Financials of vacation rental property

[basil]

Dreaming mode here, a bit. I admit I'm a bit of a hobbyist Zillow surfer.

I would love to purchase a ski condo in northern New England...probably southern VT or NH, near a mountain, about 3 hours from where we live. We have a few years to go to pay off our mortgage on our primary house, and then we will be debt free.

I think my kids and I would enjoy it a lot. My DH is not sold....but I think I could convince him if the financials were sound. If we could rent it enough to pay for our taxes/HOA fees, he may agree. We'd need someone to manage it though, so that would cut into our rental income.

There seems to be a possibility my parents would split this with us - they currently own a ski condo in ME that is too small and too far. But have hung onto it because it doesn't cost them to keep it.

How do you go about calculating various scenarios with renting, etc.? What types of things are most important in this type of property? Anyone own a condo in VT/NH and willing to share how that goes?

[erosenst]

We own a condo in Florida that we rent out. A lot depends on your goals - stay even? Make money? Contribute to costs? Two of the three are easier to attain

High level - you really need to list all costs of ownership (insurance, interest if any, taxes, upkeep including stuff that will need to be refreshed to keep renting, management fee, cleaning service etc)

We have done it for 3 years now. Feel free to ask any additional questions here or PM me.

Good luck!


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[basil]

We own a condo in Florida that we rent out. A lot depends on your goals - stay even? Make money? Contribute to costs? Two of the three are easier to attain

High level - you really need to list all costs of ownership (insurance, interest if any, taxes, upkeep including stuff that will need to be refreshed to keep renting, management fee, cleaning service etc)

We have done it for 3 years now. Feel free to ask any additional questions here or PM me.

Good luck!


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I'd be happy to stay even or contribute to costs..My main goal would be to use it! But I would prefer to own something than keep renting if the $ was the same, even though I realize that is not financially sound. It's a psychological thing about having my place and my stuff and being familiar with it, rather than someone else's space. I would intend to calculate the amount we wouldn't spend renting in the benefits.

When you decided to buy your Florida place, how did you calculate all those things? Obviously some are easier than others, like taxes, insurance, interest. But not sure where to start in terms of upkeep, etc. Also do not know how to guess at typical rental income and $ of days rented, though that may be more obvious if/when we decide to seriously look rather than just Zillow surf on a rainy afternoon...

[erosenst]

It was sort of (sort of) easier for us. We knew that the rental season is really only three months so we knew the most we were likely to be able to rent it. We got lucky - we learned after we rented how controlled (by the HOA) the leasing terms are. We also priced right and got good pictures (can’t emphasize how much a professional photographer pays off) and have rented literally every day we’ve wanted to rent it.

For upkeep - we charge renters a cleaning fee, and most rentals do. If you will use and rent a lot you may not need a home watch - we have to have that. But two of the most important people in your lives will quickly become the cleaning service and home watch and/or handy man. (Your management company may take care of both. If so, THEY become important.)

We have had very minimal damage but you have to plan on some. If it’s not “wear and tear” the security deposit and terms of your lease will cover in theory. We replaced dishes that became chipped and some minor water repair where a renter didn’t put a shower curtain in the tub. The rest has been us continuing to upgrade as we bought turnkey. My cousin had rented a lake house out for years. His suggestion was to provide cleaning supplies etc - if they are there people will use them, and use what you would like them to use. We have only had one renter where the cleaning service said that they left it less than clean. The rest have kept it really clean. I think some is the price point - people who pay what we charge are used to living in a nice place and taking care of it.

When you determine price look on Zillow for “way far out” to see the range of prices - then closer in to see what’s no longer avail/people have rented. (Make sure to look at a comparable season.) Are people paying up for nicer and those rent first? Is money a real object and cheaper rents first? We priced “kinda low” the first year to get reviews and have been creeping up since. We aren’t at top of market but top third and we will stay there.

Reviews are a BIG deal. Consider having a friend rent via VRBO, and reimburse them for everything including booking fees, if you aren’t getting rentals. Even one review is better than none. Again - we got lucky and rented the first year without doing this. We directly ask our renters to leave a review.

