Anybody have a good way of analyzing a weekly vacation rental condo or house?
I would do it the same way you would analyze any rental property except all of your income will possibly be coming in during a shorter period so you want to be sure you can save and carry the property through the off-season. Also, you need to research the market in the area where the rental is just like you would analyze the market for residential apartments to be sure you are not overpriced or underpriced. If it's a condo, check out the financials of the condo association and be absolutely sure they have money and they have a good leadership team in place such as a board of directors or management company. You will be paying all utilities in this case so be sure that is factored into your financial analysis.
This is what we use:
Purchase price = A
Downpayment plus closing costs, furniture, linens, supplies to get going = B
Yearly Utilities, taxes, mortgage payment, insurance, housekeeping, replacement furnishings and supplies, maintenance and repairs = C
Yearly Projected Gross Income = D
Equity = E
D needs to equal or be greater than (B x 10%) + (C x 10%)
If A appreciates in time, that's a bonus, but not expected
The longer we own it, the more E we have (not sure how to calculate this), also a bonus
Our time is a factor that needs to be considered, it is not passive income, it's active. Our experience is that the more we own in one area, the less actual time spent per each property (also not sure how to calculate this value)
Hope that helps!
With these I've seen the need to plug in management exp at about 40% of gross, not your typical 10%. Resort /vacation type properties also have a huge beta, meaning they go way up when things are good, or way down when they're not. Riskier than a typical rental.
You might want to look into taxes, too. In CA anyway, there is a huge luxury tax on short term rentals, less than 30 days. Not sure how that works with vacation homes, but you might want to check it out.
Of course, you charge the tenant, but you'd have to report it, pay it, etc. - if it applies.
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