Does buying a small piece of lakefront property & renting it out make sense?

[JasonG]

Just wondering if buying a small piece of property of Winni (or any lake really in the region) for the sole purple to cover the mortgage actually can be done.

Not looking to profit and make a living on it. Just rent it, cover mortgage, upkeep, so in X years we have a piece of property that is clear, free and less expensive to own.

I cannot imagine renting lakefront is actually in demand off season?

[wifi]

I'm sure others have more experience in this than I, but once bought, it would be hard for me to stay out of it...

[winnipiseogee]

We tried that with our first house up here. We rented it out for the whole summer and used it ourself the other 9 months a year. It was a great rental property and we never had any problem getting it filled. That said we only covered about 60% of the mortgage/taxes. Nevermind the up keep expenses.

Then we decided we had to use it one week in the summer..... then two weeks.... then three weeks. Then we moved into it year round!!!!

I think it would be really hard to pay the mortgage even if you have better self control than I do!

[Patiently Watching]

I have a lot of experience with seasonal lakefront rentals and this sounds like a bad idea and something I would advise a prospective customer/client against... While the first year is often the hardest to book up, the season is very short and these properties have large tax bills and generally need more maintenance than other homes might (proximity to the lake = moisture, etc.).
Also, while the smaller lakes have properties which are priced for sale at lower prices, they also fetch lower prices on the rental market...
Could it be done? Maybe. Will it be difficult? Highly probable.

[TiltonBB]

I doubt, based on my experience, that you could cover all of the mortgage, taxes, and expenses with rental income. However there are also tax advantages you will have by depreciating the house, and, if it loses money those losses will offset some ordinary income.

For the last 11 years I have been fortunate to find winter renters for a rental house I have in Gilford, but at a very discounted rate. During the winter I usually get a monthly rate of about 1/3 of what I get for one week in the summer. Having a winter renter does give the comfort of having someone in the house in case of any heat or frozen pipe issues. One thing that may attract winter renters is your proximity to the ski areas. For several years I rented to people from out of state that got season passes to Gunstock.

There are better explainations of the tax issue here:

http://www.irs.gov/taxtopics/tc414.html

You are considered to use a dwelling unit as a personal residence if you use it for personal purposes during the tax year for more than the greater of:
14 days, or 10% of the total days it is rented to others at a fair rental price. That use substantially changes what you can deduct, although I don't think we have reached a point where the IRS has someone look in your bedroom window to see who is sleeping in your bed! :)

There is more information on personal use here:
http://www.irs.gov/taxtopics/tc415.html

Good luck!

[Dad sold the C * C]

Great information TiltonBB. That's the hard choice, is it a business or a vacation home.

Sorry for the very long reply, but we learned a lot in the past few months :look:

As was mentioned: Taxes. Yes it varies from Town to Town, but it is a chunk of change. A 2-bed 1- bath in Sanbornton will be over $10K in taxes this year. Add a mortgage to that and everything else….

We had been looking at a lot of houses while we rented the past three years and you can look at it a few ways.
1) buy a condo, association or very congested part of the lake and keep the price down.
2) Water front or non-water front AND LOCATION on the lake
3) Older 3 season camp (more on that later)
4) Or the dream: ½ acre or more on the water and already updated or newer 4 season (for this you will start at $750K ….. maybe)

Now look at it from the renter’s side: I want some privacy, my own dock and beach, 2 bathrooms, parking (for the extra “day-guest” I won’t mention). Nice outdoor space and amenities. Funny that’s what we wanted when we looked for a house, we got most of it, but not all of it.

I don’t want to be a “Donnie downer” but just go in with eyes wide open; use the internet, the amount of information you can get from town tax sites too the Registry of deeds is amazing. You will also find the turnover rate is very high, especially in the years following a crash like 2008. (2 of the people we rented from have HAD to sell their houses).

