March 6th, 2010 → 3:43 pm @ mmatchev
low-maintenance vacation rental property
I know that sounds incredibly simple, but you might be surprised at how easy it can be to overlook things that should be obvious. After all, this is probably something you’ve never done before, and nothing is ever simple until you have some experience with it. The best way to find out the condition of a house is by employing a home inspector. It’s always money well spent. Of particular interest in the home inspector’s report will be the condition of the roof, electrical wiring, heating system, and the plumbing. These are all non-cosmetic items that often are not readily apparent to the naked eye. But they are some of the major areas of a house that tend to erode with time, and repairing them can be expensive and time consuming. Buy a home without these problems to begin with, and you will save yourself many days of headaches in the years ahead.
Here’s another consideration to take into account. Many people think it’s a great bargain to do the exact opposite of what I’ve just said. They intentionally buy a vacation rental house with many problems because the price will be lower. Then, they rehab this diamond in the rough and end up with a lavish home for a cheap price. While that may sound good in theory, and there certainly are cases where people have made money this way, doing a successful rehab is much more difficult than most people imagine. Did you ever see the movie The Money Pit? It may be a Hollywood comedy, and an exaggeration, but it also contains a valuable lesson. Just like when the government makes an estimate on a public works project, when the final numbers are added up, it inevitably seems that the project comes in over budget rather than under. The same tends to be true when you try to rehab a house with a number of repair issues. Moreover, during the period that you are making your repairs you will not be able to rent it out. Your cash flow will be put on hold indefinitely. I’m not ruling the idea out completely, but carefully consider these potential problems before going the rehab route.
