Vacation Home Rental Ownership as a Retirement Strategy

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Vacation Home Rental Ownership as a Retirement Strategy

Jack Seigler
Investor · Spring, TX · Member since 2015 · 2 posts · 1 vote

Lately, I have been working on my retirement plan - where to live, multiple locations, one location, fractional ownership, rent vs buy ??  There are many options.

One scenario we would like to have is to live on/by the water (Gulf or ocean) 4 months out of the year, Colorado 2 months out of the year (Summer to escape the Texas heat), and "Home" in Texas the other 6 months, less any destination vacation trips we take...

Looking at the Ritz Carlton Bachelor Gulch, or similar level, for the Colorado piece - 1 BR Suite with full kitchen, turnkey, etc. for $700K. There is a hefty HOA fee, and the Ritz gets 50% of your rental pool income! In spite of that, if I got 45% occupancy in the rental pool, capitalizing on the peak seasons in Beaver Creek, I can buy the property, service the debt, live there 8 weeks per year during July and August, at an out of pocket cost estimated at about $400/month. Of course airfare, car, etc. are additional, but also a write-off against the rental income...

The second part of the strategy would be to buy a beach house or condo for around $500K, and get 35% rental pool occupancy during the year, and live there December through March.   This scenario yields about a +$5000 per year surplus, so overall, these two retirement properties that I would own 100% (not fractional/timeshare) creates a breakeven financial result, and they are appreciating assets (hopefully).

Because of the peak patterns and the overlap of the schedules, cash flow remains positive in every month of the year, so I don't have to float any expenses. 

Seems too good to be true...What am I missing?  The cash outlay to buy the properties would be covered by my equity in the 2 rental properties I own currently...

All comments welcome!

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Paige Kelsey
Rental Property Investor · Vancouver, WA · Member since 2015 · 112 posts · 142 votes
11y

I own 2 vacation rentals in the Springs and i like where your head is at.I have a few questions. Soo where would you live the rest of the year? Ie april- june? Sorry maybe i missed that. I would also be concerned  that if the economy begins to slide super high end vacation rentsls and ski vacations are what will go first for people. I would be concerned that you really are at the top of the market so betting on equity and the long haul is a rough bet on those properties. The market in colorado right now is on Fire not sure you would be buying super smart. Also 45% holy cow!! That seems sooo high! I am saying.. While a good plan I might keep looking- is check out different areas and look for a better deal- you can do better:)

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  • Paige Kelsey
    Rental Property Investor · Vancouver, WA · Member since 2015 · 112 posts · 142 votes
    11y

    I own 2 vacation rentals in the Springs and i like where your head is at.I have a few questions. Soo where would you live the rest of the year? Ie april- june? Sorry maybe i missed that. I would also be concerned  that if the economy begins to slide super high end vacation rentsls and ski vacations are what will go first for people. I would be concerned that you really are at the top of the market so betting on equity and the long haul is a rough bet on those properties. The market in colorado right now is on Fire not sure you would be buying super smart. Also 45% holy cow!! That seems sooo high! I am saying.. While a good plan I might keep looking- is check out different areas and look for a better deal- you can do better:)

    1Reply
  • Jack Seigler
    OP
    Investor · Spring, TX · Member since 2015 · 2 posts · 1 vote
    11y

    Great input and points to be considered, thanks.  Key objective is to get out of Texas for the worst weeks of Summer, and have our feet in the sand for a few months out of the year too.  Yes, there are other options besides Colorado that we need to look at.  Obviously the key assumptions in my model must be realistic and come true for this to work - occupancy rates and $ rate per night/week.   I just like the idea of having someone else pay for my vacation homes, and as I played with the scenarios, found that the best strategy seems to be to have 3 places:  2 of them in rental pools with overlapping revenue patterns.

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  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    11y

    I go to Topsail, NC every year with my family. It's a really low key area. There aren't very many people when you're on the beach which is what I prefer. I always thought that I would love to live on the ocean part of the year and rent out the property when I'm not there to "pay for it". I started talking with some other homeowners in the area and got the same answer every time.... A great year is a year when they only loose a little.... The hurricane/flood insurance costs them 36k a year. So it would not be an investment but a liability. Now not to say that's the case everywhere... That's just what I found where I liked. 

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  • Lucian Harris-Gallahue
    Gaithersburg, MD · Member since 2015 · 30 posts · 8 votes
    11y

    Really like this plan, a lot of people would want to pull this off, but not too many would pull the trigger.  Props.

    Also good points Paige 

    @Jack Seigler

    @Paige Kelsey

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  • Robert R.
    Investor · Gatlinburg, TN · Member since 2015 · 75 posts · 33 votes
    11y

    Great idea to ponder. However continue to challenge yourself on the questions. Vacation rental management can take a huge chunk of your income. Can you manage them yourself via vrbo. etc? If that is what it will take to accomplish the goal is it worth it? Another question is how will it effect your annual rent if you live in the properties during the prime season?

    Owning our own vacation rentals and managing from afar for a couple years, these are the best questions I would ask myself. 

    Hope this helps!

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  • Paige Kelsey
    Rental Property Investor · Vancouver, WA · Member since 2015 · 112 posts · 142 votes
    11y

    I would agree with Robert. We live in the same city as our rentals and there are actually very few to no rental agencies that will manage these for us. Typical agencies will not do it. Sure you can do pretty well with VRBO, and Arbnb but you will need someone with boots on the ground. They are very high maintenance. You need TP or dish washing soap or or or not to mention the regular maintenance stuff that happens. I love having the vacation rentals but you become almost a tour guide of sorts to be at the top of the game because really this too is a competitive market.  

    1Reply
  • Aaron Crow
    Investor · Forney, TX · Member since 2015 · 90 posts · 30 votes
    11y

    My wife and I have been discussing as well.  I am putting this into my longterm planning.  

    0Reply
  • Marina Kimak
    CEO · San Francisco, CA · Member since 2015 · 14 posts · 8 votes
    11y

    very interesting topic, just going away from the fractional ownership. As I can see, some people are concerned with management of their vacation property, try home-away or flipkey, they are excellent holiday rental companies. And you need a housekeeper in town, of course, but s/he will provide you with peace of mind. We are renting out our residence in France when we travel, and it works great. I'll be happy to provide more information on that subject if you want.

    As for the fractional ownership, from the information I found, it is not same as a timeshare, you actually own a part of real estate and a deed. Your share entitles you to spend there certain amount of time every year. However, property appreciates and so does a value of your title. Property is professionally managed, and there are monthly or yearly fees that cover utilities, taxes, housekeeping, insurance and most likely some "emergency funds". All owners participate in decisions if new purchases are needed, like furniture, bedding or appliances. 

     What I find most interesting is that most of "fractional ownership" include 2 or 3 different high end homes or condos in different parts of the world.

    Questions? Just ask, I would be happy to share my findings. 
    Suggestions? Please share, I am sure we can all benefit from common knowledge

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  • Pete Peterson
    Renter · Pacific Palisades, CA · Member since 2015 · 17 posts · 1 vote
    10y
    Originally posted by @Jack Seigler:

    Lately, I have been working on my retirement plan - where to live, multiple locations, one location, fractional ownership, rent vs buy ??  There are many options.

    All comments welcome!

    Why deal with that kind of headaches? If you love real estate then invest in an index fund like VNQ. Better yet just invest in stock and bond index funds. Diversify. Then you don't have to do a damn thing. Then you could spend your time as a realtor making more money.

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