Vacation rental

18 Replies

Hello! My name is Lynn and I am new to Bigger Pockets. I'm in the midst of educating myself on real estate investing and my goal is to pursue rentals and flips close to my home in the Chicago suburbs. I figured in a few months I'd be ready to start. But, while scoping out real estate I came across a place in Wisconsin that seems to be perfect as a vacation rental. Which is something else I've been interested in.  The sellers are motivated as they are moving and have dropped the price considerably in the last month. It's turnkey and it would give me a place to put my boat as an added rental incentive. I'm driving up to see it day after tomorrow and want to be prepared. I've researched VRBO, etc on current rates and am guesstimating on how many days I'd be able to rent it. It has the possibility of year round rental as there are things to do for all seasons. Does anyone have advice on "crunching numbers" for a vacation property? Thanks so much!! And thanks to BP for the forums, podcasts and the UBG!

@Lynn Maher without knowing more about your deal the only advice I can give is know the market.  If you have not truly investigated the area you may be off on what a good deal is.  At least try to find an expert who knows the local market there.  You need to buy at the right price.  You make your money when you buy.  Start there then move forward to look at what rental rates and demand are like for vacation rentals there.

hello and welcome!!! There us a podcast about vacation rentals, I think in the late 50's early 60's. From what I understand, vacation rentals can be very lucrative if you can keep vacancy low,but require allot of upkeep. If it were me, I would look at the property as if it were 100% financed, abd assume above average vacancy. If the numbers work, you'll probably do okay. Also, don't forget to include additional cleaning expenses for every rented week, and an umbrella policy, just in case!!! if you share more about the deal (acquisition cost, average weekly rates fit the area,age of the property, hoa costs, etc,) we may be able to give you a far more useful response.

Good luck and happy investing.cheers!

Thank you Jerry! Yes, very sound advice. I'm familiar with the area but more as a vacationer who's been looking to buy into the area for several years. Now it's time to approach this as a smart investor. 

Vacation rental should be treated the same as a regular rental since in a sense they both are considered investments. Look at the local market and determine your minimum and maximum rent (be realistic). Figure out how many months out of the year you can rent out this place, which you have mentioned year round minus 10% for vacancy to account for worse situation. As long as you calculate your cost (PITI, cap ex, management, misc.) correctly and make sure it will cash flow positive, you're a winner. When I lease a place, I normally advertise with max rent and gradually lower it to find the sweet spot. But when I do my calculation, I normally use the minimum rent number because I know if needs be I can always lower my rent and still make money. There are a few good calculators at Fileplace that you can use if you don't have one already. Good luck

Man! It took me 10 mins to reply and there already two other posts.  Guess I need to type faster:-(.  Sorry, if some of the answers seem redundant.

Thank you Kevin, that is very helpful. I will plug numbers in there and see how it looks. 

Kurt, it's a 1960 home with 5 bed 2 bath. I think the size will be a draw for family get togethers or a couple families. Most rentals are 2-4 bed with 1- 1.5 bath and rent for $1500-$2000/week in the summer. It's a very we'll maintained home. As I see it now there's no HOA but I will learn more. I need to figure insurance and cleaning costs. I'm hoping the agent may have some insight as to rentals in the area.

At the least this will be a wonderful learning experience and a nice Sunday drive!

not redundant Kevin! Good advice!

@Lynn Maher   First advice is make sure it's on a lake that allows wake and you can waterski on it.

If it is a no-wake lake you will severely limit your audience.  

In regards to crunching the numbers I'd say it's probably best case a cash flow neutral situation and more work than you think with renting it yourself.   But owning a lake house is part of living the dream.  Good Luck!

Originally posted by @Kevin Tran:

Vacation rental should be treated the same as a regular rental since in a sense they both are considered investments. Look at the local market and determine your minimum and maximum rent (be realistic). Figure out how many months out of the year you can rent out this place, which you have mentioned year round minus 10% for vacancy to account for worse situation. As long as you calculate your cost (PITI, cap ex, management, misc.) correctly and make sure it will cash flow positive, you're a winner. When I lease a place, I normally advertise with max rent and gradually lower it to find the sweet spot. But when I do my calculation, I normally use the minimum rent number because I know if needs be I can always lower my rent and still make money. There are a few good calculators at Fileplace that you can use if you don't have one already. Good luck

Man! It took me 10 mins to reply and there already two other posts.  Guess I need to type faster:-(.  Sorry, if some of the answers seem redundant.

WHAT YOU REALLY WANT TO KNOW IS AVERAGE NIGHTS OCCUPIED OVER THE YEAR, AVERAGE RATE, AND EXPENSES (CLEANING, PROP MGMT, REPLACING LINENS, NORMAL MAINT, ETC..)

