Analyzing a deals tangible and intangible benefits/shortfalls

3 Replies

Hi, there’s a lot for sale which is adjacent to our home. It’s 200k, 60’x108’. There are trees on the backend which I don’t want to remove (they benefit my home) and setbacks, so useable space is about 40 x 40. It’s looking like lot prep (including permitting, foundation etc) will be about 20-50k (big spread, it’s our first time building and we’re getting different quotes). Looking at plunking down a modular which at minimum would be 70-150k depending on unit size and number of BR (better to save money up front and do 1 BR or risk spending more and going 3 BR?)

Ok when it’s all said and done we can rent on Airbnb for about $100/ night for 1 BR pretty consistently (our area is a popular beach destination, this property is about 1 mile through a state park to the beach and would have private access at all times), or probably $200/night for 2-3 BR.

Long term rent would be less. Probably 1400-2000/month depending on BRs.

The numbers seem tight to us to get to 10% CAP, BUT how do I factor in the fact that this land will appreciate nicely over time, that having it will benefit our home (we can save the trees and control the size of the unit)?

Overall we tend to be risk adverse but this is a once in a lifetime deal and we plan on living here a long time. We don’t want to let our emotions (we’d really love to HAVE this) cloud the fact that maybe we should be investing this $350k somewhere else?

Please help it’s not going to last long!

Long term appreciation of the land is one of the assumptions you can make in your underwriting. You can, say, calculate your equity over time, in addition to cash flow.

Before making too many plans, definitely figure out if the plan will be allowed by your municipality. Many areas have implemented fairly onerous restrictions on short term rentals.

Based on your numbers the cost is too high to make a decent return. 
A$350k purchase at a minimum should net 10%,  $35k/ year.

At 70% occupancy,  $150/ night, your gross rentals for 255 nights = $38k x 50% overhead= $19k net.