Purchasing a vacation rental as an investment

[Kahanu Noa]

Hey BP, To those that are seasoned in buying vacation rentals as an investment, could you share your experience? How is deal analysis and financing conducted on vacation rentals? Living in Hawaii, my relative lives on a neighbor island and is currently renting a condo that was recently purchased. Her lease will be up in the next four months. A few days ago, a couple of remodeled condos which are "vacation rentable" came onto the market. The plan is for her to live in it as an owner occupant and then rent it out as a vacation rental. Has anyone done this before? I

[Arlen Chou]

@Kahanu Noa , I have one but I would not say I am experienced in vacation rentals. My property is is in Carmel Ca. I bought it as a personal vacation unit (second home) and it slowly turned into a vacation rental for specific events: golf tournaments at Pebble Beach, Auto Shows and nearby auto racing events. I am not sure if my experience will be directly applicable for you, but I thought I could give you one perspective.

The property that I have is a 3bd/2.5ba three blocks from the ocean, within walking distance to Downtown Carmel and Pebble Beach.  Most of the year I keep it open so I can use it with my family, but on special events weekends I do rent it out for a killing.  It is important that if you are going to use the property for mixed use that you have areas that you can lock up your personal things that you want to keep there. The last thing I wanted to do was have to "move in and out" every time I used my own property.  I segregated the building so that the upstairs area holds of my family belongings.  Therefore I rent the place out as a 2bd/1.5ba.

In my case, I am close to the property so I handle bookings and cleaning myself.  I also have gotten to the point where I don't need to advertise and get bookings based on repeat business or word of mouth. This makes the risk level substantially lower and the potential headaches much more manageable.

The downside of the way I do it is that many months I don't rent it out, which equates to a loss.  However, the upside is that I don't have to worry about people walking around on the hardwood floors with sand on their shoes, because the people want to come back the next year.

Anyway, basically I started out as an owner occupant and I am making the transition to full time vacation rental. It can be done, but your goals and time horizon needs to be realistic to make it happen without major headaches. 

Not sure if I answered your question, but I hope it helped!