Vacation Home Is Profitable,
But It's Not Waterfront Property
by Jane Hodges
May 03, 2007
The investors: Bob and Margaret Quinn, a couple in their early 60s who lives in northern Virginia, have worked in the audiovisual and hotel management industries respectively. They have completed several types of small real-estate deals over the years, Ms. Quinn says. They subdivided their primary home's lot, where they built and sold an additional home. They also purchased a shopping center and small vacation/investment properties.
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The property: The 2,800-square-foot contemporary home was built in the 1990s and is located in Basye, Va., in the Blue Ridge Mountains. Bryce Resort is also in Basye and offers skiing, golf and other recreational activities. The Quinns' home -- which they refer to as "Quinn Peaks" -- has four bedrooms, three bathrooms, two decks, two living rooms and a fireplace.
Purchase price: The Quinns purchased the property for $209,000 in April 2003 using a 20% down payment and a 30-year fixed loan.Additional investment: $10,000. Most of the money was spent on landscaping, with the remainder used on interior features like carpeting, window treatments, new paint and periodic repairs.
The strategy: The couple bought the home for personal use, Ms. Quinn says, but decided two years into ownership to rent it out. They have been able to fetch about $12,000 in yearly profit from rental income, not including management costs, she says. About 25% of their revenues go to a property management company. The couple has decided to sell the residence to fund the purchase of a vacation home that's on a riverfront lot in Mt. Holly, Va., that also has two rental units and a commercial building.The pitfalls: The Quinns have been pleased with the residence, both as a vacation home and as an income property. The problem? "We genuinely love the area, but this isn't on the water," Ms. Quinn says.
The transaction: The couple plans to market the home as a for-sale-by-owner (FSBO) property, but will pay buyers agent fees, which they estimate will involve a 3% commission, or $11,859 (at the current asking price). The Quinns plan to reinvest sale proceeds through a 1031 tax exchange and avoid capital gains taxes by purchasing another investment property. If the home sells for its asking price, it will beat the appreciation rate seen by other properties on their block because of the home's larger size and relative newness, Ms. Quinn says.
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-- Ms. Hodges is a free-lance writer in Seattle.
Email your comments to rjeditor@dowjones.com.
