Turning my childhood home on the lake into a rental property - need advice

[Garcia]

Originally Posted by FlyingScot

It is. This whole thing is a great example of how rising real estate values do not benefit anyone except professional investors and realtors.

True that civilians (pretty much all of us on the forum) end up with more money at sale--but are we really any better off? If you're not too damn old to enjoy it, you just have to spend it on your next house.

In this case--if the property was worth $100K instead of $1MM, the OP could cajole his siblings into keeping it for family. But when real money has been made, most people want or need the cash. So while the family is better off financially, they have lost something priceless

For tax purposes, houses are worth very little - my experience it is common for people to complain about the assessed value. When it's time to sell, it's worth a fortune.

50 years ago lots near me were bought by middle class people who built camps. 30 years ago camps were on the market for under $120,000, a few below $100,000. Today houses on Bear for under $700,000 are not too common. The temptation to cash out is a big one.

[Denny Crane]

Last year my insurance company walked my property without telling me and had concerns of trees around the property that could fall on the house, threatened to cancel my insurance if not removed. Do you think they could meet me or tell me which trees or mark them? No! I had to guess which ones, cost me close to 6K and emailed them pictures of the stumps. Zero follow up from them so I guess I picked the right ones.

[Descant]

I've been absent for a bit so some responses without quoting the posts.
Credit rating. Insurance companies know, whether car or home, that people with low credit scores have more claims and smaller deductibles which are expensive to administer. Same applies in a recession.

Pictures: In the latter part of my career in insurance sales, I had to take a picture . Same with certain breeds of dogs. If it was out of state, a contractor took pictures. Not a company employee, so s/he couldn't speak for the company, and wanted to spend as little time as possible on each site, not chat with the homeowner.

Reading the policy: There are 3-4 parts to a policy. What's covered, what's excluded, conditions and endorsements. Inter-related, but not in a way that's easy to read. That's why insurance employees are licensed and pass routine, repeated, tests.

Is real estate an investment? To me, only a little bit. It's very difficult to make money if you only have one single family property. Even harder if it is seasonal. However, taxes, interest, management fees, etc. are all deductible. Along with depreciation, you can shelter a good part of other income. You can deduct travel expenses to inspect and work with your manger, etc. This could be in nearby Laconia, St. Thomas or St Augustine, within IRS limits.
At this point you have to be operating a business, not just keeping the family camp, in the operating methodology.

Family Camp Investment Fund: If an older generation established this and it has a lot of CD's or other fixed income "to be safe" you're losing money from the start as you just barely keep up with inflation. Instead of a 10 year horizon for retirement, think of a 50 year horizon for two generations beyond yourself. If you have no knowledge/experience, you can do index ETF's at very low cost with Vanguard, Fidelity or Schwab. A fee based CFP can help but be cautious with an advisor who charges a percent based on the size of the portfolio.

[Garcia]

We can split hairs about what constitutes middle class. How about this - over the past 30 years, the average value of lakefront property has increased much faster than average income over the same time period.

This made property more affordable for a larger segment of the population 30 years ago.

[John Mercier]

Originally Posted by Garcia

We can split hairs about what constitutes middle class. How about this - over the past 30 years, the average value of lakefront property has increased much faster than average income over the same time period.

This made property more affordable for a larger segment of the population 30 years ago.

All properties have.
They keep long term charts of home prices relative to median incomes.
That is done nationally as well as State and in some cases metro.

Nationally, 50 years ago... the ratio was 3.8; just before the crash they peaked at 6.78. After covid, they peaked again at 7.12 and last data point that I saw was the end of last year at 7.12

But even all that fails to recognize the significant upgrades from years gone by; or the changing face of tourism.

[FlyingScot]

Originally Posted by John Mercier

All properties have.
They keep long term charts of home prices relative to median incomes.
That is done nationally as well as State and in some cases metro.

Nationally, 50 years ago... the ratio was 3.8; just before the crash they peaked at 6.78. After covid, they peaked again at 7.12 and last data point that I saw was the end of last year at 7.12

But even all that fails to recognize the significant upgrades from years gone by; or the changing face of tourism.

And this is why a rising tide has not lifted all boats. As people become wealthier they bid up the cost of scarce real estate, which increases costs for all. (Springsteen tix too! Have you seen the latest prices? 4X or so what they were 10 years ago )

[John Mercier]

Home prices relative to median household income were pretty high right after WWII also.
It took a while for developers/builders to catch up to demand.

And the generations before the Greatest were less controlling.

[Biggd]

Originally Posted by Garcia

We can split hairs about what constitutes middle class. How about this - over the past 30 years, the average value of lakefront property has increased much faster than average income over the same time period.

This made property more affordable for a larger segment of the population 30 years ago.

I think Covid really supercharged the housing market. Before Covid I think middle-class could still afford a first home, maybe not a second home. 2 of my 3 children bought before Covid and traded up to bigger and better homes. Now they both have million-dollar homes with sub 3% mortgages. My oldest who never bought, continues to pay rent even though she could have afforded a home before Covid. She just was never confident enough to pull the trigger!

[garysanfran]

The good news is...You're a millionaire.

The bad news is...So's everyone else!

An acquaintance of mine wanted to know why the wealthy USA Government doesn't gift every citizen a million dollars so no one would have to work anymore.

Support increased education!!! It remains severally lacking.

[BillTex]

Originally Posted by garysanfran

Support increased education!!! It remains severally lacking.

Case in point.

[John Mercier]

Originally Posted by Biggd

I think Covid really supercharged the housing market. Before Covid I think middle-class could still afford a first home, maybe not a second home. 2 of my 3 children bought before Covid and traded up to bigger and better homes. Now they both have million-dollar homes with sub 3% mortgages. My oldest who never bought, continues to pay rent even though she could have afforded a home before Covid. She just was never confident enough to pull the trigger!

It works out in the end.
If the workers needed in the area have to make more to afford housing, prices will just have to rise to offset the cost of that labor.

https://www.longtermtrends.com/home-...-income-ratio/

Covid coincided with Boomers retiring, so adding remote work in spurred demand.
We created an imbalance, and economics will correct it - sometimes slowly, sometimes quickly.

[Biggd]

Originally Posted by John Mercier

It works out in the end.
If the workers needed in the area have to make more to afford housing, prices will just have to rise to offset the cost of that labor.

https://www.longtermtrends.com/home-...-income-ratio/

Covid coincided with Boomers retiring, so adding remote work in spurred demand.
We created an imbalance, and economics will correct it - sometimes slowly, sometimes quickly.

In the end, we all die!

[John Mercier]

Originally Posted by Garcia

For tax purposes, houses are worth very little - my experience it is common for people to complain about the assessed value. When it's time to sell, it's worth a fortune.

50 years ago lots near me were bought by middle class people who built camps. 30 years ago camps were on the market for under $120,000, a few below $100,000. Today houses on Bear for under $700,000 are not too common. The temptation to cash out is a big one.

Still mostly the Middle Class.

[tis]

Originally Posted by John Mercier

Still mostly the Middle Class.

50 years ago middle class could not afford the lake. Maybe they could 100 years ago when it was the "pond" and not much more than a place for the cows to get a drink of water.

[Biggd]

Originally Posted by tis

50 years ago middle class could not afford the lake. Maybe they could 100 years ago when it was the "pond" and not much more than a place for the cows to get a drink of water.

I bought a place on Winni in Alton Bay 50 years ago for 60K and I didn't even consider myself middle class back then.

[John Mercier]

We afforded it in the 90s.
And I wasn't making any killer money, nor did I have a significant portfolio.