DISCLAIMER: B&Bs and Vacation Rentals are different animals than renting out houses or apts. They are much more labor--- and mgt-- intensive. The post below applies specifically to B&Bs and Vacation Rentals
yveskleinsky-
Do both.
You're already investing, so that part is happening.
And you're gobbling up the learning part, too.
Back in 2002, my wife and I had some good investment capital and were
itchin' to do something with it.
We had chosen the B&B route for a number of reasons, one being that her family is based in CA, and running a B&B was one of the only ways we could find to get property that cashflowed in CA.
We had planned on getting a good mgt team in place, and having a great life.
Which is kinda where we are now,
4 years later.
In truth, we've gone on to make the business grow, so we're not the relaxed B&B owners we originally planned on being. We're actually crazy busy developing other properties.
The reason I've urged caution re the cabins is that we bought an underperforming property from a motivated seller (he was terminally ill), for WAY under market value.
But we never calculated that bringing the property up to speed would literally take ALL of our time, for 2+ years!
During that time we lived on our savings, and the meager dribble I had coming in from my old business that I was spending NO time on (about $80-120K/year, net, at that time). The B&B ate about $60K/year of my biz income, giving the both of us only $20K to live on one year (not easy, in CA).
A year into it, I had to choose between shutting down my biz and focusing on the B&B, or vise versa. The biz had far more regular cashflow, but zero future (high tech jobs can be like that).
And the B&B had a HUGE upside, but was not making money.
We chose the B&B.
But it wasn't an easy decision. Esp when we had to cash in virtually everything we owned to live. We sold all of our RE-- all of the houses we owned-- since we had borrowed against them to fix up the B&B. We also had an enormous garage sale (rented out part of the fairgrounds in Napa), and sold as much of our belongings as we could part with for pennies on the dollar.
We made a lot of sacrifices to make this B&B work.
I realize rental cabins may not have *nearly* the same kind of upkeep. But realize that you will have:
1) A much bigger alligator to feed every month (ie, mortgage payments), and
2) Be much more dependent on reliable, efficient staff.
So the 2 questions to ask are:
1. Will the income from my current job both support me, and pay ALL of the mortgages/taxes/insurance for this investment each month? If not, how long will my savings last? (it better be a minimum of 18 months, b/c that's how long it takes to sell resort property).
and
2. Will I be willing (and able) to physically perform all the labor required for this investment, if needed? (e.g., weekly cleanings, if your cleaning staff walks out).
If the answer to both questions is "yes", or if you have at least 2-3 back-ups ($$ and staff) for the above, than I say-- go for it!
If not, I'd strongly suggest you reconsider.
Buying vacation rentals or a B&B takes much more time than your average RE investment. That's why it has such a great upside.
)