We also benefited a bit from my “love of the chase”. We routinely get comments on how well equipped the kitchen is, how nice the linens are etc. I knew good deals on quality stuff and took advantage and saved a lot. Happy to share suggestions there as well.

Let me know what else I can answer!

[Snow mom]

There are a lot of Airbnb listings for places like Cannon, Waterville, etc. It’s so common to rent out houses and condos in these ski resort areas that you’ll find a lot of realtors that can walk you through the process and give you ideas of what is involved. I’m not sure where you are in MA but I’d really do NH over VT. While they seem pretty equally close VT is a lot more geographically isolated in that it’s harder to get from here (wherever in VT) to there (wherever in VT). I love the Whites and really wanted a place up there but ultimately decided it was a pipe dream. One thing I’d consider is _when_ would you want to use it. There are times that are particularly popular for rentals, like Columbus Day, February break, etc. and those are the times you’d be most assured renters, but also most likely to want to use it yourself. We know people who live in Newton and rent their cape house for the summer weeks except maybe one or two. They only really use it for themselves in the off season as they can get so much more renting it per week over the summer. When you’d want to use vs. rent will make a difference in the economics. Some of these areas have more amenities that make them nice year round but not sure how full the ski villages are in the non-ski season.

[Snow mom]

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[mmsmom]

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[mmsmom]

Keep in mind that there are tax implications for rental income. However, you can deduct many expenses to negate the taxes. But, in order to classify the house as a rental for tax purposes then you can’t use it personally for more than 2 weeks a year or 10% of the time it is rented, whichever is greater.

I don’t know all the tax rules but this is something that came up for us. You can still deduct expenses if you use it more but you can’t claim a loss.

Also, with the pandemic which hopefully won’t happen again but I would plan for what would happen if you couldn’t rent it for a season or two. Make sure you could still cover the expenses.

[erosenst]

The pandemic has definitely impacted us. We chose to refund a week for people who left early in March to get home. We’ve had several cancel for Jan-Mar 2021 although have been able to rebook, and when March canceled the second time we decided not to rent again - DH can use it during the pandemic when he usually would
have conflicts most of March.

We have heard others that aren’t so lucky - haven’t been able to rent and it’s causing financial
hardship. I would try to make sure it’s not that close.

Agree on tax rules - we can only deduct expenses to amount of income. It just means that we don’t have to pay tax on the income.

Reminds me - check if there’s a lodging tax or similar where you are buying and if it includes this type of rental. Ours have it and we pass that cost through to renters. We’ve never had anyone question it.


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[WatchingThemGrow]

Not the same market, but I'm enjoying sitting in my in-laws' rental beach house right now. It is a huge blessing to us as this is our 3rd week this year here. A college niece (and her friends) got stranded here when the pandemic started and had to stay for more than 2 mos. The restocking/replacing feels like an ongoing task. The pans, linens, bath rugs, sofas, tv's, washer and dryer, all appliances, elevator, etc all need repairs. I think MIL kinda balances the rental income with home improvements that are constantly needed. So, we ended up getting couches and a dishwasher this year, then needed a new fridge, w/d, back deck, and roof within a few months of each other. DH asked her about something else and she said, "Not this year. I've spent enough on that place this year!" So, you'll want to determine what your limit is, how much you intend to spend each year to maintain the contents. We've had new mattresses and window blinds, doors, windows, new paint...it goes on and on. Actually being down here to "receive" all the new appliances was a bit tricky when stuff needed to be delivered between renters, during the workweek. I'm glad our "team" of BILs and SILs are able to help out now that MIL is not so much.

It's always something though...we really need to replenish the comforters, another set of couches... so how much of that type of stuff are you up for? Our rental company does a great job, but I do get annoyed that my awesome Aldi pan from the spring is now all scraped up by renters. OH, and are there people you'd let use it without paying? It's probably good to have that part figured out.