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potential condo purchase

1,557 Views | 2 Replies | Last: 5 yr ago by proudaggie02
DriftwoodAg
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AG
We are contemplating purchasing a condo that would primarily be used as a vacation rental/family retreat. There is lake access and a pool. Has anyone had any experience with properties like this? Questions we need to ask? Horror stories?
Sooner Born
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proudaggie02 had a couple of vacation properties and has done very well
GaryClare
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AG
proudaggie02
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hot_rod_9384 said:

We are contemplating purchasing a condo that would primarily be used as a vacation rental/family retreat. There is lake access and a pool. Has anyone had any experience with properties like this? Questions we need to ask? Horror stories?
I'm hopefully about to buy my third rental condo. My philosophy is to buy small places in great locations because I want to maximize rental income and appreciation while having as little exposure as possible to repairs. I'm always looking for my next place, and I focus on cashflow and then appreciation. I want places that I think will net at least 15k year. In my experience, I've done way better managing my places than the previous management company or front desk.

Economics: The expenses and factors I look at when running numbers are HOA (is cable, wifi, a/c, heat included?), property taxes, insurance (usually really cheap), property management, assessment history, quality of the HOA board and financial reserves, and how much I have to pay per cleaning (and can I expect to chrage all or most of that to guests?). Also, you lose 3% for credit card processing with both Air and VRBO. You pick the % of tax collected on VRBO, while Air determines the % based on location (I have to pay 6% tax for Air bookings in one place and 8% for the other). On the plus side, include rental income, mortgage principal, depreciation, and other tax benefits (just about everything is an expense, with the exception of mortgage principal). I'd talk to an accountant to make sure you're considering everything.

I agree with Gary in that you need a good property manager. The logistics need to work and allow for a system that operates smoothly while not requiring much involvement from the owner. Here is my process:
-I handle the bookings on Airbnb and VRBO. I allow for automatic bookings where guests can book without my approval. When a booking is made, I respond with a template response that has details on checkin/checkout and other details.
-I then pass most everything off to my property manager after I spend 1-2 minutes setting up the reservation in their system. I place a lot of emphasis on customer service, but I typically don;t spend too much time.
-I'll send a welcome email the day before or the day of checkin. I'll then send a checkout email the day they leave. VRBO and Airbnb both automatically collect and refund the security deposit in the amount you choose.

A good deal of my success is based on maintaining high high ratings/reviews on Airbnb and VRBO. Both of my places are in the range of 4.8 to 4.9 out of 5 stars on Airbnb and VRBO. You need a 4.5 average on VRBO to get the highest status (Premier); you need 4.8 on Airbnb to be a Superhost. There are other requirements, but the rating average is the toughest to meet. Your listing gets preference if you reach these levels.

Here are some other tidbits/random info:
-VRBO is either $500/year per listing or you can pay nothing and "pay per booking" where they take 5% of each listing. Airbnb does not charge anything.
-I use Avalara/MyLodge to handle licenses and quarterly tax payments (takes about 15-30 minutes per quarter to pull the numbers and enter in their system).
-Find a good, local real estate agent. Have the agent find out everything about the HOA, building, potential assessments, etc.

I agree somewhat with Gary that it helps if you expectations are lowered with respect to rental income. We love our places, and we probably spend 5-7 nights in both per year. I disagree in that it'd be hard to find better places for my money to work, in my experience.
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