Investment in high end real estate markets can be a challenge for most buyers.
If the price of the real estate does not intimidate, then the low cap rate, or return on investment, will. In fact, carrying costs v income on luxury real estate investments are often negative for many years, or until the property is sold.
With real estate investors in our expensive San Diego market, we frequently suggest they consider the purchase of a vacation rental for several reasons:
1. It is an investment that will likely return a much higher rent than a comparably-priced property that has a long term lease. The property, however, must be located in a premier destination such as a beach or a busy luxury resort.
2. The property is cleaned and inspected on a regular basis and ongoing maintenance is a given.
3. A furnished vacation rental can be used by the owner, subject to advice from a tax planner. This gives the vacation rental owner the opportunity to both enjoy the real estate investment and possibly even improve the property during this visit. (Another tax deduction?)
4. Vacation rental furnishings are depreciated and expensed, which may provide further tax advantages.
The coastal San Diego real estate market offers several such opportunities. Our balmy climate attracts a year round flow of visitors who either wish to vacation by the ocean, or who wish to luxuriate in or near a luxury resort, such as the La Costa Resort and Spa, that offers not only golf, tennis and spa but is also close to beaches.
It can be difficult to find lucrative vacation rental listings, because many real estate developments do not allow short term or vacation rentals. Additionally, the property must be located where visitors want to stay.
We currently have such a listing. This busy and furnished condo is located in the La Costa Chateaus (behind the gates and on the grounds of the La Costa Resort) and is priced at $460,000. Even with discounted rates because of the noise and distraction of a major building remodel, the owner has been receiving an accumulated average of $3850 per month during the extended high season, and a low of $1850 during the slower season.
Once the scaffolding is down at the end of this month and the landscaping is restored, it is expected that rents will increase.
The buyer of this rare offering will acquire not only a condo that rents for $150 plus per night, but will also inherit the bookings, marketing site and clientele that go with it.
When real estate markets are shaky and when investor confidence is wavering, the vacation rental purchase with its ongoing revenue stream may make enormous sense.
Do we believe in this type of investment?
Absolutely! In fact, we own a couple of condos at the La Costa Chateaus and have found them to be terrific investments. If you are interesting in knowing more about vacation rentals or this La Costa Chateau property, just call Mike Murphy at 760 402 9102.
If La Costa Resort and La Costa real estate is of interest, you may wish to also read:
Blavish: Ownership of luxury vacation rentals provides some excellent tax benefits as well.
Beautiful property, and a very well laid out article. I think your argument is right on!