Income Properties in Summit County
Summit county is a wonderful place to buy a vacation home, but is it a good place to buy an income producing property? The answer to that question can be very tricky. With prices on the rise, it is becoming more and more difficult to purchase a property that will actually make money. When I speak with clients, I often advise that it is possible to cover your costs by renting your home but you have to be able to prioritize that over your desires sometimes.
When looking at a home to purchase it’s very important to balance your monthly carrying costs with the rental potential. HOA’s can be one of the biggest factors that prevent you from being able to cover your costs. If you compare a home that has a monthly HOA fee of $400 to another that has a monthly fee of $800, that means that you have to be able to generate $4800 more in rentals per year to be able to cover your costs.
Another factor to consider is what is included in your HOAs. Heat tends to be the highest utility in our cold mountain climate. Heat can be upwards of $200-$400 per month depending on your heating system. When you have renters using your home, they are not as conscious about the cost of heating as you would be so expect them to leave the temperature higher than you may personally. If your HOA does not include heat, your carrying costs will be much higher. Renters also expect cable and internet so those can be around an additional $100 per month if your HOA does not include them.
Location is one of the biggest factors that determine the amount of rent you achieve. A ski-in/ski-out home will always achieve more in annual rent than somewhere that requires you to drive to the ski resort. Of course this will come with a premium price so you will have to factor that in. Also, the number of people that your home will sleep is a big factor. Don’t confuse the number of people with the number of bedrooms. Often a 2 bedroom with good sleeping solutions will rent just as well as a 3 bedroom that sleeps the same number of people. Surprisingly 1 bedrooms and studios do extremely well in our market here in Summit County.
When you rent your home also makes a huge difference. Of course you are buying a vacation home because you want to be able to use it too. However, if you think you want to use your home on major holidays, you can expect to loose out on a huge amount of revenue. Christmas is one of the biggest revenue generating times of the year so if you are tempted to use it during that time just be aware of the income you may be loosing out on.
Last but not least, the way that you handle your rentals will make a huge difference. If you want to hand the keys over to a professional management company and have them do all of the work, expect them to take 30%-40% of your gross rentals. That will severely cut into your ability to cover your costs. If you want to cover your costs or even make a little money, it is going to take work.
Keep in mind that if you were just going on vacation frequently that you would be spending money on hotels every time. (That could be spending upwards of $5,000 a year if you are coming up monthly.) If you are buying a vacation home, you may not be able to cover 100% of your costs, but even if you are putting $5,000 of your own money into your home each year, you are still in a better position than just spending that money on hotels. You are building equity into your home every year you own it. No one can predict exactly what the real estate market will do, but chances are when you go to sell your home in the future, you will make a profit. Not to mention that when you are on vacation, you always have a place that feels like home!