Vancouver , Bc · Member since 2017 · 73 posts · 13 votes
Does anyone know of a city that attracts tourist and visitors in all 4 seasons. I'm looking to invest in an airbnb property. Currently have 3 in AZ but the summers are low season and bookings drop off significantly.
Thank you
Skiing and the like during the winter, water skiing during the summer.
Great place for a 90% LTV "Second Home."
All you have to do for it to be a legit "Second Home" and not an investment property is PROMISE to go there for skiing or water skiing once a year. Think you can handle that horrid burden?
While it's a head-scratcher to some, our largest properties here in the greater Palm Springs area book year round. My largest home has 3 of 5 weekends in August booked already....seems like large groups are willing to brave to 110 heat.
Skiing and the like during the winter, water skiing during the summer.
Great place for a 90% LTV "Second Home."
All you have to do for it to be a legit "Second Home" and not an investment property is PROMISE to go there for skiing or water skiing once a year. Think you can handle that horrid burden?
@Chris Mason can you tell me the pros/cons of having a legit "Second Home" as you say vs. it being an investment property? Apologies if that's a n00b question, I'm just starting to dip my toe in the VR scene.
I assume it has to do with the more favorable loan terms you can get on a second home - so my follow-up question is, can one get a loan for a second home but still have the IRS treat it as an investment property? (I believe I'd rather have all the deductions than a lower down payment, but haven't really crunched those numbers)
I'll go poking around for a thread that addresses these questions, too. :)
@Chris Mason can you tell me the pros/cons of having a legit "Second Home" as you say vs. it being an investment property? Apologies if that's a n00b question, I'm just starting to dip my toe in the VR scene.
I assume it has to do with the more favorable loan terms you can get on a second home - so my follow-up question is, can one get a loan for a second home but still have the IRS treat it as an investment property? (I believe I'd rather have all the deductions than a lower down payment, but haven't really crunched those numbers)
I'll go poking around for a thread that addresses these questions, too. :)
Hi Julie,
Biggest pro is of course the better interest rate and lower down payment. Biggest con is that it's harder to qualify for, as rental income from a "Second Home" cannot be counted in the mortgage math.
I am not a tax professional & you should confirm with your tax professional.
However, what I have seen tax professionals do is make "Fair Rental Days" on Schedule E accurate. Let's say you were skiing there for a 15 days, go water skiing there for 15 days (can you handle that burden?), and had it on airbnb the rest of the year.
Tax professionals seem to often then set it up so that you get to write off 11/12ths of the fixed expenses, for the 11 months it was rented out (so 11/12ths of the mortgage interest, etc), and all of the expenses specifically associated with the rental activity (cleaners, advertising, etc). If that makes sense.
Don't shoot me if I'm wrong, but I believe that other 1/12th of the mortgage interest and property taxes is instead written off on Schedule A.
So you still get to write everything off, it just takes more work from the tax professional to do it correctly (I'm probably a little off on parts of this, as I am not a tax professional).
@Akash Y. has a good point with Palm Springs/Palm Desert, that area (from a San Diego residents perspective) seems to do a lot around putting on events in the summer. Just things to try and drag people to visit for a weekend in the 110 degree heat!
The biggest issue is that in semi-peak and non-peak times you end up with the Friday-Sunday vacation renter. It's not a peak time so you don't have the leverage to get a full week of rental income out of them (even if they're not there the full week). Consequently you'll appear fully booked but only get about 1/2 the revenue if you try to look at it by number of days booked.
Thanks so much for the prompt response @Chris Mason! I had read @Logan Allec's post in this thread regarding different tax treatments in various use scenarios, but I think I made some bad assumptions about which things carry over from one scenario to the next. I will definitely check with my accountant regarding the best choice for me. :)
And maybe I'll poke around Lake Tahoe a bit... it's so gorgeous up there, but I'm trying to stick within a few hours' drive of my home in LA, at least to start...
Skiing and the like during the winter, water skiing during the summer.
Great place for a 90% LTV "Second Home."
All you have to do for it to be a legit "Second Home" and not an investment property is PROMISE to go there for skiing or water skiing once a year. Think you can handle that horrid burden?
I'll look into Lake Tahoe, thanks for the suggestion.
As for a "second home" I've told my lender I'm going to use it for personal use and use it on Airbnb while I don't use it for personal use. Is it usually the intent during the mortgage application process? I mean surely i'm allowed to change my mind and rent it out?