Do NOT use 10% vacancy as a worst-case scenario for vacation rental after figuring out which months can be rented. 90% is a very high occupancy rate, even if you're just talking about a 1 or 2 day gap between rentals due to timing of coming-going.. I'm 100% booked for the next 30 days on my AirB&B rental during peak, but that is at a low rate, and there is usually at least some gap. The vacancy will all depend on your rate and the seasonality though..

Call a local property manager who does vacation rentals. Call local hotels and ask them about their occupancy rates. Look at prices & availability on-line, etc to get a better feel.. Good luck!

Thank you everyone for your input. It's good to know that I can treat it as a regular rental for calculations, making adjustments for a higher vacancy rate, of course. It's a great house that the buyers are very motivated to sell. But, I want to do additional research with property managers in the area. It was great to get out there and talk to realtors (I went to several open houses in the area,too) and drive around to check amenities out. It was funny because I left there thinking the area was lacking in certain things and I went home and told my sister about my day and it turns out it's the same lake her friend has a house on and my sister and their large group of friends visit up there and have a blast. So, I will reach out to her for insight as well.  Thanks for listening! All in all I am learning and having fun too!

Hi Lynn,

I manage two vacation rentals on a gorgeous Lake is Wisconsin.  I know you mentioned there are things to do all four seasons but I would be cautious in assuming you are able to rent the property consistently year round. We are booked solid in June through August but quite slow the rest of the year even though there is snowmobiling and great cross country skiing in the area.  If the property is "up north" you might have more luck renting to snowmobilers but they can me rougher tenants and that market is entirely dependent on snow fall.  If it doesn't snow, Wisconsin tourism dries up in the winter very quickly.  Just some thoughts.  

Hi Lynn -

My best advice . . . If you are interested in vacation rentals, come to Central Florida - home of Disney World, SeaWorld and Universal Studios.  Rental demand is year 'round with the biggest rental seasons being around the holidays and during the summer months.  Plus, it's a great place for you to vacation in your own vacation home.  A great time to come is during the winter (except around Christmas - very crowded) when the weather is great and the crowds are much smaller.
If you want to consider this, please feel free to contact me.  I'll be happy to help you in any way that I can.

Keith

Nicholas you are very right about the snow being a big factor. I realize that it wouldn't be consistent year round but I am thinking maybe some long weekends in the fall and occasional weekends in the winter. Can I ask what lake you are on? I have a call in to speak with a property manager in the area to get some insight on number of days booked and the area. I was looking at a place on Lake Wisconsin, but was worried about the lack of nearby grocery stores and restaurants. Also, originally I was thinking of a smaller home but now I am shifting to a larger home to fit bigger or multiple families and/or friends. I thought that might be a bigger draw. Does that make sense? Thanks!!

And, Keith you are right about Central Florida. Love it down there, just not ready to make a jump to an out of state invesment yet. Hopefully someday soon!

Hi Lynn,

The properties are on Green Lake, WI.  I live in Madison so I'm a little familiar with Lake Wisconsin.  Its a nice lake and you may get some winter skiers bc your are relatively close to Devils Head and Cascade Mt, depending on which side of the lake you are on.  I wouldn't be too concerned about lack of grocery stores or restaurants.  If the property and lake are nice, that will be draw enough.  Most people stock up on supplies on their way to Green Lake bc of a lack of grocery stores.

I would say buy a property that you and your family will enjoy bc hopefully you will be using it as well.  I have a property that sleeps six and one that sleeps twelve.  Honestly the property that sleeps six rents out more because its more affordable for smaller groups and couples.  Offering a boat hoist is also a huge bonus for renters and a good way to differentiate yourself.  

Thanks Nicholas!

Very helpful info. I also heard from an owner in the area that said you can work with Cascade on packages and they will promote your property.
The boat hoist is a great plan. I will be offering a pontoon with the rental as an added incentive, too. But I'm want to check out how that plays out with insurance.
I think its a plus that the property is on the east side, just 5 min off 39.
It's a lot to consider but I'm excited about it.

Great advice so far,

I am also looking at a property for vacation rental (in West Central Fl). I would also mention to consider flood insurance as that is a speed bump I have recently encountered being on a canal. I am reviving an old post with this comment so tell us.. Did you end up pulling the trigger? How did it go?

@Keith Courtney

 I am kind of curious on talking to you about vacation rentals as well. My family furnished all of them in the 90's and one of my best friends owns Contempo, but I have never personally stepped in and bought a vacation rental. I'd love to hear what you have going on right now.

Some of the comments in this thread pertained to estimating the average occupancy rate for a vacation rental property. While not exactly the same as vacation rentals, I find it useful to be familiar with the most recent occupancy rates for the hotel industry. In 2015, the average occupancy rate was 64.6%, according to industry experts.
Source: http://www.calculatedriskblog.com/2016/06/hotels-o...

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