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URL:  https://boards.fool.com/intercst-2-i-believe-most-real-estate-investors-17670186.aspx

Subject:  Re: OT: KISS Date:  8/11/2002  10:31 AM
Author:  inparadise Number:  73474 of 882327

Intercst: 2) I believe most real estate investors buy properties close to home? Am I way off base there? So in addition to buying "well-selected properties", I also need to insure that my current place of residence and its surroundings is not the site of the next "highly localized" debacle.

I know this one person who buys mid range price SFH in resort areas all over the world to rent to the tourist market. The return on these properties are astronomical. Though it means having a management company do the day to day work, the extra rent one gets on the short term market is well worth it. We looked at a house here on St. Croix that would have gotten a long term monthly rent of $1500-$1750, (and of course the tenants would have been responsible for all utilities and yard work,) but would rent in season for $2500 to $3500 per week based on number of occupants, (including all utilities, maintenence and maid service). Based on a conservative 90% occupancy in the high season and 25% occupancy in low, (numbers we got from multiple management cos on island based on their similar properties,) hiring out all but the pool work and acting as my own renting agent, we were projecting a 15% return in year 2, going up to 25% return per year in year 10. This was with assuming the first year would be a total write off, doubling anticipated expenses for variable things like water and electricity, and having a 0% appreciation on the house.

He recruits all his rentals over the internet, saving the 20%-35% a realtor would charge him. While it would be insane to project your profits on renting 52 weeks out of the year, he had his rented out 50 weeks pre 9/11. I have noticed a slight decrease in occupancy since then, but not during season.

Nothing is guaranteed, and if you leverage yourself beyond your comfort level you are a fool, both with real estate and with stocks. Given our circumstances, we could have afforded to swallow all the costs if the place didn't rent. We wound up backing out due to local issues, but I am actively researching this area of real estate investing. Wouldn't mind investing in a REIT that does short term rentals.

InParadise,
who thinks we should set up the REHP REIT based on this premise. <grin>
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