Real estate reality

[corn18]

How would you like a take-home pay of $22K a month with no tax?

I wouldn't want to take the cut in my net income.

[thestrongprofessional]

Owning rental property

Hey guys,

I've always been interested in owning rental properties. I currently live in San Juan, PR and I started looking for properties about 3 months ago. After looking at between 15-20 properties and doing the math on all the expenses associated with owning and operating a rental unit I decided against buying one here. I would eventually love to get into the rental business and hearing about how people build long term wealth doing it only reinforces my desire.

Raphael

[TexasHusker]

Hey guys,

I've always been interested in owning rental properties. I currently live in San Juan, PR and I started looking for properties about 3 months ago. After looking at between 15-20 properties and doing the math on all the expenses associated with owning and operating a rental unit I decided against buying one here. I would eventually love to get into the rental business and hearing about how people build long term wealth doing it only reinforces my desire.

Raphael

I feel certain that there are plenty of real estate opportunities in San Juan. Being a prime year round vacation destination, a vacation rental might be the best way to dive in. There are currently 377 vacation homes in San Juan that are listed on VRBO. That tells me there are 377 other people doing it. There are over 1400 vacation rentals listed in Puerto Rico on VRBO alone!

With you living there, you are at a distinct advantage because you can scout out really good buys.

Good luck!

[TexasHusker]

I wouldn't want to take the cut in my net income.

The difference is, his $22K a month is backed by hard assets that will likely appreciate significantly over the long term.

$22K a month salary works great, until the company has other plans.

[corn18]

The difference is, his $22K a month is backed by hard assets that will likely appreciate significantly over the long term.

$22K a month salary works great, until the company has other plans.

Ah, I see. I have assets as well. But since they are in the market, that means they could lose 40% of their value in any given month. While his assets are likely to appreciate significantly over the long term. Wish I were as smart as you guys, then I wouldn't have bought a house that lost 30% of its value in 2009 and has just now recovered to what it was worth 7 years ago. But after transaction costs, is still under water 10%.

You make it seem so easy.

[Singuy]

I'm kind of in the same boat. Yeah I've got some headaches - just had a vacation rental burn to the ground in the Gatlinburg fires - but I'm also grossing $115K a year in return. My investment income allowed me to walk away from my 50 hour a week headache for good.

Any investment that makes prolific returns is certainly going to involve more energy than Fidelity Target 2050 Fund.

You gross 115k but what is your number after property tax/hoa/insurance/maintenance/home warranty/lawn care and interest?

[corn18]

I'm kind of in the same boat. Yeah I've got some headaches - just had a vacation rental burn to the ground in the Gatlinburg fires - but I'm also grossing $115K a year in return. My investment income allowed me to walk away from my 50 hour a week headache for good.

Any investment that makes prolific returns is certainly going to involve more energy than Fidelity Target 2050 Fund.

Sorry to hear about your rental burning down. That seems to be a risk that should be acknowledged. While the structure and contents are covered by insurance, is the loss of rental income covered?

There is little chance of my investments burning to the ground.

[TexasHusker]

Sorry to hear about your rental burning down. That seems to be a risk that should be acknowledged. While the structure and contents are covered by insurance, is the loss of rental income covered?

There is little chance of my investments burning to the ground.

Thank you. Actually the insurance settlement will make this a really good investment: I had $220K in the structure. The land is easily worth $100K and I got a check to rebuild the structure for $165K, plus I will receive approx 1 year of lost rent and a check for contents.

But certainly any investment property should be adequately insured.

And I assure you, any investment can burn to the ground. I've had many.

[StormRichards]

Thank you. Actually the insurance settlement will make this a really good investment: I had $220K in the structure. The land is easily worth $100K and I got a check to rebuild the structure for $165K, plus I will receive approx 1 year of lost rent and a check for contents.

But certainly any investment property should be adequately insured.

And I assure you, any investment can burn to the ground. I've had many.

Do you plan to rebuild? A neighbor's property was considered a total loss after a gas line explosion last winter. They finished the rebuild over the summer. At the time, I wondered to myself whether I would want to rebuild or do the tear down then sell the land. Honestly not sure what way we would go.

[97guns]

Thank you. Actually the insurance settlement will make this a really good investment: I had $220K in the structure. The land is easily worth $100K and I got a check to rebuild the structure for $165K, plus I will receive approx 1 year of lost rent and a check for contents.

But certainly any investment property should be adequately insured.

And I assure you, any investment can burn to the ground. I've had many.

Looks like you can sell the land and get into another like property and pocket some money, around 40k?

[Nutria]

There is little chance of my investments burning to the ground.

Literally, no, your stock market investments can't burn to the ground, but metaphorically... remember all the Enron employees who put most of their wealth into company stock.

[TexasHusker]

Do you plan to rebuild? A neighbor's property was considered a total loss after a gas line explosion last winter. They finished the rebuild over the summer. At the time, I wondered to myself whether I would want to rebuild or do the tear down then sell the land. Honestly not sure what way we would go.

Yes, we are going to rebuild. The land is immediately on a rushing trout stream and they aren't making any more of those, so we are currently rebuilding a first class log cabin that should improve our return over the old house significantly.

One secret to a good vacation rental is location. Since mine is on water, it is sought after. Kids can fish, play in the creek, etc.

Here is another one of ours: www.CabinOnRiversEdge.com

[disneysteve]

Texas (and whoever), I have a question about your rental homes. We rent vacation homes regularly. We are actually in one right now. I know rental places really take a beating. I'm curious what damage you actually charge the renter for and what things you chalk up to the cost of doing business.

[TexasHusker]

Texas (and whoever), I have a question about your rental homes. We rent vacation homes regularly. We are actually in one right now. I know rental places really take a beating. I'm curious what damage you actually charge the renter for and what things you chalk up to the cost of doing business.

Vacation rentals typically do NOT take a beating - that is a huge myth. We have found that guests are generally very respectful of our homes and appreciative of being able to stay. We have had one of our cabins since 2005 and the only one time do I recall an item being misused by a guest. (A teenager carved their initials on the inside door of an armoire)

Additionally, wear and tear is very light - much lighter than a residence, and for several reasons:

1. Guests don't "use" the house much. They rarely cook, rarely use the washer and dryer, etc. Vacationers want to eat out, see the attractions etc. They just aren't home much to use the house.

2. A good property rents 200-220 nights per year. So the other 140 nights, it is empty.


I have 4 cabins grossing about $115K per year. I earmark $10K a year for repairs / maintenance. Hot tub repairs, HVAC, septic, lawn, trees are the primary expenditures.

[StormRichards]

Vacation rentals typically do NOT take a beating - that is a huge myth.

Not speaking from personal experience but have a few friends that have rentals. Like many things related to real estate, location, location, location is a big factor. A cabin on a lake and a tiny boardwalk rental in Ocean City, Maryland are going to have a much different customer base.

The friend that owns vacation rentals on a family friendly beach in Florida doesn't have horror stories to share. They have guest books in their units filled with wonderful messages often thanking them for sharing their slice of heaven with them. Many become regulars.

The friend that owns a small boardwalk rental in OC has shared pictures showing just how disrespectful people can be to other people's property.

Location, location, location