Investment property - Posted by Michael

import · July 23, 2007, 7:48pm

Posted by James on July 25, 2007 at 06:05:50:

I’d be thinking that a regular LO for a seasonal property wouldn’t make as much money versus renting the property out to multiple tenants as a vacation spot/getaway.

Just my thoughts - it might actually be better w/ straight rent though.

James

import · July 23, 2007, 7:48pm

Investment property - Posted by Michael

Posted by Michael on July 23, 2007 at 19:48:40:

I have recently purchased a beach home. The property was purchased for $975K. I am having some issues with the note payments. The interest rate is too high. 9.5%.
The property is used as a rental. I have a management company that handles the renters and all of the marketing.

I would like to get some options on what I should try. And who should I talk to first. Any information you can provide would be of great helpâ?¦

Thanks!!

import · July 25, 2007, 11:04am

Where? - Posted by Wayne-NC

Posted by Wayne-NC on July 25, 2007 at 11:04:02:

All “beach” property was not created equal. Locale will help in our assessments.

import · July 25, 2007, 5:41am

Re: Investment property - Posted by Eric in FL

Posted by Eric in FL on July 25, 2007 at 05:41:08:

Michael,

Please don’t take this as negative advice but it comes from years of being in the vacation rental business. You need to really assess if you should keep this property or sell it now, any way possible. I know you think your new beach home is a great investment but sadly it probably isn’t. I own oceanfront homes that I see as barely breaking even, which is fine, but there are so many other costly factors.

You could refinance the property to a much lower rate but I hope you bought extremely right because if you are on the east coast I bet your appraisal might come back lower. Maybe not just going with trends.
Come October - May will be maintenance time. Be prepared to spend double or triple for repairs than you would a single family home. Yes, triple because weekly or monthly renters don’t care.
Take a look at your utility bills. I often drive by the houses and the AC is on 70 degrees with every door wide open. It’s reality.
Even if you are getting $3000 a week rental fee with 25 possible weeks (you will have vacancies) it will get real tight. PITI - $5000 per month + utilities ($500 / month) + repairs ($1000 month) + management fees ($500 / month)(Rev $75000/yr Expenses $84000/yr) and all the sudden you are negative. Not to mention the wonderful natural disaster of hurricanes or flooding. 2004 was unbelieveable. Anyway,I know it seems like the greatest investment at the time but long term you may want to sell on great terms and wait for the next great deal. Hope this helps.

Best Regards,
Eric in FL

import · July 24, 2007, 11:49am

Re: Investment property - Posted by Matthew

Posted by Matthew on July 24, 2007 at 11:49:51:

Michael-
have you considered an option ARM? I put 2 on my investments- makes it cash flow really nice and making one or two full payments a year keeps it from negative amortizing.
I can send you the info.

import · July 23, 2007, 8:27pm

Re: Investment property - Posted by James

Posted by James on July 23, 2007 at 20:27:10:

Sounds like a great investment…as long as the beach isn’t man-made.

When you say ‘issues’, what exactly do you mean? Where’s the property located? Can you lease it out as a seasonal placed better than your management company? Alongside of them as well?

Find out the going rates for rentals in the area on the beach - this may help you understand what your management company is saying/doing.

James

import · July 25, 2007, 6:11am

Re: Investment property - Posted by Natalie-VA

Posted by Natalie-VA on July 25, 2007 at 06:11:24:

Eric,

Have you found that it’s cost effective just to put a year round tenant in a vacation property?

Just wondering if it would even out when you look at the extra expenses of having weekly or monthly tenants.

–Natalie

import · July 24, 2007, 4:11pm

Re: Investment property - Posted by Michael

Posted by Michael on July 24, 2007 at 16:11:14:

What, I am referring to was a high P&I payment. The number was good initially but now there are cash flow concerns…It is being leased as we speak. Only trouble is the property does not generate that much cash in Oct-May. Too may slow months.

import · July 25, 2007, 7:30am

Re: Investment property - Posted by Eric in FL

Posted by Eric in FL on July 25, 2007 at 07:30:23:

Natalie,

I have begun doing that because years ago I bought right. The problem in FL is the communist local governments did things like raise property taxes on one of my houses from $3300 to $11200. I complained but all I was told was “that is how much your property is worth and this is the millage rate.” Case closed but I wonder how they will react when values start heading down? Do you think they will take less tax? Yeah right. Any way, yes long term is the way to go but again it barely covers everything since the tax and insurance increases and that is why several owner are going short term. It’s a slippery slope in FL that we cannot control (taxes and insurance) and that is why you will see this is just the beginning of the implosion. The benefit of the implosion is great deals in the future.

Best Regards,
Eric in FL

import · July 24, 2007, 8:13pm

Re: Investment property - Posted by StevenS(CPA)

Posted by StevenS(CPA) on July 24, 2007 at 20:13:47:

Do you want to keep the property? You could sell it on a wrap with a small down and owner financing or rent to own and then you wouldn’t have to worry about renters or rental payment.

import · July 25, 2007, 10:57am

Flip-Flop possible? - Posted by Wayne-NC

Posted by Wayne-NC on July 25, 2007 at 10:57:08:

If current trends continue along the lines that you imply, the future $1,000 property payments will look like this: T&I $850, principle and interest $150. Maybe an over exaggeration but you got the concept. The banks won’t like that! How can values increase if the payments that people can afford get eaten up with taxes and insurance? Something gotta give! Years ago in a small beach town in NJ my Dad told me about an area where they would GIVE you the property as long as you build on it within 18 months. This is so they can TAX it! Florida will get there. The new slogan for Florida" Move here and we will GIVE you the house! Just pay the taxes and insurance of $2,000/month (written in fine print). Mortgage interest fluctuations will have no effect at that point. True ownership will have evaporated. If you don’t pay your quasi mortgage the true owner will come and take it back. Buyers will essentially become renters. Basically that’s the way it is anywhere right now. We buy the right to use from the true owner, the government!