We're looking into buying a investment property to use as a short-term rental (IE - VRBO) and are thinking Galveston would be a good place since it's relatively close and we can make use of it in the off-weekends.

Wondering if anyone on here has experience with this? We're trying to look for the best potential return - beach house, bay house, condo, east-end, west-end, etc. We're heading down in a couple of weeks and would like to meet up with an agent to discuss in more detail and have them keep an eye out for us.

If anyone on here has some advice (or an agent recommendation) - I'd appreciate it.

Thanks in advance.

Highly recommend Barney Rapp Realtors (409-763-1961). I've known Barney for 60+ years and we were roommates all 4 years at A&M. You won't find a better guy to deal with.

Premium has a place in Pointe West. He's got a post in classifieds for the vrbo listing

cclearman said:

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Premium has a place in Pointe West. He's got a post in classifieds for the vrbo listing

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Was unaffected? Pointe West overall. Nice place. Curious.

If you can buy with all cash, insurance doesn't have to matter.

To risky otherwise to me.

So owning a property on a barrier island with no insurance isn't risky?

Diggity said:

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So owning a property on a barrier island with no insurance isn't risky?

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You have a lot different options. Set the amount of the premiums aside to rebuild if that's your goal. You're not forced to pay into astronomical insurance you'll never get your money back on.

If not, sell the lot and your only out the purchase price instead of tens of thousands of dollars in insurance each year on top of it and interest.

That's sounds like a good plan if there are no storms for several years or so after purchase.

Just my take on it. Family has had beach house for over 50 years. You think dealing with insurance is frustrating in Houston? Good luck watching home owners point the finger at wind who points the finger at flood, who says it doesn't apply because of some obscure fine print. Of course that's after paying 10-20 fold premiums every year for all of them.

That also doesn't factor in highs maintenance costs because the sun and salt destroys everything exponentially quicker than even in Houston.

I'd rather wait five years to rebuild than deal with the insurance game anymore. Statistically, the storms don't happen enough otherwise.

If this is a true investment property, there are much better and safer ways to invest your money. If you are trying to finance a get away spot, it might work. Just don't go fooling yourself into thinking you are going to turn some crazy profit.

Milwaukees Best Light said:

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If this is a true investment property, there are much better and safer ways to invest your money. If you are trying to finance a get away spot, it might work. Just don't go fooling yourself into thinking you are going to turn some crazy profit.

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Yeah, I don't think anyone really "invests" in beach houses, they just try to rent out enough to help with the mortgage. OP should spend some serious time in the areas he's interested in before finding out the hard way that he's got the ratio of bookings to free weekends completely backwards.

Call it what you want. It's not lower risk to not carry insurance.

Thanks for the replies.

"Investment" may be a bit of a misnomer - we're not expecting this to throw off tons of money every year. But if we can get something that pays for itself, plus a bit, and allows us a place to stay in Galveston a couple of times per year - that's what we're looking for.

Thanks

Why Galveston when you can get a timeshare on Lake Conroe?

We looked into this a few months back and there is no way at current market prices that you will be cash flow positive on something like this when factoring in insurance and routine maintenance unless you put down significantly more than 20% down.

HeightsAg said:

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We looked into this a few months back and there is no way at current market prices that you will be cash flow positive on something like this when factoring in insurance and routine maintenance unless you put down significantly more than 20% down.

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yep, prices are just too high right now. I have been looking at a canal house for a while.

We put 10% down as a second home and made 50% cash on cash ROI our first year. Went so well we bought a 2nd and will probably buy a 3rd (all beach side houses) unless we do something in the commercial market for another business.

So far way out performing our long term single family investments and it's a lot of fun to use it whenever it's open. Our rule is basically only going down when it's not rented which is enough for us.

I will say this - you will earn your ROI as it is a job. If you plan to let someone else run it for you their fees and lack of urgency will probably cost you to break even, but more likely lose.

how did you get away with only putting 10% down?

Ragoo said:

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how did you get away with only putting 10% down?

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2nd home

Premium said:

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We put 10% down as a second home and made 50% cash on cash ROI our first year. Went so well we bought a 2nd and will probably buy a 3rd (all beach side houses) unless we do something in the commercial market for another business.

So far way out performing our long term single family investments and it's a lot of fun to use it whenever it's open. Our rule is basically only going down when it's not rented which is enough for us.

I will say this - you will earn your ROI as it is a job. If you plan to let someone else run it for you their fees and lack of urgency will probably cost you to break even, but more likely lose.

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How much you do yourself? You do the cleaning or hire that out? Where do you list? Just on places like AirBnB and Yelp?

Premium said:

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Ragoo said:

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how did you get away with only putting 10% down?

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2nd home

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And you aren't violating the terms of the loan by using it as a rental (or an investment property)?

03_Aggie said:

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Premium said:

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Ragoo said:

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how did you get away with only putting 10% down?

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2nd home

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And you aren't violating the terms of the loan by using it as a rental (or an investment property)?

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We do use it as a 2nd home though. It wasn't strictly an investment property. From what I'm aware you can rent out your primary or secondary homes.

Hire everything out but schedule all trades, Cleaning, etc and schedule and manage all bookings.

