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Laura Dunlap, Realtor®
217 North Bay Avenue
Beach Haven, NJ 08008
Cell: (609) 290-76860
Fax: (609) 492-2708
Vacation House for Free?
This summer I had the opportunity to work with producers from the new HGTV series, Vacation House For Free. HGTV featured one of my listings in its program. As a fan of HGTV, I looked forward to having a front seat to the process. For those who have never seen the program, the format for the show is like the other "house hunter" shows. First, the host takes the buyers to see an awesome house that has everything they want. After getting the buyers' hopes up the host gives them a reality check informing them that the house is priced way above their budget. Then the host shows the buyers three properties that are more affordable that have more or less the amenities and location they want. The buyers compare them articulating the pros and cons of each property along the way. Viewers wait in suspense until the buyer ultimately chooses which property they like the best.
Vacation House for Free, however, offers the buyers the chance to own a vacation house for free! Wait…what? Well, sort of... in this show the host, who is a carpenter by trade, works with a buyer to find, as HGTV puts it, "a diamond in the rough in their dream location". He then gives the buyers advice about how to renovate the property to maximize their rental income to "cover all of their annual expenses." The idea is that the buyer gets a vacation house for "free" to use for the rest of the year. Sounds great, right? I was certainly intrigued because many of my buyers want the same thing.
The shoot took place on an unseasonably cool and rainy morning in June; certainly not the kind of day I was hoping for since overcast days never make a beach house look its best. The buyers, a couple who met on LBI, looked at my Beach Haven listing and compared it to houses located in Harvey Cedars and Barnegat Light. Among the amenities they were looking for was a water view. You will have to tune in to find out which home they chose. In case you are a big fan of the show I won’t spoil the fun by sharing any more details.
Shows like this are certainly entertaining, but buyers who are looking for a vacation rental property need to be realistic and do their research. To start, I recommend contacting a buyer's agent with local knowledge of the area and experience in both sales and rentals for help. A local real estate professional will be able to obtain accurate information about the rental history of the property, how long (the number of weeks) the typical rental season lasts in a particular area, how many weeks a buyer can count on renting at peak rates as well as a list of actual expenses the buyer should anticipate as an owner of a vacation home. If a house does not have a rental history, a realtor can prepare a comparative market analysis for the property to inform the buyer of its rental potential. And while a real estate agent usually cannot provide estimates for renovations they can refer a buyer to reputable local contractors who can.
A local agent will know what factors to look for in a property to maximize the rental potential and rental income. On LBI, like most real estate markets, location matters both in terms of proximity to the water and entertainment. For example, off-season events that take place in Beach Haven, like Chowderfest, sailing regattas, fishing tournaments and weddings lengthen the tourism season which in turn extends the rental season there beyond the typical 8 to 10 weeks. In an area such as this you may even be able to get more for rent during the off-peak weeks than in other areas of LBI.
While the mortgage payment is typically the buyers’ greatest carrying charge, buyers must also consider other costs i.e., flood and home owners insurance and utilities, in calculating whether and how much of the rental income will cover their expenses. A local realtor can assist a buyer with getting quotes for insurance.
Regarding renovations, buyers should know that building ordinances vary by municipality and affect what a buyer can do, the cost, and how long a renovation will take to complete. A local realtor and contractor can properly advise a buyer about how local ordinances can affect buyers’ renovation plans.
Finally, tax wise there is a distinction between vacation homes and investment properties and it has to do with how many weeks the property is rented and how many weeks the homeowner uses the property. These distinctions have tax consequences for the homeowner so a buyer is wise to consult a tax professional when considering their purchase.
At the end of the day, there really is no such thing as a vacation house for free. But a vacation house on LBI remains an excellent investment even if you run an operating loss. The rental income will offset part of the money you were willing to spend anyway. Sharing the cost among renters who, if all goes well, will become repeat customers and perhaps close friends; you will have a home of your dreams, and maybe even a home to retire to at the shore.
I am a full time LBI resident and real estate agent, with over 17 years of experience serving buyers, sellers and rental owners on LBI and the surrounding mainland communities. Let me be the professional you turn to when you need assistance or advice selling your home, buying a new place or finding a vacation rental at the shore. Contact me today.