I previously wrote about finding your investment property and this is part two of this series. Part one talked more specifically about my trip up to bend Oregon and how I was looking for vacation rental properties.
To me, vacation rental properties can be a lot more profitable and enjoyable because you also get to enjoy using the property as well as renting it out. There are downsides of course to buying a property you plan on renting out such as faster wear and tear, people not treating the property very well, having things broken or repaired. Having said that the good news is these people renting out your property are paying down your mortgage and usually at a nice nightly premium price.
So the rental property I looked at an Oregon was a two bedroom two bath 1,800 ft house right on the 17th fairway of a nice golf course. It’s a prime location for those looking to get away and it’s also set up nicely as a two-bedroom house so couples can come up together. So my target renter in this instance would be an older married couple usually wanting to get away with some of their good friends who are more likely to take good care of your house versus a couple of college kids looking for a place to party.
I met with the realtor and this property is actually a unique property as its owner is selling a 50% interest instead of the entire property. So this would be a 50/50 partnership with the current owner which would allow both of us six months a year to either rent out or vacation ourselves if we wished.
I asked for a revenue report to see what the monthly gross income is from renting out the property. Since the average nightly rate is about $300 it doesn’t take too many days to be rented out a month to have a nice gross revenue coming in. But the current owner is using a vacation rental company to fill the house which takes a 40/60 share. This of course takes 40% out of the gross revenue which gives us less money coming in each month. But of course in order to get a house filled, you need to work with a vacation property management company since I don’t want to have to market the property myself.
The 50% ownership is being offered at $300,000 and after running the numbers I would be paying almost $400 extra out-of-pocket which means it’s not cash flow positive. Now in most instances for investment property I would walk away from a deal like this but since it’s a vacation home as well as a investment property you have to think somewhat differently.
I still haven’t made my decision and the property has been on the market for a couple months now ( Bend has an excess supply of real estate on the market currently) so there’s no real rush. If the seller is willing to come down on the price and the gross revenue continues to trend upwards, then I might be more interested in jumping on this deal.
As for now though, I’m going to wait it out and see what other deals I may stumble upon in the meantime. It’s important to not always by the first property you come across even though you might think it’s a great deal. It’s always nice to have a couple of options before making your final decision.