Anyone here own vacation rental property that's not a time share?

We just got back from a week on our favorite island on Georgia's coast. I've been going there every summer since I was a kid. We have always rented half of a duplex from a particular realty agency there, even when I was a kid. The houses are individually owned and the rentals are handled by the agency. SWMBO and I have talked repeatedly about owning one of the rentals (of course - who doesn't dream of living on an island, right?) but there are some market forces in play that might make it a better investment now than it has been. I had some discussions with a local realtor and it sounds like most of the properties end up being a break-even for the owners.

Right now we'd be talking about owning at a distance (3.5 hour drive, one way) and continuing our normal life, but the idea might be to purchase additional properties in the future with an eye to retirement, or to sell at a profit in the future.

Has anyone here actually owned property that was rented in this fashion in a similar market? What's your experience?

If this island happens to be St George, I'm looking too.

I'll go in with you on the other half!

In reply to SVreX:

Not that one! Jekyll Island. Isn't St George in FL?

Curious to hear what others have to say too. My wife and I have considered over and over buying a rental in Kissimmee, FL since we're big Disney fans. It's an idea we've kicked around. Wouldn't do it for a few years yet, but it's of interest. We're actually heading to Disney next week.

In reply to ultraclyde:

Duh. I knew that.

In reply to ultraclyde:

What are the market forces that make Jekyll attractive right now?

(I'm in the market to buy a vacation rental)

When yall buy, let me rent a week at a GRM discount! Otherwise, I have no input. I'm not at that level in life yet!

My dad recently purchased a vacation home, but it is for family only. He did try to buy a place that would have included a cottage for rental, but it just didn't work out.

He basically figured that if he could rent it out 4 weeks a year, he'd have been able to break even. He ultimately decided it wasn't worth the hassle--but there aren't really any property managers up there.

My grandpa did it as well--back in the day, he found it to be a pain in the ass and had to deal with theft and generally messy people. He got out of it really quick. In todays world of airbnb, I imagine things would be much, much different.

I looked into this a couple of times. As an investment, vacation rentals are typically not that great. It is complicated from a tax perspective-- the tax benefits can be pretty limited depending on your income level and how you use the property. A lot depends on how much you buy it for.

I had a condo in one of the ski areas in Colorado for awhile. I bought it out of foreclosure and paid a very good price. I owned it for several years. I found I could use it very little in the winter as that was the peak time for rentals. Some of the rental pool companies are very restrictive about the times you can use your own condo because they make the most of their money at peak season, as well. They also take a pretty good chunk of the revenue to rent and manage it for you. The good news was that the winter rentals just about paid for the place and I could use it in the summer about as much as I wanted-- which was OK, too.

This was before VRBO, which allows you to keep more of the revenue, but means you have to be a lot more active in managing the rentals, clean ups, etc.

Whether you'll get much appreciation and how much you keep is also a function of the tax situation and what you might buy it for. In my case, I owned it for several years and sold it for 50% more than I paid. However, I had been depreciating it over that time and had to pay capital gains tax on the lower basis versus the sales price. At the end I don't think I got much out of it except for free lodging for some vacations. If I had kept it for a few years longer I could have made more, but vacation rental properties took a real dive 2008-2012 and I don't know if they have recovered much.

Only started thinking about this again when we were looking for properties that we could rent and then eventually use as a retirement home. I looked into the whole vacation rental thing again and backed away-- too many issues with maintenance, HOA costs, renters and lack of tax benefit that made it, at best, a break-even proposition, and that was based on a lot of rental days and not many owner days.

In-laws just moved into their rental on Jekyll as their retirement home. I'm on the island a LOT during the year. My grandfather-in-law helped design the island infrastructure. My in-laws inherited his house a few years ago.

Pretty much broke even on the whole deal. The utilities are $$$ due to the A/C needing to run most of the year. Parker-Kaufman or Jekyll Realty will handle the renting part and SOME of the upkeep. We found the rental agency was really lax on fixing renter damage. You will spend a LOT of money furnishing the unit, as the rental companies have a "must" list of stuff that renters want. You will have a TV in every bedroom with cable TV of some sort. The kitchen will have a list of appliances that must be maintained, but the renters will somehow either destroy or steal.

