Not sure this is necessarily a strategy, but more of an idea/dream I was thinking about the other day.
It all started because I used to live in Vail. I love that mountain! I love to ski! I live in Park City, UT now, but the weather has been horrible, so we've had very little snow (up until this week, hooray!) I so miss Vail, and thought it would be fun to go out there several weeks every winter, even every other week or something. What if I bought a vacation rental and rented it out weekly, but only 2 or 3 weeks out of the month, and then I stayed in it the other times?
I also used to live in Mammoth and have a lot of friends there. I have plenty I could rotate through crashing with so as not to wear out my welcome if I visit, but what if I did something like a part time vacation rental too? Eventually maybe do the same thing in other places, and be a real powder chaser. Own condos/homes in Vail, Mammoth, Jackson, Telluride etc.
Obviously the goal wouldn't necessarily be stellar cash flow, I'd get a lot of benefit out of using it myself. Cash flow sure wouldn't hurt! I was just thinking though, that timeshares cost money, renting a place on vacation costs money, what if I owned places and made a little cash flow? Broke even? Would this be more likely of a profitable scenario if there were multiple locations involved, as each property would be rented out a higher percentage of the time?
This could be a totally asinine idea from an investment standpoint. But even if it loses money, I really like the idea of being able to go to Vail and ski there every other week while still living in Park City. Let's just keep it simple and start there. Will this work, at all? Is this a horrible investment idea and I just need to be rich enough to live in multiple places and travel wherever I want? :)
Hi Amy! Vacation rentals are a great idea for us powder chasers! There's a few things to think about before jumping in however.
I wouldn't consider a vacation rental a proper real estate investment, unless you plan to make a business of acquirin and managing your properties.
One key point to consider is that property management fees tend to run near 50% in these resort areas.
Also, it's not so easy to chase storms when your property has been rented that week.
Lots of things to think about!
I think this sounds like a great idea. I have to agree with Kristin that it does seem like a lot of work if you want make it worth it. Websites like VRBO.com and Airbnb make this type of thing very easy to do. I really want to get into the vacation rental side of the business and have looked extensively in Park City for something relatively inexpensive to work. My family owns quite a few properties in Brian Head which is a very small ski resort, but is only a couple hours drive from Salt Lake. They do very well down there and a lot of money is being spent there to develop it. Its not fancy like Vail or Mammoth but it may be something you want to look into. Let me know if I can help!
I can't speak to the question of whether or not it makes sense financially, since I haven't really looked into that idea too deeply myself (though it seems like it would be hard to cash flow something like that due to the high property costs, but what do I know?). I just wanted to mention that my in-laws own a condo in Mammoth that they use exactly the way you stated - they use it sometimes, but let it get rented out at other times. One thing I found out about vacation rentals in Mammoth is that it has to be in a condo/association situation. The city apparently doesn't allow SFRs to be rented out on a short term basis like that. At least that was the case a few years back, I'm assuming that hasn't changed. So, something to remember to look into if you decide to pursue this idea.
I kind of do this- I have a place in Big Bear- I go up when it's not rented out. I manage the property myself so I save the 30-40% management fees and because I am the manager- I can give it all the attention it needs to be sure it's rented out as much as I want.
@Kristin Whitaker Yikes 50%! Guess that is something to look into for sure. Sounds like highway robbery. I mean, I suppose I can understand being a resort town, everything has prices that are outrageous, but sheesh! True, it wouldn't be a true powder chasing scenario, but more that I just like different mountains.
@Quintin Mortensen I have heard of a few people who have property in Brian Head. Not to mention, they're getting all the snow lately! HAHA, They are pretty small, but sometimes that's better... for more reasons than one! Not sure I will ever not be a fan of the back bowls at Vail though!! If I did this, that's probably where I would start, just because it's where I want to go the most right now! But Brian Head would also be a good option to look into.
@Kimberly T. Yeah, I think a condo would be ok. The thing about vacation rentals is that the price per night can be pretty high, especially during holidays, so it can make up for the high property cost. You'd obviously need to do some research on the actual numbers, but that's how people make their money. I know people who live in each others living rooms during Sundance and rent out their rooms, and pay the entire month+ of rent.
@Mike R. Yeah I hadn't really thought about managing it myself. I suppose especially at first, if I just had one property and if I was going out there frequently, it would be pretty easy to manage myself. Wouldn't really be so doable if you were going to do multiple locations all over, so that's something to keep in mind.
