Vacation Rental or Long Term rental?

Question

Hello! My name is Allison and I am new to Bigger Pockets. I am currently educating myself on real estate investing. I am trying to figure out my strategy. I live in Tampa FL and my dream is to own a property in walking distance from the beach. I would use this property as a short term rental and use it for my family 2 weeks out of the year. I have heard there are many tax benefits using short term rentals. My husband and I currently have $100k to use towards investing in Real estate. Would you invest in a vacation home property and go the short term route, or would you invest in a single family long/mid term rental property? Or.. if you have $100k, what would you do with it as a REI?

Noah Bacon · Answer

Hi Allison! Welcome to BiggerPockets and thanks for joining!

Here are some tips for networking and making the most of your account.

1) I'd fill out your profile fully before you do anything else! As that will at least help folks that you reach out to know that you are a real person, with a picture and professional bio. Particularly be sure to include your goals for real estate investing so that folks can help you.

2) Go to the Search bar, and look for some local members in your area! Reach out to a few of the folks, perhaps those with hundreds or thousands of posts in this forum, and connect. You can do that here.

3) Check out some of the local meetups that you can find in this forum! There are so many so be sure to filter by your location.

4) Review this comprehensive 64 page deck on the state of the 2023 housing market (in your resource page as a member of BiggerPockets!) for real estate investors put together by Dave Meyer and available for all BiggerPockets members.

5) Consider meeting with a few agents in your area even if you are just getting started! An investor friendly agent can do all sorts of helpful things, like setting you up with a search for properties or connecting you with folks who have recently done deals like the ones you want to do.

6) Consider analyzing a deal or two in your local market, just for practice, with a free use of our Rental Property Calculator (or other calculators).

Hope this helps! Please reach out with any questions you may have!

Swaroop Beesetty · Answer

Welcome to BP Allison!

Let's break down the pros and cons of investing in a vacation home for short-term rental versus a single-family home for long/mid-term rental, and the potential impact of each decision over a 10-year period.

Investing in a vacation home for short-term rental:

Pros:

• The potential for higher rental income during peak vacation seasons
• The opportunity to use the property for personal vacation time
• Potential for tax benefits associated with owning a rental property
• Appreciation in the property value over time due to its location near the beach
• Higher nightly rental rates for a vacation home compared to a long-term rental

Cons:

• Seasonal fluctuations in rental income
• Higher maintenance costs associated with short-term rentals
• Potential for more wear and tear on the property due to frequent guest turnover
• Higher cost of entry due to the desirable location near the beach
• May require a property manager to handle guest turnover and maintenance, reducing profitability

Impact over 10 years:
If you invest in a vacation home, you may see appreciation in the property value over 10 years, particularly if it is located in a desirable beach area. However, seasonal fluctuations in rental income and higher maintenance costs associated with short-term rentals may impact profitability over time.

Investing in a single-family home for long/mid-term rental:

Pros:

• Steady, reliable rental income with long-term tenants
• Lower maintenance costs compared to short-term rentals
• Easier to manage with a long-term tenant, reducing the need for a property manager
• More flexibility to choose a property in an area with lower cost of entry
• Potential for appreciation in the property value over time

Cons:

• Lower rental income compared to a short-term vacation rental
• Potential for longer vacancy periods between tenants
• Less opportunity for personal use of the property
• Potential for more wear and tear on the property due to long-term tenants

Impact over 10 years:
If you invest in a single-family home for long/mid-term rental, you may see steady, reliable rental income over a 10-year period. However, the lower rental income compared to a short-term vacation rental may impact profitability, and longer vacancy periods between tenants could also impact overall profitability.

Ultimately, the decision between investing in a vacation home or a single-family home for long/mid-term rental will depend on your personal goals and risk tolerance as a real estate investor. It's important to carefully consider the pros and cons of each strategy, and to consult with a real estate professional or financial advisor before making any investment decisions. Good luck with your real estate investing journey!

Raymond J. Rodrigues · Answer

Hi @Allison Craft, reach out to @Josh Green, he’s a local to the area and can provide you with sound advice! He’s assisted quite a few of my clients in the past and I’m sure would be happy to provide you with some guidance.

Aj Parikh · Answer

Hi Allison, One of the easiest ways of scaling in real estate today is to invest in turnkey properties out of state. If you have a busy 9-5 routine but have the money to get started and don't have enough time, turnkey companies provide some of the best resources to scale your portfolio. I have used that strategy so feel free to reach out if you want to discuss.

Farley Youman · Answer

Allison: it sounds like you have a great plan- and who not does like beach property near Tampa!

However, beach properties- or even ones that are within walking distance are not cheap.  So, with 100K, you may need to set up a loan and also consider what it takes to qualify for different types of loans.  I have seen these types of properties not be able to refinance later because of a variety of reasons. One reason is that Lenders usually base their numbers not on Air BNB, but rather with a a 12 month lease agreement rate. However, we can use Air BNB numbers after you have been doing Air BNB for 12 months and have records.  I cannot give you the full picture here but would be glad to discuss your plans and give you some tips if you contact me. Thanks.

Dylan Ottens · Answer

Hi Allison! While there are a multitude of factors that go into deciding which type of investment you should go for; here are a couple questions that if answered, may help you make a decision:1. Where do you interests lie? - When you think about what your portfolio looks like 10, 15, 20 years down the line, what does that look like? Do you have many short term rentals, do you have an established network of mid term rentals, or do you have many single family homes, etc.The answer to that question will help you decide how to get your feet wet with this first deal, and focus on what you should be researching/learning. Once you decide on one (or your first) interest, you can really start to master it!2. What does your current financial situation look like? - Cash flow is crucial to making sound investments without necessarily affecting your current lifestyle (negatively). Can your current income support the different types/levels of expenditures that may come from a short/mid/long term?3. How active are you looking to be? - Do you or your husband have time to manage a short term rental and all of the moving pieces involved; or are you more interested in somethin *less* active like a single family long term rental?All just food for thought and meant to spur some good ideas I hope! You two have done a great job already saving up $100k that can be invested, hoping to hear some good news on which direction you plan to go!

Allison Craft · Answer

Thank you for the advice Noah! I updated my profile, I am already scheduled to meet with an investor friendly realtor in my area next week and I have been analyzing some properties just for fun using BPs calculators.

Vacation Rental or Long Term rental?

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