The best was when a long term renter would pick up the house for 3-4 months at a time. They were usually snowbirds looking to escape the frozen Midwest.

You will replace the outside A/C unit every seven years or so, make it five years if you are on the ocean site.

You do NOT own the land on Jekyll, you lease it from the state. That is a separate cost outside your mortgage. You also have to pay for your own trash pickup, and since you are renting you will need to hire a local "mow & blow" yard service.

Keep in mind they are about to build two more hotels (118-room Courtyard by Marriott and a 90-room Residence Inn). If you can get a good price on a house/duplex/condo then you may do well, as the island is getting a LOT of renovation. You won't have the crazy party crowds as renters, mostly families.

You want more?

In reply to yupididit:

If you ever make it to Keesler you'll be shocked at how cheap property is within sight of the beach.

I haven't, but my sister-in-law owned a rental chalet in Pigeon Forge, TN for 15 years. Worked out great for the first 5 years until their rental agent retired.

New rental agent wasn't too good: restrictions on when they could use it themselves, not rented all the time because the rental agent owned other properties that got first priority, etc.

At the 10 year mark the "everything needs repair, replacement" phase kicked in. They did a lot of that while trying to sell, but it took 3 years to find a buyer.

My parents own a rental condo on a popular lake in VA. The rate of return is hilariously bad.

In reply to slefain:

This is excellent and very specific info. Having been going there for years, I think the amenity investments they've been making are really well done - maintaining the unique character of the island while bringing some badly needed modernization. I'm betting these combined with the increased hotel and condo development will (in the long term) drive tourism numbers up and therefore property values as well. In the short term I think the flood of available, brand new condo properties may hurt the sale price on the older rental homes.

I didn't realize the existing homes were land-lease but that makes sense. How do those payments run?

Good to hear some review of the management experience as well. We've always rented from Parker Kaufman. They've done fine by us as renters, but I wondered how the experience was on the other side of the coin. I've heard management fee numbers around 20% but I have no reference if that's normal or not

How bad are property tax rates and home insurance on the island?

So am I understanding that the housecleaning is contracted by the agency but the homeowner contracts the yard care? I figured the trash pickup and utilities were billed directly to the homeowner.

I think the sweet spot for property there is along Beachview Dr but not actually beachfront. The erosion on the NE coast concerns me over the long term, but you want to be as close to an access as possible for better rental volume and rates.

Talked to my father-in-law this morning. He pays about $700 a year for the land lease, and another $4k in property taxes to Glynn County. There is also another $750 for the fire department.

Insurance is fun. The whole island is a flood plane, but depending on the elevation of your house affects who much you pay. My in-law's house is on land 6" higher than the neighbor's house, but it makes a massive difference in their insurance costs.

Beachview is a great location. Walking distance to the beach from almost every house. Sure getting over the rocks is a pain, but that's just Jekyll.

There are still units available in the new development: http://www.thecottagesatjekyllisland.com/

My in-laws are considering buying another place on Jekyll to rent out again, mostly as a tax shelter. My father-in-law was at the JIA (Jekyll Island Authority) meeting last night and said he was really shocked at how well things seem to be progressing on the island. Everyone is actually happy with the direction, and things are falling into place.

As an investment it's usually a pretty bad idea but numbers don't lie. Every situation is different and only you can put together a spreadsheet and determine if it's worthy of your time and money.

One thing I will add is this really a place you're going to use often enough to make it worthwhile? I've always thought about how it would be awesome to own a slopeside cabin or beachside bungalow but then I realize how cheap these rentals are on VRBO. That and I always want to try new mountains or beaches. Maybe once I'm old and decrepit it would make more sense but for now, there are too many other areas to explore to be worth being tied down to one spot.

One thing on this, if you plan on using it a significant amount of time for yourself: My grandpa owned his place for over 40 years--most of that, he did not rent it (at least the last 25 years). He often said that it was the BEST investment he ever made for his family--his sons, daughter, and grandkids. He was right--he lost a lot of money on it, I'm sure--and he would have done MUCH better putting it in VTSMX or something--but it was the best thing he could have done with the money for his family.

YMMV.