I cannot tell you how many times we have encountered this basic dilima.
A person really wants to buy a home here and they are crunching numbers and asking all of what they think are the right questions.
What are those questions you ask?
Well, they ask will it cash flow more often than not. Every property will cash flow. Some negative.
All properties can be cash flow positive if they are rentals if you put enough capital into them.
And yet all those kinds of questions are wrong. At least for this market where we practice.
Mind you our average selling price on our team is always well north of $2,000,000 and in some years well north of $3,000,000.
If you can write that kind of check for a vacation rental home or a second home that is lightly rented or not rented at all then you have some serious financial flexibility. Many people will pay cash and then take out an asset backed loan (think margin loan).
Still we are dancing around the edges.
So let us say you came to us and you wanted to spend $3,000,000 on a home here. We looked a few and we found the one. We did all of our analysis and $3,000,000 was the right price.
Now let us say you will pay cash. And let’s say that it will rent for about $160,000 a year. Now after the rental company takes its share and you pay taxes and insurance and the utilities and some upkeep so it stays in good shape you are left with about $60,000 at the end of the year.
Not bad.
Now you and the family enjoy it for well more than the 2 weeks allowed for it to qualify as a rental property under the rules but that is ok. You enjoy the home for 6 to 8 weeks even.
Now 10 years have gone by and things have changed a bit here and there. For any number of reasons it is time to move on to a lake house, a mountain house or just something else that needs to change.
You come to us and ask us to give you the analysis and it hasn’t been the best 10 years. We find that after all expenses to close the home you get a check at the closing table for $2,987,600.
Considering all of this the simple question for you is this.
HINT: If you struggle for more than a nano second to say yes then this is not something you need to be doing.
Come here with joy in your heart and mind to do something special.