We had hoped to rent ½ the summer. but knew we lost the first year before we even closed. We have some issues that need to be addressed before we allow someone in our new home. I would recommend browsing the Community forum on “Home-a-way or VRBO” same one. There is a lot of good information there. Also it gives you an idea of the cliental you may get. I grew up renting Lake houses, with one bath, BYO sheets and don’t count on a fancy kitchen fully stocked with spices and All-Clad pots and pans. That still works with most New Englanders but not if you have people flying in from other parts of the country.

Now on the flip side if you have the money and are looking for a long term “investment” other than the stock market, Lake front may not be a bad choice. but make sure you won’t loose it after a bad rental year, expensive septic system, or a “small renovation” that gets way out of hand due to old wiring or waterfront permitting issues.

..................... And We really did just do this?? :eek::eek:

Good Luck with your decision

[brk-lnt]

Honestly, if that's your goal you'd probably be better off buying 1 or 2 income properties in a regular area where you can be more confident they would stay at 90%+ occupancy over time. Then when those properties are paid for, sell them and buy your lake property with the proceeds.

[codeman671]

I can say from my experience being on an island and renting, that I could have rented out every week over the summer at $4200 per week, with some long weekends early and late season to fill in. The demand was huge. With numbers like that, you could probably break even without a problem.

I may do it again at some point, but with the plan of using it to pay for itself.

[nhboat61]

We purchased our property and it had two houses on it.

We were able to rent our cottage for a full year and that paid the mortgage.

We are in the hole for the insurance, taxes and upkeep, but not much. We use our main house every other weekend and 3-4 months solid June to October.

We have a rental property in CT that covers the taxes, mortgage, insurance and upkeep. With a little left over monthly, I use that to offset the above (cottage) expenses.

Our tenants left and we are getting new tenants who will pay a years rent and only use it 6 months ! That will cut down on the upkeep.

[Descant]

We bought a condo many years ago when motel conversions were strong. Rent in the summer and use it for skiing ourselves in the winter. The first summer weekly rentals went pretty well. Our first winter rental cancelled-not good skiing, so we didn't want to use it either. The next winter we rented Labor Day to Memorial day at very reduced rates to a single tenant. This worked well, but showing and renting in the winter at long distance was not good and we didn't have enough margin to pay a manager or Realtor.
Moving weekly summer rentals in and out on Saturdays started to consume our weekends. People called Friday night to say they would arrive late or on a different day and we had to cancel plans to work a new schedule.

Finally, we decided our weekends were more important than the condo and we sold it. Nice profit. Two years later, the condo market collapsed and nobody wanted a Lakes Region condo at any price, and financing was difficult for most. Many foreclosures ruined the market.

Vacation properties can be a very volatile market. If you can afford the place without rental income, and you decide to rent, that's OK. If you're relying on rents to pay the bills and you want a mortgage, a lot of lenders won't talk to you. If you buy other rental properties and plan to sell later to buy a retirement home, you may have to pay back the depreciation. Better to get the mortgage paid off and use the income stream to pay for your retirement property.

[Diver Vince]

I doubt, based on my experience, that you could cover all of the mortgage, taxes, and expenses with rental income. However there are also tax advantages you will have by depreciating the house, and, if it loses money those losses will offset some ordinary income.



Don't forget any depreciation on a business residence must be recaptured when the residence is eventually sold. Uncle Sam may be dumb but he's not completely stupid. Talk to your accountant to learn all the facts. I am not an accountant nor do I play one on TV. ;)

[HomeWood]

My family has had several showings for a new lake house in the last couple of months, since my wonderful :rolleye1: extended family forced the sale of our original family house on Winni. We plan to rent whatever house we buy to cover taxes and some up keep.

We DO NOT want to get into a house that we MUST rent to afford it. Make sure you do not get into that position.

[brk-lnt]

We DO NOT want to get into a house that we MUST rent to afford it. Make sure you do not get into that position.

Technically speaking, if you MUST rent it, you can't AFFORD it.

Good luck with your search for a new place, seems like there are some good deals out there.

[JasonG]

Technically speaking, if you MUST rent it, you can't AFFORD it.

Good luck with your search for a new place, seems like there are some good deals out there.

I appreciate the replies. A lot to think about, but clearly the answer is NO.