Order of success:
VRBO
Trip Advisor
Air BnB
TexAgs

Ragoo said:

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HeightsAg said:

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We looked into this a few months back and there is no way at current market prices that you will be cash flow positive on something like this when factoring in insurance and routine maintenance unless you put down significantly more than 20% down.

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yep, prices are just too high right now. I have been looking at a canal house for a while.

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I agree with this. In our community I do not see any decent deals.

I don't care one way or another, but if you're getting the ROI you claim, I don't think it would qualify as a second home.

I think 10% and 14 days is the litmus test.

Diggity said:

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I don't care one way or another, but if you're getting the ROI you claim, I don't think it would qualify as a second home.

I think 10% and 14 days is the litmus test.

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i don't care one way or the other, but the amount or marketing put into the rental side of the 'second home' makes the 'second home' sound like more of a tertiary.

Ragoo said:

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Diggity said:

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I don't care one way or another, but if you're getting the ROI you claim, I don't think it would qualify as a second home.

I think 10% and 14 days is the litmus test.

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i don't care one way or the other, but the amount or marketing put into the rental side of the 'second home' makes the 'second home' sound like more of a tertiary.

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What do you mean? People sign up second homes to be managed by a company - those people pay 20% in management fees. It's a HUGE marketing cost to do so.

We choose to do the management ourselves and save that money. I really don't see the difference.

Here is an interesting article on the topic here:

https://themortgagereports.com/21116/second-home-mortgage-qualify-for-vacation-residence

Quote:

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New lending rule: defray second home cost with rental income
For some, owning a vacation home may sound like something reserved for the rich and famous, but that's not necessarily true.
Owning a second home may not be as expensive as it first appears. The reason: potential rental income.
Some homeowners defray their monthly mortgage expense by renting out their vacation home when they're not using it.
The rise of Airbnb and similar services now makes it easier to receive occasional rental income.
This practice is even allowed by most lenders. Fannie Mae, the agency that creates rules for the majority of the nation's loans, updated their stance recently.
While rental income can't be used to qualify for the loan, Fannie Mae now says that lenders can consider a property a "second home" instead of an "investment property" even if rental income is detected.
This is important.
Second home mortgage rates are lower than those for rental and investment properties. And, downpayment requirements are more lenient. The rule may not come into play when you buy, but most certainly will if you want to refinance in the future.
Make sure the property meets all second home requirements to avoid paying higher rates now and on a refinance later.
To be an eligible second / vacation home, the property:

• Must be occupied by the owner some portion of the year
• Is a one-unit home (not a duplex, triplex, or four-plex)
• Is suitable for year-round use
• Belongs solely to the buyer
• Is not rented full-time, and is not under a timeshare arrangement
• Is not operated by a management firm that has control over occupancy

In addition, the home must be a reasonable distance away from the buyer's primary residence. It also helps if the house is in a resort community or area.
In short, the property must "feel" like a recreational residence, not a rental property posing as one.

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Premium said:

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Ragoo said:

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Diggity said:

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I don't care one way or another, but if you're getting the ROI you claim, I don't think it would qualify as a second home.

I think 10% and 14 days is the litmus test.

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i don't care one way or the other, but the amount or marketing put into the rental side of the 'second home' makes the 'second home' sound like more of a tertiary.

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What do you mean? People sign up second homes to be managed by a company - those people pay 20% in management fees. It's a HUGE marketing cost to do so.

We choose to do the management ourselves and save that money. I really don't see the difference.

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the comment is based on 10% down for a second home versus 25% down for an investment property. The amount of marketing for the vacation rental of your 'second home' makes it look less like a second home and more like and investment property.

Premium said:

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Here is an interesting article on the topic here:

https://themortgagereports.com/21116/second-home-mortgage-qualify-for-vacation-residence

Quote:

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New lending rule: defray second home cost with rental income
For some, owning a vacation home may sound like something reserved for the rich and famous, but that's not necessarily true.
Owning a second home may not be as expensive as it first appears. The reason: potential rental income.
Some homeowners defray their monthly mortgage expense by renting out their vacation home when they're not using it.
The rise of Airbnb and similar services now makes it easier to receive occasional rental income.
This practice is even allowed by most lenders. Fannie Mae, the agency that creates rules for the majority of the nation's loans, updated their stance recently.
While rental income can't be used to qualify for the loan, Fannie Mae now says that lenders can consider a property a "second home" instead of an "investment property" even if rental income is detected.
This is important.
Second home mortgage rates are lower than those for rental and investment properties. And, downpayment requirements are more lenient. The rule may not come into play when you buy, but most certainly will if you want to refinance in the future.
Make sure the property meets all second home requirements to avoid paying higher rates now and on a refinance later.
To be an eligible second / vacation home, the property:

• Must be occupied by the owner some portion of the year
• Is a one-unit home (not a duplex, triplex, or four-plex)
• Is suitable for year-round use
• Belongs solely to the buyer
• Is not rented full-time, and is not under a timeshare arrangement
• Is not operated by a management firm that has control over occupancy

In addition, the home must be a reasonable distance away from the buyer's primary residence. It also helps if the house is in a resort community or area.
In short, the property must "feel" like a recreational residence, not a rental property posing as one.

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thanks for posting. Clears some confusion I had on the topic.

Lot Y Tailgate said:

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Why Galveston when you can get a timeshare on Lake Conroe?

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This is one of those gags that never ceases to make me chuckle.