# Anyone own a Vacation property that they rent out?



## swoop_ds (Mar 2, 2010)

My wife and I love going on a warm vacation every year. Lately we've been looking into possibly buying a property somewhere and trying to figure out what that would entail.

Does anyone on here have a vacation home that they also rent out when they aren't there? How does this work, and does it actually help with the affordability of the property?

-Dave


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## marina628 (Dec 14, 2010)

We have a couple in Florida but we only use it 1-2 weeks a year so really did not purchase it for us.You really need to be aware of the high costs with short term rentals and in our case we found the more you spend the higher the ROI was going to be .We increased our budget by 30% to get the numbers to work.


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## the-royal-mail (Dec 11, 2009)

Your annual vacation will turn in to 12 months/yr of liability. I don't like being tied down to one spot like that and it's very expensive for foreign specuvestors who get charged all sorts of non-resident fees and taxes. You could get wiped out by one weather event.


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## Ihatetaxes (May 5, 2010)

the-royal-mail said:


> Your annual vacation will turn in to 12 months/yr of liability. I don't like being tied down to one spot like that and it's very expensive for foreign specuvestors who get charged all sorts of non-resident fees and taxes. You could get wiped out by one weather event.


Lol. My $2m liability umbrella costs me $500 a year and covers my short term rental (comprehensive insurance is more expensive but similar to what I pay at home). Rental income booked into 2014 is now past $60k and should hit $75+ and I predict total expenses of $25k this year. Wife is a little ticked off I have been so good at keeping it booked up she can't get down there until the fall this year. 2015 already booked through April.

What foreign fees and taxes? I haven't paid any. The only single bill that has been an eye opener is our water bill which is about the same as our electricity bill ($3000 last year) but we do have a pool and spa plus renters do lots of laundry, etc.

Plus we LOVE the house, used it 35 days last year, bought it with cash we exchanged when the Canadian dollar was above par in 2012. And our neighbourhood has very low DOM, zero foreclosures, extremely low HOA fees (under $1,000 per year) and a great board who manages the funds with an iron fist.

Do your research, spend a lot of time in any area you are thinking about buying in and don't do it unless you have a great retirement plan in place, significant assets and lots of cash to cover any emergencies or periods with low rental income. Don't do it if there is even a remote chance you will have to sell it within the first few years as it can take a lot longer to sell a vacation property.

I just run it like a business and enjoy all of it. Accountant just did our US tax returns and not too painful.


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## MoreMiles (Apr 20, 2011)

USA may deem you one of their residents and ask for a cut, according to the new FATCA law. You are also subject to their estate tax and your worldwide asset is all reachable by them now. 

So no tax implication? Think again.


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## marina628 (Dec 14, 2010)

There is taxes to consider when you sell or die so these definitely need to be factored in to this.


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## fraser (May 15, 2010)

When we mentioned buying a second home in the US (we eventually did not), our accountant told us not do anything without consulting her on how to structure the purchase from a US tax perspective-both operating and disposition. 

I cannot remember the details of the reference material that she gave us but I do remember it being an eye opener.


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## hboy43 (May 10, 2009)

MoreMiles said:


> USA may deem you one of their residents and ask for a cut, according to the new FATCA law. You are also subject to their estate tax and your worldwide asset is all reachable by them now.
> 
> So no tax implication? Think again.


I leave RE especially foreign RE to those that are smarter than me. I don't want to have an expert or even passing knowledge of tenant laws, foreign laws, foreign taxes, insurance, weather, OHIP rules etc. 

Remember I am just a back woods rural hick at heart. Hell I heat with wood. Chainsaws I can do and if I can't it is a $300 fix to get another one.

Less tongue in cheek, I suspect there are ways to keep one's winter vacation desires and investments orthogonal and do fine with both, and as a happy side effect need to know and deal with a whole lot less law, risk, and complication in their lives.

hboy43


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## Ihatetaxes (May 5, 2010)

Yes and if I was in my 70's or older or in poor health and the house represented a significant portion of my net worth I might be concerned. I paid a good lawyer who specializes in cross border trusts and Canadians owning US assets to educate me on the issues before I decided to buy down there. He agreed that a trust did not make sense for my family and that even if I died tomorrow the tax liability my wife would have to pay would be insignificant. The house we bought will not be our retirement vacation destination as we will probably want something different at that stage in our lives.

