Turn Your Home into a Money Maker by Buying in the Right Location

Check out this comment left by a reader on my post titled More on Buying Vacation Homes:

I have family that lives in Augusta Georgia. They own a home that is close to the Master's Golf tournament. They own their home and live there year round, but they rent out their home every year for the Masters Golf tournament to businesses for the week. They typically net between $10,000 - $12,000 for their 2000sf 3 bedroom home for the week. They basically pay the majority of their mortgage from renting out their home one week out of the year! Home prices have skyrocketed in Augusta because of the Masters, but it might still be a worthwhile investment.

Wow! Imagine that -- you can rent out your home for one week and make most of your mortgage payments for the year! Or if you don't have a mortgage, you could simply pocket a cool $10k for a week's effort.

Of course this idea has limited ability to work since you have to be near a major event/desired location. But if you think of all the sporting events, entertainment venues, vacation spots, etc., it's not that far-fetched of an idea. You certainly can see how renting out your home for part of a year can make a lot of sense -- even if you "only" cover something like half or one-third of your annual mortgage payments.

I've been thinking of this idea as part of an overall retirement plan/strategy to move to a nicer part of the world. For instance:

• Purchase a vacation home somewhere nice at a good price (since prices are low now in many locations).


• Try to buy a place that has some track record of past rentals (either for events or vacationers) so you're not completely betting on something that may never materialize.


• Use the place personally as well as rent it out for several years, letting the rent money cover a major part of the mortgage. (Yes, you'd have to cover the rest as well as other home-owning costs.)


• Ultimately sell your current home and relocate to the vacation home full-time.

I know, still lots of "ifs" and unknowns in this plan, but it's not a completely unreasonable idea. It would take the right home in the right place, but perhaps it could be found.

Any thoughts on this idea?

Comments

[texashaze]

A friend of mine bought a beautiful oceanfront condo in Puerto Vallarta 5 years ago. The property was bought as a vacation/retirement home. He planned on renting it out to help pay for it.

A couple of issues he's dealing with: First, the income as portrayed by the real estate agent was about 30 to 50% what they showed. So I wouldn't count on much income on your cost modeling. Second, the value of the property has decreased significantly. He bought at the peak which looks to not return for decades. As with all property, you make your money when you buy so get a good deal. Third, the operating costs were much more than expected - taxes, HOA fees, property management costs (you will have to have someone watch it as it's far away), and finally furniture and general upkeep costs (paint, furniture and interior need to look good to get rentals). Finally, when you retire and want to move in the property will need a good cleaning, painting and updates after all the years of renting.

Not to be a downer FMF, but the costs appear to exceed the income to pay for such a property. However, since real estate is so depressed it may be worth the risk if you get a good deal.... my two cents.

[Pop]

If they bought the home 20 years ago I bet it's true. But what does that have to do with buying today?

[JT]

I'm sure there are plenty of quasi-arbitrage situations like these around the US, but whether or not you can beat the crowd is an important element of the money-making side of things.

Also, what's the return on time for renting out a property like this? It may generate a few hundred or even thousand dollars, but the hassle/headache etc. might not make it worth it.

[KC]

Another suggestion...look into using your home for commercial shoots. My company has used people's homes in the UK for about $2500 USD for 2 days of work. Not sure what the going rate would be here but you don't have to have a magnificent house, just one that works for whatever the company is shooting. You typically have to be out of the house from about 8am-7pm and some of your stuff may be moved around but if you're working with a reputable production company, at the end of the day you won't even know anyone was there (and if you do, even $100 spent on a cleaning service keeps it a very lucrative deal). On a $250k mortgage at 4.5%, you're talking 2 months of payments for 2 days of slight inconvenience!

[jeffinwesternwa]

LIABILITY! your homeowners insurance probably does not cover you when you rent the home and liability wise: the home should probably be placed in an LLC., Any "accident" arising can easily turn into a lawsuit vs. your other assets. Do it right, talk to a real estate lawyer FIRST!!

[MattJ]

My graduate advisor had a vacation home in a resort community near/in Atlantic City that he rented out. He had a management company handle all of the business of arranging for tenants and prepping the house between tenants, and he used it in the off-season (it was near his family). According to him, the few months of the year he rented it out paid for the mortgage.

A few years ago he sold his house and retired to the Atlantic City 'vacation' home.

It's definitely possible. Of course, he was a professor at a top engineering school with a very nice salary, lucrative consulting opportunities, and quite a few patents to his name, which probably alleviated the concern that he could lose money on the deal.

[Rich A.]

This concept works for Sir Richard Branson, who rented out his amazing home on Necker Island in the Virgin Islands for $53,000 a night. At least, he did until it burned down yesterday.

[Rich Schmidt]

Like you said, it would take the right home in the right place... at the right time and price for a purchase, of course... and also the right people to manage it for you while you're away.

That last one is the kicker.

[Michelle]

My cousin lives in Oshkosh, Wisconsin right near EAA. She rents her home over the course of the event and earns enough to pay a bill or take a vacation. She and her husband simply live at their in-laws for the week.

I also know a family who lives near Lambeau Field in Green Bay, Wisconsin. They allow cars to park on their lawn for home games at $10 per car (they fit up to 20 cars on their property per game). They earn enough over the season to take a small vacation.