Reply to Do you think a vacation home is a good investment?

Forum Index » Money and Finances

Reply to "Do you think a vacation home is a good investment?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]For us, absolutely!  We purchased an ocean front house in Corolla, NC in 2017.  We got it for a steal and it has a mortgage at a nice low  fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep.  And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.  [/quote]

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?[/quote]

We only rent it for the weeks in the summer when it commands top dollar and then use it the rest of the time or allow our parents to stay.  It’s a beautiful home and I get so happy every time we go.  Our property management company keeps the home beautiful and their fees are very reasonable for the service they provide.

We paid $1.1M and a conservative estimate of its current value is around $2.5M.  So between the $500K down payment and $115K in repairs, those are just about our only costs since the mortgage, insurance and repairs have been pretty closely covered the summer rental fees.  (Except 2020 when we did not rent, but used it as soon as the OBX bridge opened up.) If we were to sell it now, that would be huge gain on our $615K initial investment and would beat the performance of our stock market holdings since 2017.

To the hurricane comment, that’s the case with virtually all ocean front homes. It’s a risk, but that’s the nature of the world.  Some won’t be willing to risk and that’s fine for them too.

For us, it was a very wise choice.  If we did not have the cash to fix up the home when we first bought it, it would be another story.  Having the cash to make the house beautiful and ready to rent at a premium was key.  [/quote]

See, here’s the thing.  It’s worth that now, but OBX property values rise and fall with reckless abandon.  There is zero guarantee that your house will maintain or increase in value, and an equally good chance that it will decline.  And the decline can happen with very little notice. [/quote]

Sure, that’s part of the risk. Just like any investment.  Real estate is no different.

But I’m willing to take this particular risk and if the house declined in value, it’s only a modest portion of our NW.  We have plenty of other assets in property and the stock market.

And so far it’s paid off handsomely in our case.  $615K of our cash in 2017 for a $2.5M asset in 2023 plus the use of that asset has worked out quite well.  It’s fine if others want to make different choices.  
[/quote]

You’ve missed my point.  I’m not talking about real estate in general.  I’m talking about OBX real estate in particular.  It’s a lot more volatile.  The overwhelming majority of the houses are investment properties.  The first downtown in the market and the first rise in interest rates hit there first.   Yes, there was a nice covid upswing, but that’s over.  [/quote]

Okay, it sounds like you and I disagree and that’s totally fine.

My home could lose over 50% of its current value and it still would not meaningfully affect our cash flow.  It would simply go back to around our purchase price in 2017.   We can ride out a market downswing.

Now, if we lost renters (like we did in 2020) or the rents went way down, that WOULD affect how I view the house.  Right now it costs us nothing marginal to own the home since the rental income covers mortgage, taxes insurance, upkeep etc.

Then we would have to cover the $4K monthly mortgage, taxes and insurance from our own funds.  We could do it, but I would not be happy about it.

Or if there was a big natural disaster, that would obviously not be great, but that could happen anywhere at anytime and I choose not to live my life worrying about stuff like that.

I get why people would not want to take the risk.  But some people have the cash and are willing to jump in.  There are some upsides to be aware of as well as the downsides.  [/quote]

Does it stress you out when you go to the house and stuff is broken/missing/dinged up? I'm type A and I don't think I could handle this. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics