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      01-11-2019, 02:34 PM   #1
albertreet
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Vacational Rental

Hey all, I know in this forum there is a lot of business minded people, so I wanted to ask. How much is your profit in your vacacional rental after mortgage an expenses?

I'm currently about to invest on a house of 550k putting 55k down so 10%.

I know I'm going to net $500 or more, monthly after expenses and mortgage.

Is this ok?

Thank you all!
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      01-11-2019, 02:49 PM   #2
JohnnyCanuck
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While I don't have a vacation rental, we do own two rental properties and I think you're looking at this wrong.

Your costs are: mortgage interest, maintenance, insurance, renter acquisition costs, and property taxes. Your income is your rental income. However, this income is taxable so you need to account for that. Your true net income is therefore your income minus your costs and taxes on your net income. That part is easy and you are projecting a $6000 annual profit on a $50000 investment or 12% before taxes.

That's pretty good ROI. On top of that, you have the added utility of your rental income paying the principal of the mortgage building equity at no cost to yourself. That is additional profit to be factored into your calculation. The last area of profit/loss to consider is whether property will appreciate or depreciate.

In other words, your true profit is: net income + increased equity +/-appreciation/depreciation (minus initial acquisition (closing) costs and projected disposition costs) minus taxes. I know nothing about capital gains taxes in the US so it may be an additional factor.

In the scenario you are laying out, you are likely going to have a very healthy ROI. Once you calculate what that actually is, you can then determine whether you have another investment vehicle available that may provide a better return at the same risk level. If your numbers above are grounded, that's unlikely and it sounds like a good bet.

Last edited by JohnnyCanuck; 01-12-2019 at 12:03 PM.
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      01-13-2019, 02:21 AM   #3
eluded
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Does $500 a month profit cover depreciation, repairs , issues with tenants/lawyers, and unseen expenses?
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      01-13-2019, 01:13 PM   #4
Timdm3
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We have one in a beach community that provides roughly 15% roi. We make that in 11 weekly rentals during the peak season through vrbo and a few weekend rentals through the year. Rest of season is open for use for my family and friends.

While extra income and increasing equity are great, we still are aware and save for upkeep. House is 4 blocks from ocean 2 blocks from bay and gets hammered by salt air. Air conditioning handlers x 2 will need to be replaced at $5-7k each. Repairs from renters that are mostly good but they do beat up the house.

Overall great investment and would recommend it but it is not passive. There is definitely a labor aspect to keeping renters happy and house in good condition.
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      01-14-2019, 12:14 PM   #5
KenB925
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I have a vacation property, that we just started renting out this past summer.

It has been renting well, we bought it well put just over 20% down, the place is now worth just shy of double what we paid.

Being our first year we had a bunch of startup costs. We use a rental company that is local to the property.

So far I would say that renting out a vacation home is a way to offset the costs of owning something that you want. There is the nice up side of the property appreciating (hopefully), all in it is profitable, but not really a source of cash flow.

Depending on where your property is there are other things you can do with it. Ski lease for example, but that comes with what I think are too many disadvantages.

January should be our best month yet, so my tune may change slightly, but the second installment of property taxes are going to be due soon.

If anyone is looking for a place to stay in Tahoe Check it out.
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      01-17-2019, 08:19 PM   #6
albertreet
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Thank All for your response, I think I've found a better deal. I'll keep you posted on the progress
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