With the real estate sector in the tank and with commercial real estate ready to get hammered, and with fuel prices up and consumers cutting back, this might be a perfect time to buy a property with vacation cabin rentals on the property. If you have ever dreamed of running a vacation spot business of this type, this might be the perfect time to buy and turn your dreams into reality.
Let’s take an example or case study. Let’s say you found a nice property in one of America’s most popular tourist destination points. Right now those real estate properties have been hammered from all sides. Fuel costs have gotten seasonal travelers to ditch their plans for road trips and with real estate prices the way they are, a number of these properties are now in foreclosure or are selling for rock bottom prices.
Okay so let’s take a 1.2 million dollar piece of property with rental cabins, right now you might be able to pick it up for around a million even considering it is already a steal due to the market? Well, it sounds like a business investment + a place to live. So, ask yourself can you pick up the property for 20-25% less due to economic issues? Does the current owner wish to partner, worried about losing the property and all his investment?
Let’s say you divided the property up, called half your home and half your business. Assuming you could steal the property for 1 million. For your home part you would put down 20% of 500K, which is 100K and for the other 500K you’d need 40% as a commercial loan, so you’d put down 200K, thus you need 300K total.
Your personal income would be paying for your half and the other half would be a business with investors. Your half would run you about; $2,750 or so (assume 7% and 30-years). and the other half for the business would be; $3500 or so (assume 12% and 20-years). Next ask:
- How do you propose to get financing for this property?
- Is the owner willing to carry paper?
So, should you are looking for an investor partner? Have you sketched out a Business Plan yet? It is an important step. Next consider what you net worth is and how much you’ll need to put down. Your income and net worth may not be sufficient to impress anyone or bank in lending you money, so that is a huge issue. And vacation rentals don’t do as well, in harder economic times, right? Also ask yourself
- What are the maintenance costs of these units?
- Do you have facility maintenance experience?
- What about your kids and their college money?
- Will you put them to work too?
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