Vacation rental on northern MN recreational lakes.

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Vacation rental on northern MN recreational lakes.

Brandon Capelle
Real Estate Agent · Jordan, MN · Member since 2017 · 12 posts · 1 vote

Vacation rental wisdom wanted! 

I'm considering purchasing a cabin on a popular chain of lakes in the Baxter/Brainerd/Crosslake area of Minnesota and holding it as a short term vacation rental. If anyone has experience doing this in the area I'd love to hear your feedback on how it's going. 

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Andy Schornack
Banker · Wayzata, MN · Member since 2016 · 59 posts · 17 votes
9y

I have seen it work well, but primarily when the rental is on a lake with strong demand. The variability in rents and the limited buyers on an exit make it a less attractive investment opportunity in my opinion.  I would argue a better investment is a duplex in Minneapolis metro where you have longer rental contracts, larger potential exit opportunities, and likely a more stable market price for the building. 

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  • Mike Strodtman
    Investor · Bemidji, MN · Member since 2016 · 23 posts · 6 votes
    9y

    Hey Brandon!

    I'm from up north and it is a great place to visit and thankfully for us live.  I too have kicked around the idea of buying a place to rent out.  One of the biggest things to consider is what else is there to do in the area?  People love the lakes but those who come up here for that want to rent mainly in June, July and August.  I just found that there are too many months where it is vacant and bills keep coming. 

    If you start looking for a place talk with realtors who know of people or companies that clean and do maintenance in the area.  When people move in for their vacation there is a chance something is going to break or not work and they will want it fix.

    By no means do I want to discourage you, just my observation. Although, if you are buying it for your family to use and if extra income is a bonus go for it!

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  • Rich S.
    Central, MN · Member since 2015 · 148 posts · 184 votes
    9y

    Just an idea.... but something to consider is vacation rental through the summer months, but possibly a 9 month rental the rest of the time or corporate rental if there is a large company that brings people in from a distance on a regular basis.  When I think about the 9 month route... I think about a family who is forced to move right before school starts to get their kids started and buying a house just takes too long... or a teacher or school personnel who was newly hired, wanting to rent to get the lay of the area before buying... 

    One thing to keep in mind(which I am sure you have) is that many of the northern MN cabins are not year round... so may only be able to rent during summer months because they aren't insulated, set up for winter, etc.. 

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  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    I would talk to you tax advisor about the vacation rental rules if a main consideration is personal use of the property.  If you use it too much you may lose out on your operating expense deductions (utilities, advertising, etc).  Also most people aren't aware of lodging/sales taxes they must collect and remit on short term rentals.  I would familiarize yourself with that also before making the leap.

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  • Brandon Capelle
    OP
    Real Estate Agent · Jordan, MN · Member since 2017 · 12 posts · 1 vote
    9y

    Thanks for the replies! 

    My primary focus would be to have it rented, and not use it for personal. Also, would want it suitable for year-round use. 

    I recently listened to the Zeona McIntyre podcast and it prompted me to look into this as I was preparing to purchase another duplex in the Minneapolis area. I'm trying to figure out which would be the better way to go..... 

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  • Andy Schornack
    Banker · Wayzata, MN · Member since 2016 · 59 posts · 17 votes
    9y

    I have seen it work well, but primarily when the rental is on a lake with strong demand. The variability in rents and the limited buyers on an exit make it a less attractive investment opportunity in my opinion.  I would argue a better investment is a duplex in Minneapolis metro where you have longer rental contracts, larger potential exit opportunities, and likely a more stable market price for the building. 

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  • Mike MoeBusiness Member
    Realtor · Minneapolis, MN · Member since 2017 · 79 posts · 52 votes
    9y

    Hi Brandon- Small world, i've been contemplating the same thing, in the same area! I'v ran the numbers on a few places, and it seems like it could work really well. From the analysis i've done, and the rents being charged and occupancy filled currently for similar properties on VRBO, you'd need it to be rented between 90ish days a year to break even. Knowing that June-August should be booked solid at peak rates, you'd really only need to rent it for 7-10 days a month through the winter months to make it a pretty lucrative venture. Knowing that there is a decent snowmobile and ice fishing demand in the area, my best guess is that this is also attainable. Let me know if you want to connect and chat about this more. I'd love to share my numbers on this option with another investor, to see if they agree with the analysis or not.

    Mike

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  • Derrick Whiting
    Investor · Blaine, MN · Member since 2016 · 4 posts · 1 vote
    9y

    Hi All, I literally have an offer in a lake property on the Chain of Lakes in Alexandria as I type this. It looks very attractive for long term hold but needs some improvements. I've discussed with realtors and property managers in the area and the plan would be to do what Rich had mentioned. Twelve - 1 week rentals and then do a 9 month lease for Corporate housing or Student housing in the area.  I am still working through all the details but looks attractive. Let me know if any of you do it as I'd love to chat and learn from your experience.

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  • Brandon Capelle
    OP
    Real Estate Agent · Jordan, MN · Member since 2017 · 12 posts · 1 vote
    9y

    Seems like the 9 month lease would be safe/comfortable but is there really more demand for that vs winter recreation activities? Are you going to self manage?

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