50% or 1% rule

3 Replies

I'm looking at buying a beach house in South Carolina. The rental season from what I can tell is only really 5 months. I want to purchase a 2nd home and rent it out for as much as I can but take advantage of it in the off season. The rental income will cover around 10 months of PIT&I and additional expenses ie utilities, internet, phone, cable, water electric or about 80% of my out of pocket costs. I know the 50% rule is a rule of thumb for investment properties. Just wondering anyone's rule of thumb in this situation.

The 'rule of thumb' for this class of property is 'It's not an investment, it's a lifestyle.' I call these types 'hybrid-resort' and investing rules just don't apply well. Buy it because you want to, not for investment gains.

Updated over 3 years ago

Welcome to BP! Just noticed that was your first post!

@Marc Lewis I agree with @Chris Martin

 It's hard to apply rules to vacation property.  I've looked into it but have stuck to typical buy and holds...I'm the tenant when I stay at the beach!

I m a big believer in these rules of thumb but they go out the window for a resort type rental. Income only comes in 5 months a year but expenses are 12 months a year. I am sure that throws the numbers way off the scale.

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