Vacation home/rental vs SFH nearby? Better starting point?
Hello everyone.
I'm new to this site/forum and just getting into the real estate investing world. My wife and I always wanted a place in Florida (currently live in Michigan), and were considering using a ball park $50k HELOC on our home to purchase (use HELOC as down payment) a condo down there. We would of course rent the condo out year round, and visit maybe once a year. Looking in the $200-$250k range, preferably SW Florida, as close to oceanfront as possible due to increased rental potential. However, I'm somewhat leaning towards using that HELOC for a small purchase nearby our current home instead, to be rented out as well. I was thinking to go this route just to get our feet wet in the market, and see how it goes. It's obviously less "risky" to do the small home nearby, but the Florida place comes with potentially high, consistent rental income, nearly year round. Plus, we would have our place to enjoy when we go down there.
Does anyone have any advice or a direction to go?
Thanks in advance.
@Fred Buechel You will need to determine what you're trying to accomplish. If you only think you'd use the Florida place once a year, my suggestion would be to buy a property local as a long term rental. Then rent a condo for a week as a vacation. A short-term rental -- especially if you're going to use a property mgmt company which I'm assuming you would -- probably won't generate any more profit than a local rental unit.
Just my thoughts, I'm sure others will have different suggestions. Best of luck.
PS...also make sure that you won't leave yourself too house-poor on your primary home with the HELOC and you factor in the payment cost on that money as well.
good advice. Thank you!
Hey Fred, something near the beach could certainly bring potentially high nightly rents if properly managed. You would want to call around to some local Property Management companies in SWF that do STR's and see what kind of rates/fees they charge and the occupancy you can expect. Get a consensus of average rates, occupancy, and other expenses such as CDD's, HOA, and everything else associated with STR's to see if the numbers make sense. There are plenty of options in SWF for that price point, however if the Property Management or HOA's are too high it can be hard to do much better than breaking-even. If you need help locating the right condos there let me know. If you have a general idea of the returns you'll be targeting with the smaller purchase nearby simply compare the two from the ROI and risk involved. If you plan on self managing the smaller investment nearby as a first investment it might save you some money but will also require your time. Theres always a tradeoff.
Depends on your comfort level. If you're new to real estate, there's a whole lot to learn and having a property out of state would be a lot to take on (unless you made really great local connections and found a good PM company). Personally, I would start locally. You'll learn a lot about what to look for in a market you at least know and can respond to quickly. Then take that knowledge and branch out.