We just looked at a good cash flowing weekly rental. We have been having the discussion around this question...
Why would you sell a weekly vacation rental that has a $35k a year gross and is cash flowing an estimated minimum of $11k per year? (Based on it having a mortgage).
Who knows? Maybe they want to invest in a strip mall. Maybe its too management intensive. Maybe they inherited it. Did you ask the seller/listing agent? Also dont ever rely on seller provided financials. Do your own analysis in case you haven't done that yet.
Vacation rentals have turnovers every week, people can call you, you have to deal with furniture which has a short life sometimes in such rentals. There are 52 rental agreements a year, 52 different tenants, all on vacation. People shop for vacation rentals so you need to respond regularly. You need to give issues immediate attention, I was mad when the vacation rental dishwasher broke, there for a week and washing dishes all week.... My thought would be they don't want to deal with it anymore. I don't want to discourage you but just to point out it is different then a monthly rental.
Expenses unique to short term rental:
- Utilities (trash, water, sewer, gas, internet, tv)
- Cleaning and prep
- Consummables (soaps, towels, linens)
- Hotel taxes (this depends on your locality)
Also, to Rob's point, it is more management intensive than long term rental.
How much would the property cash flow in a long term rental scenario?
Hi @Jeff Hink
As others have mentioned above, there are more costs and work involved (if you are hands on) with vacation rentals.
Maybe they had a bad experience that caused them to question whether or not it was worth it for them. For example, we have a vacation rental in Kihei, Maui and we know an owner that has a rental in a different complex than us there. They came to us letting us know they were selling their condo (we passed because at the price we agreed upon we wouldn't be able to pull in positive cash flow).
When I asked why they were selling it, they mentioned they had a bed bug scare w/ a guest. The guest woke up two nights in a row w/ bites on them. They had the place inspected by an exterminator and come to find out that it was sand fleas the guest had gotten. The headache of dealing with this situation and the possible bed bug remedy costs (they were told $2,500) was enough to scare them out of the vacation rental business.
So you never know, as some have mentioned above, check with the selling agent and see if you can get more details. Also, check with the HOA if there is one, maybe costs are going up either with the monthly association fees, there's a big special assessment coming up or worst yet they could be changing the rental rules not allowing short term rentals.
Add another expense for Vacation rentals: Aspirin for headaches...
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