I worked out a deal as mentioned above, of leasing out 5 rentals and doing Vacation Rental out of them.
Little background first.
We currently have 8 vacation rentals up and running here in Manasota Key Englewood Florida 2 quadplex units, we are finishing up rehab on a 5 plex, just purchased a 6 plex ( purchased owner financing) that we will be rehabbing this year to have ready for next season January thru March 2020, with will give us 19 units, that are already booked for the 2020 season.
be more than happy to explain how we obtained 19 units in a 3 year time frame.
But back to the leasing of 5 units
Gentleman down the street sees how we have been renovating our above properties, show him how we are furnishing them and renting them out as Vacation Rentals and doing very well.
Neighbor has 7 plex, was only interested in doing annual rentals here on Manasota Key (does not want to be bothered with Vacation Rentals. He had rehabbed this property which is on the Gulf about 7 years ago. was asking $2400-2500 a month for annual rentals. As I have mentioned in other threads in resort towns like Manasota Key it is hard to find annual rental tenants that can afford that kind of rent. Most annual renters here are restaurant workers or people tied to tourism or retirees.
In the 3 years that we have known this gentleman he has only had one renter that lasted for 4 month before she told him that she could not afford the rent.
Gentleman does not need the money, but finally figured he still could make some money off of his property.
So he approached me and asked if we would manage vacation rentals in his unit for him.
I told him I was not interested in managing for him but if he was interested in renting to me and let me sub lease to do Vacation Rentals my self we might have a deal.
He said he would rent 5 units out of 7 since he wants one for himself an 1 unit for family members when they visit.
So I said give me a price for all 5 units to lease.
He came back at $2200 a month if I rented all 5 units.
I told him that would work.
I then asked, how about if I give you one year rent upfront on 5 units,
We finally agreed on $100,000 up front for annual lease of 5 units.
That works out to $1667 a month per unit , what's that work out to? around 32% savings on rent
So I am renting 1 unit for $20,000 a year
Based on what our other 1 bedroom properties are renting for and with this property on being right on the beach I am planning on gross rents in the neighborhood of $35,000 to $50,000 per unit, using the lower end and conserved number of $35,000 I would be looking at a return on my $20,000 rental of each unit in the neighborhood of 75%
I will spend about $8000.00 furnishing out each of these units (we go after the higher end market (Marriott, Ritz Carlton cliental ) so even at $35,000 - $8000 id be looking at $27,000 giving me a return of $35% and that's for the first year with the second year going back up to the 75% return.
This has turned out to be a win for him with what I figure is a rough 5% return on a $2 million dollar property that he was not able to rent on a annual basis, he has no headache doing vacation rentals.
The negative for me is I am building no equity, yet making a great return on my investment.