Again, do your due diligence like all major decisions.


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## swoop_ds (Mar 2, 2010)

How do people on here 'manage' their international properties?


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## Addy (Mar 12, 2010)

We looked into purchasing a house or condo (or few) as rental investments but it became clear after crunching the numbers it wasn't worth it for us. We would have made money but the ROI wasn't nearly as high as we wanted. If you want to buy a condo you would want to find a building that allows rentals and has an onsite property manager who is willing to manage the property for you (for an additional fee), and has a good track record. I do not suggest trying to manage it yourself.

Good luck whatever you decide.


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## Jon_Snow (May 20, 2009)

Our Mexico condo complex has a wonderful home owners association - a great mix of British Columbians, Californians, Alaskans, Washingtonians and a very large contingent of Colorado residents... the property manager is a local Mexican who knows how to get things done when the Gringos are at a loss... its all amazingly hassle free.

We used to rent it out occasionally, but not for the last ten years. We have found as time goes by that we are spending more and more time down there and don't wan't to compete for time with renters anymore. My parents are just finishing a 7 week stint down there. They seem to delight in telling their son how perfect the weather has been, as a slog my days away in the typical Vancouver monsoon season.:apathy:


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## getliquid (Mar 2, 2014)

Ihatetaxes said:


> Lol. My $2m liability umbrella costs me $500 a year and covers my short term rental (comprehensive insurance is more expensive but similar to what I pay at home). Rental income booked into 2014 is now past $60k and should hit $75+ and I predict total expenses of $25k this year. Wife is a little ticked off I have been so good at keeping it booked up she can't get down there until the fall this year. 2015 already booked through April.
> 
> What foreign fees and taxes? I haven't paid any. The only single bill that has been an eye opener is our water bill which is about the same as our electricity bill ($3000 last year) but we do have a pool and spa plus renters do lots of laundry, etc.
> 
> ...


Whats this $2m liability umbrella insurance? is it only available for US or does Canada offer something similar for landlords?

How much are you paying the property management company? I would imagine their holding the key and meeting the weekly vistors when they arrive?


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## Ihatetaxes (May 5, 2010)

getliquid said:


> Whats this $2m liability umbrella insurance? is it only available for US or does Canada offer something similar for landlords?
> 
> How much are you paying the property management company? I would imagine their holding the key and meeting the weekly vistors when they arrive?


Just double checked and this year I paid $413.22 for the umbrella and $1,930 for full comprehensive house insurance. A liability umbrella is very common in the US as most home comprehensive policies only cover you for $300k in liability. So now I have $2.3M in liability and my research tells me even if I was sued for $10M it would be enough as the insurance company will fight any lawsuit with their best lawyers forever and 99% of these cases settle for far lower than the original claim amount. Plus every renter signs a detailed short term lease contract that specifies we are not liable for any injury, etc. Then add in the child safety fence for the pool, alarms on all the sliding doors out to the pool, etc. and I don't think I need to worry about liability.

Property Manager cost me a total of $1,580 in 2013. They pay all my bills, pay my state and county taxes, pay all the service providers, coordinate the cleaning lady, lawn maintenance, pool maintenance, etc. They are the contact for all renters who have problems or questions so I have never had a phone call about a minor issue. They also pick up my mail, accept courier deliveries and hold them for me, pick up and deliver groceries for me before I arrive (nice to arrive with a full fridge and lots of cold beer). I think their fees are ridiculously low for all they do. One thing they don't do is greet new renters. I have a lock box near the front door and a garage keypad that both have the same code. I send new renters this info along with a great welcome PDF with all the house notes and instructions for pretty much everything. After renting dozens of homes and condos I believe my welcome notes and house instructions are better than any I have every seen.


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