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@Amy Van Ollefen I love your idea! I love skiing in Colorado and used to live in Colorado Springs and hit Vail, A-basin, Keystone all the time. I'm thinking about having my first RE investment be a vacation rental in Mammoth Lakes (I live in San Diego/LA) @Shelby Pracht but would consider getting vacation rentals in Pagosa Springs/Durango, Frisco/Dillon, and/or Park City assuming the numbers looked good. As the owner you could reserve blocks of time for yourself to use or you could just rent another place while you're there and check up on your rental. There also would be the possibility of "house swapping" with other folks who have places that you want to stay for a few weeks or a month. So I think this has potential as both a business idea and a lifestyle choice!
Hi @Amy Van Ollefen !
I can't speak on whether or not your idea is a good investment or not since everyone has their own goals and it sounds like you just want a place you can use often and not worried about the monetary return.
With prices in the Vail area and the fact that it would be tough to fill up during the "off season," the chances of generating positive cash flow are fairly slim.
One thing to keep in mind is the tax implications of using your condo as much as you want to do. The IRS states that if you personally use your condo 14 days or 10% of the amount of days you rent it, your property will then be considered by the IRS as a "second home" instead of an "investment property." If the property is classified as a "second home," you will lose just about all of the tax deductions that are available for "investment properties."
My wife and I live in Denver and we have thought about buying a condo in the Silverthorne/ Breck area and use it as much as we like. However, w/ home prices, off season vacancies and the fact that we would probably use it often, we came to the conclusion that it's wouldn't be much of an investment at all and would basically just be another expense. However, as my wife put it, it would be more of a "lifestyle invstment."
Oh, and don't worry about the weather too much quite yet as the mountains here have barely gotten any snow so far this season. We've been in the Denver area since 2005 and this is the only October I can remember that we didn't get any snow!
@Amy Van Ollefen oh, after a good snow, there's not many places you'll find a better powder day than the Blue Sky Basin in the back bowls of Vail!
Thanks for the shoutout, @Lee Ripma !
@Amy Van Ollefen we have a little one bedroom condo in Mammoth that we rent out nightly and it does incredibly well! I don't use it myself because I live in town full time, but there are plenty of people that are doing exactly what you're thinking about.
There is one property management company in town that only charges 35%, but which is really good for what you're getting. There are plenty that charge 45-50%. I manage mine myself using Airbnb. This is something you could do from afar on theory, but you'd need a cleaner you really trust and some boots on the ground that can run over there when sh** hits the fan. We've had a guest call because they couldn't figure out how to turn the heat off and one that couldn't get our lockbox to work (even though 200 other guests had no issue. Haha) so those are definitely considerations of you want to self manage.
The best thing about vacation rentals in Mammoth vs other ski resorts is the proximity to Yosemite. We are slammed with bookings all summer long from tourists going to visit Yosemite. Most of them don't even realize Mammoth is a ski town, haha. October is the slowest month of the year for us as the pass in Yosemite starts to close for winter storms. We have 6 nights vacant in our condo this October, which is the most we've had all year.
Amy let me know if you have any questions, I'm happy to try to help!
Oh PS don't forget to look into transient occupancy taxes where ever you're looking to eventually invest. They are 14% in Mammoth so you'll definitely want to factor that in when you're running numbers.
Great points @Jeremy Baker about the tax situation with VRs, and @Shelby Pracht on transient occupancy tax. Many resort towns have this sort of tax, something to be aware of that could nix your profit.
Also something to think about is condo HOA fees. They vary wildly, some are killer and some will kill you. Same thing with their reserves situation. Best thing to do is ask a local realtor, they'll know which ones are best for investors.
@Amy Van Ollefen, @Jeremy Baker makes a great point that you want to keep in mind how a vacation home can effect taxes. This is my understanding regarding taxes and vacation properties:
1) If you rent it out all year long: You can claim tax and mortgage interest deductions, rental cost deductions, and rental loss deductions.
2) If you use it as a vacation home for more than 14 days per year and also rent it out more than 14 days per year: You can claim tax and mortgage interest deductions, you can claim rental cost deduction (but not over rental income amount) and you CANNOT claim rental loss deductions.
3) If you use it as a vacation home for more than 14 days per year and also rent it out for only 14 days or less per year: You can claim tax and mortgage interest deductions, you CANNOT claim rental cost deductions BUT that rental income is not taxed, you CANNOT claim rental loss deductions.
4) If you use it ONLY as vacation home and do not rent it out: You can claim tax and mortgage interest deductions (can only be done if this is your only second home...you can't claim this on unlimited second homes), you would have not rental cost deductions to claim and you would have not rental loss deductions to claim.
Hope this helps!
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