-family residence buy & hold investment in East Hampton.

Purchase price: $1,050,000

House hack of sorts. Summer rental destination, so MD-LD are 70% of full-year rent and is cash flow breakeven with 3 month rental. Free use of it off season as a vacation home. Switched to full year rental when Covid created a year-round market and tenant pays utilities, so half of rent is left after the mortgage.

What made you interested in investing in this type of deal?

Wanted a tenant-funded weekend getaway. NYC had already recovered from the GFC, but good listed deals still existed out there. It's the worst house on a street with very large lots: a 2-story 1500 sf 2BR house on 1.2 acres, so there are a lot of options for expansion. The current zestimate for the next cheapest house on the street is 2x our zestimate.

How did you find this deal and how did you negotiate it?

It was listed, but poorly advertised, not well-staged, and listed during the winter when there were few buyers. Owners were a retired couple who wanted to move to Florida and had 100% equity. They were sticky on the price, but it was a good price, so we had them leave the furniture that we wanted and move out the rest, and as a result we were able to rent it that summer.

How did you finance this deal?

Traditional 30-year mortgage.

How did you add value to the deal?

Only cosmetic changes to driveway, entry gate, furniture, new coat of paint.

What was the outcome?

Tenants pay utilities while renting, so the house self-funds with a summer rental and the mortgage is 50% of a full year rental, so the rest is profit. Did a cash-out refi of 100% of our initial downpayment in Q3 2021 and bottom-ticked interest rates at 2.75%, so probably won't refi that anytime soon.

Lessons learned? Challenges?

Finding reliable communicative vendors out there is very difficult. Work often doesn't get done if you're not there in person, so we multi-task vendor management with