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Author: katiewa Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 91  
Subject: how to evaluate Date: 4/12/2012 11:27 AM
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Browsing around CraigsList last night and came across a river-front (fishing, canoeing) property for a slightly lower-than-average price about an hour away. In looking through VRBO, most vacation rentals in that area are already fully (or nearly) booked for summer, 2012, regardless of price ($100-$800) or maximum number of guests (4-30). Several have bookings for April and May, a few have them for December, 2012.

The house in question has not been used as a vacation rental previously, so there is no history. However, the current owner decided last week to rent it out this year (through a property manager), and already has 5 bookings.

I have not yet seen the house. However, the location (based on Google Earth and county maps) is excellent--private but not remote: a 5-house subdivision surrounded by state and federal land, 1/2 mile from the highway. The area is known for fly-fishing, boating, and Yellowstone in the summer, and snow-mobiling and cross-country skiing in the winter, so the house has year-round potential. Because real estate is so depressed in our area, there is significant appreciation potential over the next decade.

What other questions do I need to be asking as I consider this property?

Thanks.

Kathleen
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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63 of 91
Subject: Re: how to evaluate Date: 4/12/2012 11:47 AM
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What other questions do I need to be asking as I consider this property?

Make sure it is a legal rental. Just because he is renting it out doesn't make it so. Many towns have restrictions against short term rentals and you don't want to find that out after you hold the mortgage. HOA restrictions can also be an issue.

Since he is using an agent to rent it out, see if that agent has other rentals in the area and use a similar home rental history to get some idea of what you might expect. If you like, I can email you a profit projection spreadsheet I use to evaluate what the economics of a property looks like. It helps me remember to factor in much of the details that don't always apply to regular rentals, like cable tv and maid, as well as factor in tax benefits. Also factor in their management fee even if you intend to manage it yourself, to make sure that it is at least break even if you have to have someone manage it. I call that my "hit by a bus" factor. No way DH would manage our rental if I were taken out.

And speaking of tax benefits, get this book and read it: http://www.nolo.com/products/every-landlords-tax-deduction-g...

I got mine at amazon for about $25. Make sure you get the current edition. It has a chapter specifically for vacation rentals and points out the differences for VRs from long term residential rentals where those differences exist.

Property sounds awesome, but you already know I'm a sucker for river front!

IP

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Author: LLRinCO Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 64 of 91
Subject: Re: how to evaluate Date: 4/12/2012 3:15 PM
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You could rent the property for a weekend - doesn't hurt to check out the HVAC, appliances, electrical box, etc while you are there.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65 of 91
Subject: Re: how to evaluate Date: 4/12/2012 5:08 PM
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You could rent the property for a weekend - doesn't hurt to check out the HVAC, appliances, electrical box, etc while you are there.

Excellent idea. We rented a place for 10 days that we found out was for sale when we arrived. I spent quite a bit of time researching and documenting what I found to use in negotiations if need be. One of the issues I noted was a failing septic. We brought it to the sellers attention and told her we would not even consider submitting an offer without it taken care of. Would have not seen it without using the place, as it had been vacant for a while.

One reason we chose not to buy is that we had to get in the car to do anything, even something as basic as a decent walk with the dog. The house we bought has a great road for hiking just around the corner, and a highly regarded hike with a waterfall 3 miles away. I like having options.

IP

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