Like everyone else I have been looking, connecting, negotiating and I think I may have found one that will work. The fact that this property is a Class A property located in the most visited National Park is just icing on the cake. I would appreciate your thoughts on this possible deal.
Facts on the seller - Has owned two cabins for over 10 years - he built them, wants to move his family back home to California. The cabins are in the most ideal locations.
Facts on the Lease - After 9 weeks of negotiating (and walking away from it completely on my part, more than once) the seller has agreed to a 1 YR Lease Option for a Upfront $2,500 Fee - which includes the 1st months fee. The monthly Lease Fee will be $1250 - which will cover his Loan Payment, Taxes & Insurance. At the end I can purchase or walk away if I don't think the cabin will perform.
Facts on the Purchase - If I purchase he will carry the full amount of $170,000 in a 20 YR seller carry note at 6%. I have confirmed with a local bank who VERBALLY said they could do a 4%.
Facts on the Value Add - He only uses VBRO to bring in vacationers, I could list on AIRBNB, HomeAway, Craiglist, Ads or Flyers...etc to bring in more. The upstairs loft has a pool table, I could toss that out and put another bed up there, turns this sleeps 4 cabin in to a sleep 6. (Increase the nightly fee and open up to more potential vacationers)
Facts on the Revenue - Documented GSI over last 4 years from the cabin.
YR1 - $24,000. YR2 - $23,700 YR3 - $25,000 YR4 - $26,300
For this breakdown I assumed $23,000 in GSI, or $1,916.67 per month.
HOA - $18.33
Direct TV - $42.75
Shared Well - $20.00
Utilities - $160.17
VBRO - $33.34
Lease Fee - $1250
Turn Around is paid separately from this income - so I didn't included it.
NOI BEFORE TAXES - $392.08 (Assuming $23,000 in GSI)
NOI BEFORE TAXES - $558.74 (Assuming $25,000 in GSI)
Facts on the Variable - 2-3 Winter months don't book up to cover cost, but that cost is more than made up in spring, summer and fall. I also would be managing it, which isn't the long term goal, but I have more time than money.
Facts on the Awesomeness - This will only cost me $2500 out of my own pocket, for a Class A $190,000 property producing $23000-$25,000 a year, over 27.5 years isn't this a deal?
Since you will manage yourself you will save from 30% to 45% of rent. Your cost is the VRBO + supplies. I would estimate the supplies at about $500 per year. A typical house has $1,500 to $2,000 in maintenance and capital expenses. Your overall cost will be somewhat higher since it will be furnished an you will have multiple guests.
If you manage yourself you will have housekeeping expenses. You can charged that separately to your renter. I would put that into the $50 to $65 per cleaning.
There is usually a city, county, and/or state tax on gross receipts. In my areas that runs about 10% to 14%.
My experience is that I breakeven to about 3% Cap when I use a property manager. If I manage myself I am at 8% to 10%.
I hope that helps.
yea, I can mange and save. I have asked for revenue proof from the cabin. If the revenue checks out, think its a good play?
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