You're going to have vacancies, capital expenditures, and other unexpected expenses that will come along and put you further in the hole.

Talk to Michael Deaton at Deaton Investment Real Estate, and my commercial inspection company, WBTreece Consultants, would be happy to help with any property inspection needs (environmental, structural, capital expenditures, upfitting).Thanks!

Furthermore, not sure on this one, but I'm willing to bet that your insurance company is going to charge a higher premium for vacation rentals for both the casualty and liability portions.All of this suggests that you would need to lease it for enough weeks out of the year to compensate, above what you could expect to make on a year-round rental of the same acquisition and rehab cost, for all of these additional expenditures.

What about capital expenditures?

You just have to bake a reserve for Capital Expenditures into your analysis.In general terms you take your scheduled rent and deduct an allowance for {economic} vacancy (turnover, evictions, actual vacancy, etc).  

You should also include in your calculations capital expenditure.

Analyse all your monthly expenditures.

I live in the area so I have a relatively concise idea of what these will be.Capital Expenditures: 2%. 

I'm projected to hit the year 3 goal barring any additional unforeseen CapEx expenditures.

Edit Report Other actions $1,300.00MONTHLY INCOME$1,636.01MONTHLY EXPENSES-$336.01MONTHLY CASHFLOW3.65%PRO FORMA CAP$10,140.00NOI$59,500.00TOTAL CASH NEEDED-6.78%CASH ON CASH ROI3.69%PURCHASE CAP RATEExpensesIncome50% RuleTotal operating expenses:Mortgage expenses:Vacancy:$65.00Repairs:$65.00CapEx:$26.00Management:$143.00P&I:$1,181.01Property Taxes:$156.00 $275,000PURCHASE PRICEPurchase Closing Costs$2,500.00Estimated Repairs$2,000.00Total Project Cost$279,500.00After Repair Value$278,000.00 Down Payment$55,000.00Loan Amount$220,000.00Loan Points$0.00Amortized Over30 yearsLoan Interest Rate5.000%Monthly P&I$1,181.01Total Cash Needed$59,500.00 Financial Info0.47%2% RULE $58,000.00TOTAL INITIAL EQUITY 17.63GROSS RENT MULTIPLIER 0.72DEBT COVERAGE RATIOAnalysis Over Time1% /yearEXPENSE INCREASE 2% /yearINCOME INCREASE 3% /yearPROPERTY VALUE INCREASEYear 1Year 2Year 5Year 10Year 15Year 20Year 30Total Annual Income$15,600.00$15,912.00$16,885.94$18,643.44$20,583.87$22,726.25$27,703.18Total Annual ExpensesOperating ExpensesMortgage Payment$19,632.09$5,460.00$14,172.09$19,686.69$5,514.60$14,172.09$19,853.79$5,681.70$14,172.09$20,143.61$5,971.52$14,172.09$20,448.22$6,276.13$14,172.09$20,768.37$6,596.27$14,172.09$21,458.48$7,286.39$14,172.09Total Annual Cashflow-$4,032.09-$3,774.69-$2,967.85-$1,500.17$135.65$1,957.89$6,244.70Cash on Cash ROI-6.78%-6.34%-4.99%-2.52%0.23%3.29%10.50%Property Value$286,340.00$294,930.20$322,278.19$373,608.75$433,114.94$502,098.92$674,778.97Equity$69,585.80$81,587.87$120,254.98$194,656.21$283,770.34$390,751.93$674,778.97Loan Balance$216,754.20$213,342.33$202,023.21$178,952.54$149,344.60$111,346.99—Total Profit if Sold *-$19,716.89-$12,262.63$14,221.03$73,502.48$154,596.89$261,436.42$572,322.66Annualized Total Return-33.14%-10.90%4.38%8.38%8.91%8.79%8.19%* Property value minus net cash expenditures and sales costs