Читать книгу Bargains Beyond the Border - Get Past the Blood and Drugs: Mexico's Lower Cost of Living Can Avert a Tearful Retirement - Tom MD Kelly - Страница 8

If the plan is to eventually change your lifestyle, start the audition.

Let’s assume home values are down in the area of Mexico where you like to vacation. Truth be told, you wouldn’t mind retiring there one day. And, if you like the area, others with similar tastes will probably like it as well.

And, is there a break-even formula to use when considering annual cash flow?

One of the better second-home rental formulas now used was developed by Christine Karpinski, author of How to Rent Vacation Properties by Owner. Karpinski’s definition of the break-even point is when all of the income (rent) from your vacation rental property is enough to pay all of the bills associated with ownership of the property. In other words, your vacation home should not cost you another dime after your down payment.

According to Karpinski, if your monthly mortgage payment is equal to - or less than - one “peak” week rental rate, and if you rent for 17 weeks, then you should be able to achieve positive cash flow.

Consider a La Paz property that rents “by owner” for $2,000 per week during the peak season with a monthly mortgage payment of $2,000. There are 12 peak weeks, most or all of which are generally occupied. Then 12 weeks rented equal one year's mortgage payments.

In addition, you'll need to rent five other weeks to pay for incidentals such as power, phone, association dues, minor maintenance etc. If you handle the rental yourself and have 17 weeks booked (33 percent occupancy), you will have an -even cash flow. Rent more and you have positive cash flow, according to Karpinski who serves as the director of HomeAway.com’s owner community.

“I know the real way to retire in Mexico,” said Jeffrey Hill, the part-time Fort Lauderdale resident who uses Homeaway.com and other websites to promote his rentals. ”Start before you are ready. So many people are building up that nest egg so that the can retire. They leave their money sitting in some investment until the day the finally make the move to retire. They sell their home when they finally retire and start looking for their new place to go. Well, it's very possible that as the years go by the prices will go up.

“Take your investment money and buy a second home today where you want to retire or think you want to retire. Create a good rental property and rent it for the next 5, 10 or 15 years. The sooner you start the better. I would not be where I am today had I not bought my first home in Mexico 11 years ago. Had I only bought 30 years ago . . .”

According to the most recent study by the National Association of Realtors, consumers are making “a lifestyle choice” and turning to second homes sooner in their lives. That finding affirms what we know about Baby Boomers – the prime candidates for retirement second-home purchases – who define themselves by personal experiences and adventure. Interestingly, they are now joined by their children – the proud members of the Gen-X and Gen-Y generations – who view practical experiences as paramount in their lives.

After three rocky years, many families are feeling they can go on vacation again. These people can help you make a purchase decision sooner. Not only can renters help you get in the door now, but they can also provide steady income for you down the road – perhaps to travel in retirement.

“Make people suffer in a crappy economy for a few years and eventually they just say ‘screw it. I’m going on vacation.’ 2010 seems to be that year,” Hill said.

Let’s say you have come to the conclusion that there is absolutely no way you could afford a second home at this time in your life. Now, step back and put yourself in renter’s shoes. Would you rent this place, say for $250 a night, which is the cost of the cheapest hotel in the area? OK, that’s $1,750 a week. And, you genuinely believe you know enough people who would rent this home for at least 10 total weeks this year?

“If someone gives me all the factors of a proposed plan, I can tell them exactly where they will stand financially. If I have purchase price, currently furnished or unfurnished, down payment, rate and duration of the loan, I can let people know where they will be next year or in 5 or 10 years.

“The key is to do it right. Most people don’t. They don’t have a clue about what people want or how to make guests feel special. So many rental homeowners think that you just throw in some furniture and the renters will come. They are so wrong. There is so much more to it than that.”

Often, the key to renting out your place until you retire is buying in an area that people desire and can easily reach. In our next chapter, we suggest 10 terrific options.