Make Money Owning A Beach Home
Many property owners combine the pleasures of a beach ownership with the benefits of a healthy cash flow. In multiple instances, rental income can pay all the operating expenses (taxes, insurance, utilities, janitorial, etc.) and the mortgage payment. At times, it even leaves a nice “residual”. Check the below examples for actual houses or condos.
If you want to receive a customized estimate on a specific property, scroll down to the end and let us know which property.
The purpose of this section is to give you an in-depth understanding of owning a rental home being rented by the week-end or by the week to vacationers in NW Florida. Numbers vary from one house or condo to the next, but this should give you an good idea of what this type of investment entails. We will be delighted to provide similar reports for any house or condo you will consider purchasing.
Under “CASH FLOW FROM OPERATIONS”, you will find details of projected gross revenues (Gross Rental Income); of the expenses necessary to the proper functioning of the investment (Operating Expenses); and the resulting Net Operating Income, or NOI, calculated at the Gross Rental Income less the Operating Expenses. The NOI is the most reliable indicator of a real estate investment because it is NOT investor-specific; in other words, it remains the same whether the buyer pays cash or obtains bank financing, and regardless of the tax situation of the investor.
Under FINANCIAL SNAPSHOT, we shall find the CAP RATE, defined as the NOI divided by the acquisition price. The CAP RATE is the only common denominator in all real estate investments, and can easily be used to compare investment merits between remote locations (St. George Island vs. Naples, for instance) and between different types of investments (Vacation Rentals vs. Strip Mall, for instance).
Under FINANCING/MORTGAGE OPPORTUNITIES, we shall analyze the possibility of financing 80% of the purchase price, and its consequences. We shall arrive to a true cash return on investment; and a true return on equity (ROE). Some of these numbers might surprise you...
Other remarks: the estimate of the gross rental income assumes no owner-occupancies and a property in top shape; this property may need minor “improvements” such as interior repaint and new furnishings; the cost of upgrade is not factored in the acquisition price (but it can be assumed that the contract price to acquire might be lower than list price, thus leaving some money to carry out said upgrades. I strongly advise that you hire a tax attorney to assist you to verify my calculations and assumptions; I will be happy to talk with her or him if you desire.