Rental property advice
 

Decided I posted this in the wrong forum (rental), will try this one

We are trying to decide whether or not to purchase a patio villa to diversify our investment portfolio. This would be strictly a rental and exchange property.

Don't think it would be smart to pay cash as we'd have to take stuff out of IRAs and pay ordinary income tax on that. Not sure it makes sense to do this with a mortgage, though.

I have been trying to project yearly expenses, knowing we can manage it ourselves, clean it ourselves, and do some maintenance. I'm coming up with about $9500-$10,000, not counting a mortgage. Am I estimating on the high side?

We rented out our CYV for 4 years before moving here, but always reserved 2 weeks in April for ourselves, so pretty sure we could rent that month out as well as Jan-March. Just not really sure what is reasonable to expect for the other 8 mos. I felt I got better as a landlord as I got more experience, but it's been over 2 yrs now since we rented it out and am not certain what the demand is any more. I'm guessing it's going to go up as the build-out nears, but still, that's a guess.

Would anyone who owns a patio villa as a rental care to share their experience, both on expenses and yearly income (i.e., how many months do you rent it out)?

Rental
 

Sent you a PM.

Think also about your eventual sell out
 

Day to day cash flow returns are certainly a good thing to consider, but you might also project what your eventual disposal receipts will be. Am not optimistic that "boom times" will continue in the long run in TV. Consider that we will have more than 60,000 homes most of which will turn at least once in the next 20 years. (Average age in TV is say 68 and most will probably sell out (or worse) by the time they reach 88).
60,000 divided by 20 years is 3000 homes a year or 250 per month that must be resold. And, that is a simple averaging time line. In reality the number of resales will increase as the current population ages.
I've been told that total resales now are about 300 (developer and independents) per month with an additional 250 new sales. That means TV residents will have to sell at least 250 used homes a month, all without the benefit of big advertising dollars, lifestyle visits, etc. from the developer. And, we will be competing against newly developed "up to date" Villages type projects in the future. My point is; who is going to push this place for the benefit of resales?
As for me, I'm enjoying life now and it will be my kids' problem to dump the house for whatever, whenever. TV is a great place to live now, but it probably is not the best long term investment.

Ohiogirl, based on our experience with our patio villa, I'd say you're in the right ballpark with your annual expense estimate if you're including things such as lawn care (fertilization, trimming, mowing, shrub care, etc.), pest & termite control, internet, and cable/satellite service in your number.

Bill :)

So maybe a beach condo? Or not?
 

Thanks for all your responses. Think we've decided against a Villages rental, now need to do some homework to see if owning or co-owning a beach rental, that we can use ourselves when it's not rented, makes sense.

Anyone out there have educated info on beach rentals?

I just wanted to say that I think Jim 9922's post makes a lot of sense and thank him for posting.

I had a beachfront condo from 1996-2010. We loved it whenever we were there. And it was a very good investment for three reasons. 1) It was a beautiful place, in a great location which commanded large rental fees. 2) It was decorated attractively but as "indestructably" as possible. Beach condos get used hard. 3) We had a terrific management company. They monitored guest use carefully and protected our interests well.

To add to Jim 9922's points about eventual sell-out:

One long term item we thought about before buying in TV was the potential reality down the road about the number of people who will financially be able to afford to retire in the future. With so many companies getting out of offering defined pension plans and changing over to 401k plans, I have my doubts that in 5-10-20 (you pick a number) years, there will be proportionally fewer true retirees - most people will not be able to afford to not work. This might not bode well for the future value of homes in TV.

Not trying to be a doomsayer or anything - it's just a line of thinking and obviously predicated on several assumptions. Mirroring what Jim posted, we just said "Screw it!" and made the plunge about a year and a half ago. Who can really predict the future when it comes to things like that? We're doing what we feel is best for us.

Like Jim, we also have questions about the very long term value of the investment in a TV home. But we're not going to sit on the sidelines for that length of time to see what might or might not transpire!

Bill :)

Smart decision,i've been in real estate market for over 30 years.I've bought and sold over 100 properties, for my own account in that time frame, and continue to study the markets on a daily basis.After buying in TV i looked at the possibility of purchasing investment rental homes.After ALL expenses and potential rental income, i came to the conclusion that generating an ACTUAL positive cash flow would be difficult to achieve on any consistent basis,if at all.The only way it makes any sense for me, would be to do a 1031 tax deferred exchange for one of my rental homes in Lexington.If you have some extra money just burning a hole in your pocket, in this current financial environment buy AT&T stock,great dividend with some stock appreciation and NO management headaches.

I'm missing something. Wouldn't a beach rental home cost as much as several TV homes?

....but if it can generate a proportionally greater cash flow than a house in TV...... :thumbup:

Bill :)

OK, I suppose so. Anyway, later this year we are moving up to TV from our North Palm Beach waterfront condo. Right now, my opinions are tainted by the loss of property value (around 50%). Good time to buy, bad time to sell. We have arranged for a season rental next year. Tenants are available, but rents are not what they could be. We are moving for the lifestyle change. So, for some undetermined time, we'll own both.

Great Post! We just came back from our first visit to TV. What a wonderful place to retire! We were going to buy a new CYV and rent it out till we could retire. We gave the numbers to our CPA and he said "Not a good place to invest, wait till you retire full time, have fun and enjoy life. Your TV home is your reward, not your income property"

Ashton, you have a good, smart CPA with some good common sense!
Investing in good solid rental property as a business is a lot different than buying something because you like the area and hoping to maybe make some money from of it.

I've owned a couple of beach houses in the past. My experience is that you might break even in actual cash flow if you do all the work yourself, such as weekly cleaning, paying for advertising and booking rentals. If you pay management fees of, say 20%, then it will cost you money but if your goal is to have a nice place to use yourself occasionally, then it will certainly cost less than not renting it out. Your tax situation could effect the cost of running it.