Published by The Prudent Plastic Surgeon on July 4, 2021
Editor’s note: Today’s Post is from our PhREI Network partner, Jordan Frey MD, The Prudent Plastic Surgeon.
This post is from the The Prudent Plastic Surgeon’s Sorta Random Sunday series. I love this post because Dr. Frey highlights the difference between owning a vacation home vs a short-term rental property and the importance of mindset. If you are going to invest in short-term rental properties you will need to accept that your property will experience some wear and tear. IF that becomes too frustrating then it is ok to convert to a pure vacation home for you and your family, as long as, it is in your budget. As Dr. Frey points out, the key when investing in short-term rental properties is to have a clear understanding that you are purchasing an investment that you can use…. NOT a vacation home that you rent.
First, Happy 4th of July! We are spending the weekend on a mini vacation in the Adirondacks. And we are actually spending it in a family vacation home that was supposed to also be a short term rental. In fact, it was a short term rental, but then it wasn’t. I think it’s an interesting story so I figure why not share it with all of you!
So, my mom Lisa and stepdad Joe love the Adirondacks. For those who don’t know about them, the Adirondacks are a region in Central New York with a ton of lakes and nature and camping, etc. Really beautiful place.
Anyway, ever since my siblings and I have been kids, we’ve been taken to the Adirondacks during the summer
Usually, they would just rent a place for a week, etc. This was way before VRBO or AirBNB so the short term rental game has been strong in the Adirondacks for a long time.
About 5 years ago, they decided that they would like to buy a vacation home or second home or whatever you’d like to call it in the Adirondacks. This is very similar to tons of other people obviously.
And it’s become a really common topic brought up in online finance forums and groups. Someone says they want a second home. Can they afford it? Well…more on that later.
Also similar to many people, they figured they could also use this home as a short term rental
And why not? This way they could use it whenever they wanted and also make money from it when they weren’t using it. Genius!
Well, this ended up lasting only one summer if that.
They rented it out a bunch of times and, not surprisingly, people broke sh*t and left messes etc. In fact, Ian Cook of Carpe Diem MD famously says in his STR online course (more info here) that the #1 rule of short term rentals is “Guests will break your sh*t!” (Click Here)
Moreover, Lisa and Joe just didn’t like the idea of other people being in their home.
So, their second home/short term rental quickly became just a vacation home.
Is that ok?
Yes. It was ok.
Why? Because my mom and step dad could afford the second home. It fit into their financial plan. Any money brought in via short term renting was icing on the cake.
Unfortunately, this is not always the case.
I’ve heard too many stories of people buying a second home that they really want to treat as a second home. They buy it even though it’s more expensive than they can afford. They figure they’ll defray costs by renting it out.
And then they realize that they hate renting it out.
Now it’s a tough decision
Do you get rid of the property (if you even can)? Or do you keep renting it out so you can afford it (even though you hate renting it out)?
Yikes.
What’s the moral of the story?
The moral of the story is to know what you are getting yourself into.
If you want a second home or vacation home, then buy one. But don’t convince yourself you can buy more than you can afford because you’ll use it as a short term rental. You don’t want a short term rental.
If you want to invest in short term rentals, then do that. Buy a place that you know works as a short term rental and that you also could vacation at if you want. You know the downsides of this and are accepting of them. It’s primarily an STR that you can also vacation at, not the other way around!
Anyway, that’s my story and I hope you all enjoy your weekend!