San Diego is absolutely a year-round vacation destination, especially areas like Downtown and Mission Beach.
We don't exactly do the whole "season" thing here haha. Of course, some months are more active than others, but there really aren't any "dead periods," so to speak.
Let me know if you're interested in chatting about your options for a vacation rental out here.
San Diego is absolutely a year-round vacation destination, especially areas like Downtown and Mission Beach.
We don't exactly do the whole "season" thing here haha. Of course, some months are more active than others, but there really aren't any "dead periods," so to speak.
Let me know if you're interested in chatting about your options for a vacation rental out here.
San Diego is absolutely a year-round vacation destination, especially areas like Downtown and Mission Beach.
We don't exactly do the whole "season" thing here haha. Of course, some months are more active than others, but there really aren't any "dead periods," so to speak.
Let me know if you're interested in chatting about your options for a vacation rental out here.
Best of luck!
Hey Kevin
I'd love to talk. Is airbnb legal in San Diego?
Absolutely!
There are a few areas that have banned short term rentals and a few others I'd recommend you stay away from as I suspect they will follow similar routes. However, plenty of areas allow for VR's and show no signs of changing legislation on the matter.
Kihei, Maui is definitely a 4 season destination...although it's basically the same weather all year round. As for rentals, there is a high season and that's Dec - end of March as that's when the weather is usually the worst where most people in the US live and it's when they want to escaped to HI (it's also humpback whale season there). However, you won't have any issues keeping your VR full the rest of the year too!
Akash Yadav San Diego is a great place to live, but there is risk with short-term vacation rentals:
http://www.sandiegouniontribune.com/business/tourism/sd-fi-shortterm-rentals-20170315-story.html
Good luck if the NIMBYs don't like what you're doing! Not to mention that making it legal/permissible may come with a revenue grab: read fees and I don't know anyone with a crystal ball that can forecast that.
Risk aside, if you take a look at license plates in the summer you'll know exactly where the entire state of Arizona goes to 2-3 months out of the year!
As you'll see in the article, they've proposed 3 regulatory options, with the strictest of the 3 (21 day minimum stay) being considered as incredibly unlikely by most of the people I've spoken to who are following this closely.
I couldn't agree more that NIMBYs pose a serious threat to STRs, but that's true anywhere.
Like I said, there are certain areas (like La Jolla, Del Mar, Enc.) that you'd have to be nuts to buy a STR in because of how strong that NIMBY influence is. On the other hand, though, I think you'd have to be equally nuts to think a ban on STRs in areas like mission beach is at all likely.
The fact that the CA Coastal Commision went on record to say that they in no way support blanket bans on STRs will heavily influence the situation here. SF's recent settling of AirBnB's lawsuit against them is also a very positive sign.
The discussions of regulatory actions against STR's are taking place in just about every single city where they're prominent.
@Kevin Fox The discussion ebbs and flows, it's bound to, until there's legislation. However, the cost of entry into SD is high and you're paying a premium because people want to live here. Let's not forget, it's not like we are known to be a cash-flow city when it comes to a 12-month lease. You can risk-adjust anything, the pertinent question is what is the legislative uncertainty worth (read: discount)? I don't know what the answer but I do know it's not "zero".
@Kevin Fox The discussion ebbs and flows, it's bound to, until there's legislation. However, the cost of entry into SD is high and you're paying a premium because people want to live here. Let's not forget, it's not like we are known to be a cash-flow city when it comes to a 12-month lease. You can risk-adjust anything, the pertinent question is what is the legislative uncertainty worth (read: discount)? I don't know what the answer but I do know it's not "zero".
While the conversation is, like you said, bound to ebb & flow until it's resolved - the NIMBYs momentum, at least outside of the more "elite" areas that I mentioned, has been waning for some time now.
You're right that price of entry is high because people want to live here - however, is there anywhere you can think of that people DON'T want to live, but where vacationing is prominent?
At least in my opinion, places where people want to live but can't afford to do so make for the most promising market for vacation rentals.
You're also correct that finding cash flow in San Diego isn't widely considered as "easy," but I caution anyone who sees an "easier" investment to aquire as a "better" investment overall. Let's also not forget that cash flow is in no way the only factor to consider when measuring returns.
As for the legislative uncertainty, I feel as though it's better to invest places where a dialogue about STR legislation has either already happened or is currently taking place, rather than areas where those discussions haven't yet begun.
