How does money work out for buying a vacation home in Outer Banks, NC?

Question

We are considering buying a vacation home to rent out at some point in the Outer Banks of North Carolina, possibly in the Whalehead Beach area. But I am having a hard time understanding how the money works out. Rough example: The house we just stayed in rents for $4,500/wk in season, which I am guessing is about 12 weeks long. If it was fully rented (and assuming we would actually get the $4500), that would be $54k. Let's say $70k/year income including some off-season rentals.

It's on the market for $1,175,000. If we were to get a 6% loan that would be $70,500/year for interest alone. I have no idea how much insurance would be, but in a hurricane-prone area like OBX, I'd expect it's a lot. I'm guessing PITI would be $90k. My numbers may be a bit off, but that's still in the area of $20k/year in the red. If I'm way off, please tell me, 'cause I don't get how it would work out. Do you need sub-prime?

And how in the world would one get down payment on $1m, or do people even make one?

Answer 1

I think you're asking this question about 4 months too late, based on the changes in the mortgage market these days. Likely you won't be able to qualify without 20% down, and your current income needs to cover the payments, not expected rental income.

I can't confirm the specifics of your figures, but it's not too often that rental homes make lots of money. Here, the rental season is so short, so it makes it even harder.

Answer 2

Over $417K is a Jumbo , ( sub-prime is for low FICO score people who would never qualify for a Jumbo)
IF you can qualify for a Jumbo , the rates will be more like 7%

http://www.bankrate.com/#

And pretty sure you would need the 20% down ,
Especially because this will NOT be your primary residence .

A friend recently tried to sell his home on the Florida coast because the insurance was running a $1000 a month .

How do people get $$$$ for the $1M ?
Well the forbes list this year was only billionaires .
And some billionairs did Not earn enough to make the 400 person cut .
There are actually LOTS of millionairs now .

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Answer 3

You might have answered your own question of whether or not it's a good investment.

A couple things you missed - the interest wouldn 't be that much over the life of the loan, and would decrease as the principal balance on the mortgage came down. But on the other side of the equation, there will be maintenance expenses, and probably a rental agent.

You aren't going to get 100% financing on something like this, so you would need a substantial down payment and money for closing costs.

Answer 4

I think you are on the right track, but are a little off in your numbers. I think you will need to assume a longer rental season, 16 to possibly 20 weeks. Next, you will need to consider exactly what you are trying to accomplish.For instance, do you want to do this so that you have a place to vacation or are you just looking at this as an investment opportunity? Then, you do want to consider a down payment, maybe leverage your current primary residence for it. Next you want to figure out how long you intend to keep it, that will give a loan officer, like myself, an idea of what type of loan works best. That is when you actually can see if you would be in the black or in the red. You'll want to stay away from sub-prime deals, your interest rate will sky-rocket.
Feel free to contact me,i'll be happy to discuss these ideas with you.
[e-mail]
443-789-8742

Answer 5

money work buying vacation home outer banks nc

Answer 6

I will be down there as well and the hooters @ mile marker 3 1/2 will have the UFC fight 100