Vacation Rental Good Investment?

Question

My family vacations in Ocean Isle every year (renting) and are looking at purchasing a home as a vacation rental. Our main goal would be to rent out the home so it pays for itself, and we would have a place to go more than just once a year. Does anyone have any experience in this area or surrounding beaches? If you rent a house out in this area during season, will there be positive cash flow after paying all expenses, including management?

Neil Henderson · Answer

We operate a short term rental out of a guest house on the property of our primary residence. It pays for our mortgage plus a little extra, and it's a 350 square foot room with no kitchen and no laundry facilities. We have interviewed several people who have used this strategy to great success. @Clint Harris, Avery Carl, @J. Martin, Zeona McIntyre, Mike Sjogren, and Michael Hamilton.

It is an increasingly competitive space, but we have loved it. You just need to be prepared to compete on something other than price and be prepared to provide excellent customer service.

Whatever market you look to invest in, I would start with checking the laws around short term rentals in the area. Search Google for "short term rental ordinance" + "city name". See if there is any chatter about laws on the books or talk of laws.

Next, buy a report on the market from AirDna.co.

Mark Miles · Answer

This strategy works in the south, not in the north. The South has way nicer weather for way longer each year so you can usually rent out places in southern coastal towns for many many months of the year. In the north, people try this on the Jersey shore or Cape Cod, and it’s literally like a 10 week rental season. Then they act surprised that they have to pay the mortgage for the other 40 weeks of the year with literally zero income.On top of that, people want to use their own houses and only want to use it during the nice 10 week season, which further eats into their profits in northern areas. At least in the south, because the season lasts many many many months, you can still use It during for example May or October and you’ll get quite pleasant weather without eating majorly into your profits. Ain’t nobody using a Cape Cod or Jersey shore House in October, it’s just freezing

Michael Belmore · Answer

@Christian Fowler

Theres actually a really good episode on the bigger pockets podcast. Episode 364 with Avery Carl. She focuses on short term rentals in vacation areas and has seen some success with them.

I'm actually from Cape Cod and have seen people really thrive on short term rentals.

If your after only cash flow, there are some places in Dennis Port MA that offer land leased cottages for ranging from 95k to 140k.

I just did a brief look at what you can get in rent right now for July it looks like prices range from 150-300 a night. Thats booking in advance too.

Good Luck!

- Mike

Michael Baum · Answer

Hey @Christian Fowler, we do it like that. Our lake house is in North Idaho. It pays for itself and we make a small amount on it.

I hear what @Mark Miles is saying and I don't agree 100% with it. He always says that nothing works in the northern climes but it is working for me just fine. It all depends on the area. We are pretty empty from late fall to spring for the most part. There are ways to get someone in there for the off season.

John Underwood · Answer

To answer your question absolutely.

Your goals are more to have a free place for your family to use that is paid for by other people.

That is what is what I did. I have a lake house but same plan. I was pleasantly surprised that I also make money in each year.

Christian Fowler · Answer

@Michael Belmore thanks! I will check out that podcast.

Sean McDonnell · Answer

My wife and I recently stayed in our of our STRs on the beach in NC. It is the off season here so we do not get many bookings from Dec-Feb. It was really nice to enjoy our rental and we didnt feel to bad about blocking off the days for ourselves. I did get some work done there and it wasnt as relaxing as a normal vacation but there will be a time for that down the road :)

Tom Kastorff · Answer

@Christian Fowler I do this with my ski condo vacation rental, it pays for itself and my family and brother use it enough during the year to make it worth owning a place versus just renting (and it has appreciated a ton in just a few years). I don't know anything about Ocean Isle, so I would do a lot of homework on the seasonality (as others' have responded about so far), peak season, how to make revenue during off season, or ways to get a 6 month renter in there during the off season to offset losses. Look at Airbnb listings in the neighborhoods you are considering and see what those folks do in terms of pricing or deals for off months. Call property managers and ask what they see done during off season. Lot of ways to get answers you need.

Here is a great article on house hacking your vacation rental: https://www.biggerpockets.com/member-blogs/10042/64779-8-ways-to-effectively-hunt-for-your-vacation-house-4-free

Vacation Rental Good Investment?

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