There isn't a single city in the US that I'm aware of that you can have complete certainty about their future legislation on STR's. So that "discount factor" you're referring to should be considered regardless of whether your buying a VR in SD or elsewhere.
@Kevin Fox Your points are fair and valid. Unfortunately, uncertainly does equal risk. If you're instincts are wrong and they do pass the 21-day minimum the vacation rental business is effectively crushed. Yes, it's unlikely but it is a possibility. Just like buying in (what now is) the "wrong" side of Carlsbad couple of years ago. Or you grew up around Del Mar and thought the city would always be lax when it came to vacation rentals. I'm guessing everyone who bought back then (and it wasn't that long ago) with a plan of using it as a STR didn't think the regulations (or maybe the enforcement of them) would change.
Now, if you're the kind of agent that goes to their buyers today and says: "Realize that if regulatory challenges arise with STRs and you can't use that model then your cash-flow positive property becomes cash-flow negative." If that's you, kudos. After all, it's the owner that has the obligation (mortgage) post-purchase, not the agent. And you're 100% right, if there's any home or geography where the only way you cash-flow is to use it as a vacation rental property, it's as risky as the STR legislative maturity of that municipality. But ubiquity of risk doesn't negate risk.
@Andrew Johnson , even if they'd pass the 21-day minimum - don't you think there'd be entrepreneurs that will come up with work-arounds?
Heck, I'd bet there'd be companies, that will come up with a way to rent a whole month from an airbnb host and then find a way to break it up into smaller bookings, while the original host only has 12 1-month bookings or something. I don't know, but I'm sure someone will come up with loopholes.
@Michaela G. You @Kevin Fox could 100% be right. I could be 100% wrong. I'll be the first to say that. In fact, I'll go much farther and say there's a much greater chance that the two of you are 100% right on the money than I am. I just never go into a deal without seeing my downside, my exit, considering the what-ifs, and risk adjusting for that. I wouldn't want to sit on that property (and likely burn some cash) while waiting for the entrepreneurial landscape to figure out how to subdivide the 21-day lease into smaller bookings. And then wait for the inevitable legal shenanigans to start all over again. It sounds like you're a much better client for Kevin than I am!
Kihei, Maui is definitely a 4 season destination...although it's basically the same weather all year round. As for rentals, there is a high season and that's Dec - end of March as that's when the weather is usually the worst where most people in the US live and it's when they want to escaped to HI (it's also humpback whale season there). However, you won't have any issues keeping your VR full the rest of the year too!
Great, I will look into this location. I thought maui had certain restrictions and it was difficult for short-term rentals. do you know much about that?
@Michaela G. It sounds like you're a much better client for Kevin than I am!
Did you mean me? I have no intention of investing in San Diego. My properties are in Atlanta and they'd still cashflow, if I couldn't do airbnb.
As to 'risk' - there's a risk/reward threshold. Everybody wants to make as much money with as little risk as possible. Life doesn't work that way. The highest potential reward usually has the highest risk. To play it safe would be putting your funds into a bank account and getting very little interest. And anything else increases risk and potential reward.
@Akash Y. Most of the condos in the beach areas of Maui are zoned to allow short term rentals, then it's up to the homeowner's association on whether or not to allow short term rentals. If they do, then all an owner needs to do is apply and get their excise and transient accommodations tax ids.
For houses, ohanas and other properties that are zoned residential, each island is a little different. In Maui county, you must apply for the short term rental permit, which takes at least 6 months to get. It's quite a process to get one and they limit the number of permits in each neighborhood. Also, if a current permitted short term rental is sold, the permit does not pass to the new owner, so the new owner would have to wait at least 6 months while they apply for the permit.
I would suggest you also consider the Kissimmee, FL, area (south of Orlando and in close proximity to Disney World). Our tourist market slows slightly in May and in September, but it still is considered to be a year round market. Tourists come here from all over the world to go to Disney, Universal Studios and SeaWorld.
My personal experience with short term rentals is, though we get some reservations from Airbnb and TripAdvisor/FlipKey, a majority of our reservations come from HomeAway/VRBO.
Michaela G. For what it's worth, I think your ATL example is what I think is appealing. I don't know if you intentionally bought for STR but I like the "STR as an upside but a 12-month lease is still a cash-flow positive option". I'm moderately risk-tolerant, I want my downside to be "make less money" (and break-even if the wheels fall off) rather than "come out of pocket". I wish I had a higher risk tolerance, a lot more options would open up then.