I've been looking into doing some STR in the area I've narrowed in on. This area has multiple resorts near Mountain Creek in Sussex County NJ. The only downside is that I can't AIRBNB these units out, the resorts offer an option to enter your unit into what they call a rental pool. I have no experience with this and wondering if anyone can provide any input on how this works. I imagine they just book the rooms for you, clean and manage them.
My main question is, does anyone have any experience with this type of rental? Has it been lucrative? It seems like the resort has a built-in property management and cleaning team. Any input would be greatly appreciated, thanks!
Real Estate Agent · Member since 2021 · 20 posts · 26 votes
4y
There are many of these where I invest, I have analyzed many of them. While it is a great passive investment, the fees for leasing and management can be upwards of 30-40% which wipes away most profit. The units generally will produce income, however usually at a 3-6% CoC rate that is more suited for families looking to subsidize their vacation home, not an investor looking to scale.
Real Estate Agent · Member since 2021 · 20 posts · 26 votes
4y
There are many of these where I invest, I have analyzed many of them. While it is a great passive investment, the fees for leasing and management can be upwards of 30-40% which wipes away most profit. The units generally will produce income, however usually at a 3-6% CoC rate that is more suited for families looking to subsidize their vacation home, not an investor looking to scale.
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Regardless of differing strategies, the concept is the same. I also would not get involved in an HOA of any sort, or give a lot of my profits to a manager....
Real Estate Agent · Boulder, CO · Member since 2015 · 284 posts · 226 votes
4y
@Allen Collins, I would agree with @Matt Ternullo, the numbers on these usually don't seem to make sense, especially with poor management and marketing at a high cost (40%). I agree with the group that you would do better with a normal condo or home, or possibly another market.
Rental Property Investor · Denver, CO · Member since 2019 · 78 posts · 66 votes
4y
@Allen Collins I'd echo what others said, low return due to high mgmt fees (and HOA board votes on improvements that you'll pay for). We have friends that do this at a resort that they love and their kids/family can use. That could be a good reason. But, strictly as an investment you can do much better.
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
4y
Hey @Allen Collins, I agree with @John Underwood and @Bruce Woodruff. We looked into a place in Bend Oregon. Inn at the Seventh Mountain. This was a long time ago and places were really cheap. We could only use the resort management just like you are talking.
Once we figured in purchase, HOA dues (which were huge) and the substantial special assessments, we were negative by a couple of percent.
Here are some downsides to me. One is you are in the pool with other owners. Not a big deal until you realize that there might be one family or business that owns multiple units. They will get first priority on rentals. Second is the same reason. The group that owns the most units get the most votes when things are decided on.
At the place we looked at, a single wealthy family owned the majority of the units and essentially they made all the decisions on everything. The rest just had to go along. That is why the place was so cheap. Some families were selling their 3/3 top floor, 2000sqft condos for a dollar just to get out from under the special assessment that for their unit was nearly $380,000.
We were looking at the smallest place which was a 900sqft "studio". It had a small bedroom, almost like a closet. It was $50,000 with a special assessment of $74,000. Way above the cost of the unit alone in that market at the time.
I am not saying that this is what will happen to you. At least look at the bylaws, the current level of maintenance on the properties, the list of owners and the like. Go in with as much info as you can.
Needless to say, we passed on the condo. Now I won't look at a place that has an HOA or any kind of townhouse or condo.
Thank you everyone for your input. I'm struggling to find a deal that makes sense to me in my current situation so I'm trying to get creative. After reading all this, I will move on.
Rental Property Investor · North Fork, NY · Member since 2016 · 1k+ posts · 631 votes
4y
However, if you can buy those weeks from the resale market for pennies, it could cash flow well BUT it all depends on the resort. A pool probably the least lucrative way. I’ve done it in FL. Once. There are plenty of resorts that allow you to rent them out on your own. You could buy a week for a small price at a resort in Hilton Head for example that has low maintenance fees, $800, and rent it out for minimum of $200-$400+ /night. Some resorts will even pay you $2800 if you give them back your week annually. Owners want out and will give them away to get out if paying the annual maintenance fee. Not not going to get you rich but it answers your question. Like John did.