$20k a month in cashflow on one door

[John D.]

Purchase Price: $960,000

Rehab required: $310,000

ARV: $1,400,000

Monthly rents: $36,000

This was my first Vacation Rental that worked out.

But prior to that success.....After having a couple of Vacation Rental purchase contracts fall through, I bought a 6-plex in Palm springs, six two-bedroom one-bath bungalows with a pool in the middle, in a great neighborhood.  Palm Springs banned Vacation Rentals on multi-family properties with 4+ units, and my hopes were dashed.  I sold the property at breakeven a couple of so years later.

I bought my first vacation rental that worked out a few weeks after I bought this other investment.  It was in the City of Indio (aka the City of Festivals) home of the Coachella and Stagecoach Festivals.  I paid $960k for a 5 bedroom 3 bathroom ~5,000 SF home (dated) on a gorgeous 2 acres including gorgeous grounds, a quick walk to the nearest Festival entrance, and 40 or so minutes to Palm Springs.

After $280k or so in remodeling the home (including adding 4 additional bathrooms), and $30k or so on enlarging the pool and improving the already impressive grounds (plus perhaps $30k in furnishings), we are grossing more then $400k a year in gross vacation rents.  After failing to find a competent local property management company I've built my own.  Less then 3 years in, I am netting nearly $20k per month on this property after all expenses including (in-house) property management.  After a pending cash-out refi, cash on cash returns will be around 50%.

In an economic downturn, we will likely take a big hit.  I can break-even with a 50% cut in gross rents, and am prepared to take a larger hit for 4 or 5 years if we see a sustained and substantial depression.  It's a high risk endeavor given the reliance on a good economy, and the local Festivals.  It's seems one, risk-adjusted, that make sense given my risk-reward threshold.

Fun to finally share this Journey! 

I have other successful vacation rentals in the area, but this one is the most fun!