I own a duplex on the bay just a block from the ocean in LBI, nj. Over the last two years we broke even on the rents, refi’d and put $30M back in and have seen an appreciation of more than $100M in the property. It is a great place to stay when it is not rented during the 10 week season. If you can break even on the first year, I think you are very lucky. Look closely at those figures to check for “other” expenses. I would pay particular attention to the appreciation in that area, writeoffs, and maintenance factors before buying. Also, is the land leased or do you buy it? Finally, what is the likelihood you will rent the full season i.e. what is your competition offering and are vacancies common. Finally, in an economic downturn second homes are usually the first to suck wind. But they certainly are fun to have.
My partners and I are going to purchase a property in Fire Island NY. A very popular and strong summer rental area. The values typically mirror the apartment market in NYC so we are probably near the high end currently. This is not a major problem since we will use the properties and rent along side friends for next few years.
Question: How can you expect to do over the long-term with these properties? There is not a clear relationship between rental value and property value as many of these are held by owner-occupants.
First year in we will probably break even after debt service, taxes and insurance(which is federally subsidized).
All ideas and comments are welcome.
Re: Investing in summer rental properties - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on January 21, 1999 at 14:34:53:
From the vacation rentals I have personally looked at, breaking even is the best I have seen. The market may be totally different in NY, but on the Atlantic coast of Georgia and South Carolina, most people are happy to break even.
The prime rental season only has about 12 weeks here. After that, the place is empty or is renting for a much reduced rate. Also, if you own the place, you will want to use it yourself. You also must take into consideration the management of the property. Who will take care of it when you are not there ? These services can get pretty expensive.
You will need to ask the question “Are we in this for a profit or are we in this to have a vacation home for ourselves ?”
I personally haven’t found a vacation property that makes anywhere near the money that my regular rentals do.