As many of you that keep up with my real estate investing site know, we were fortunate enough to buy a property at Jackson Lake near our home in Atlanta for a second home. What I did not realize before I started toying with the idea of looking at this type of real estate was the immense profit potential that resort or vacation properties hold. This point was further driven home to me by a student who is starting to successfully work the condo market in a resort area on the east coast. He and his wife have bought and sold several of these properties in a very short time frame, and the profits are over $40,000 per deal with little if any renovation/rehab! Sounds like a nice way to buy real estate!
Resort / Vacation real estate can make some great profits for several reasons:
- This type of real estate is generally by people who live some distance away from the property.
- There is a high likelihood that this real estate is not used much anymore because the owners do live so far away, and is thus an unwanted expense in both time and maintenance for the owner.
- The owner is not able to necessarily fully keep track of the rate of appreciation on his or her real estate. Furthermore, with the decline in the stock market of the last year or two, many more dollars have been flowing into these types of properties making them rise greatly in price. Even if the owner knew the market value two years ago, that may be very low in today's market. This type of real estate is more liquid than in the past because of the demand for them by owners.
- The properties are vacant, and not full of people's best furniture, so the owners are more likely to be willing to allow you to option the property or lease/purchase it with the right to access it so that you can show it to prospective buyers.
- Your buyers will not be as picky on cosmetics or other common owner occupant issues because it will not be their primary home.
To give you an illustration of how you can literally buy real estate like this, even at full retail, and create immediate substantial profits, I will walk you though my personal deal on our lake house.
We purchased our property at a discount from the appraised value. The property was priced in-line with other one-bedroom properties on the lake. I know what you are thinking — who would want a one-bedroom property?!? Not me! Not with two kids, two dogs, a wife, inlaws and friends. A little too many people in one room for me. What is unique about this property, and several others that I have seen since I have been following this market, is that this one bedroom house was actually very large, approximately 1300 square feet. What I saw was that it could easily be cut into a three-bedroom house for a thousand dollars or so, which would raise the price some $50,000 at a minimum. Thus, some of these properties can literally be turned from one bedroom to three or four with some new walls and doors. Walls and doors are cheap.
We had pondered selling the house after cutting up the rooms, but have decided to keep it and make it a base of operations to find other similar properties that we could work with. We are implementing the following system to make money while we are riding around on the boat and enjoying the water:
- Get a recent list of comps from a local realtor for recent sales at the lake. Drive around and look at these to learn what areas of the lake sell for more etc. A market like this can be learned in a day.
- Write down the address of each property that we see that looks neglected, overgrown, or in need of repair. (The address must be posted on the docks by law on our lake).
- Write the handwritten letter in our course to each of those owners.
- Call to follow up with those owners. If they do not respond to my letter.
- Ask if they are willing to sell, and if so what their best price would be?
- If too high, ask if that is the best price that they could give on this real estate.
- Propose an option/lease option or a straight purchase to acquire the real estate.
- Market the property through newspaper advertisements and signs on the dock facing the water.
If you have trailers on nice lots, the “break up and liquidate” strategy is also something you should consider. Speak to several used trailer companies and advise them that you are acquiring some lots at the lake with trailers on them and would be interested in selling the trailers so that you could do new construction on the lots. Ask them what they are interested in and the prices they could typically pay for single-wides, double-wides, or triple-wides. We have been given a general number of $15,000 for a nice double wide. They will come out, take it, and cut you a check the same day. If you can find a lot with a mobile home that is priced for the land only, might it make sense to sell the home and sell the lot after the home is removed? This could be an easy $15-20k payday even paying near to full retail.
In closing, this is a neat market that really is primed to be lucrative because of the current economic situation. People are buying this type of real estate like never before, and owners often do not know what they really have because of recent appreciation. I would urge you to consider this strategy as something to work into your real estate investing tool kit. I would urge you to especially look at one bedroom properties on the market, even listed ones, and see if you can break them up into more bedrooms which will give you a huge immediate profit with little effort or expense. This market is not small. We saw several other properties that could have been cut into more bedrooms like the property that we bought, but the water as deeper and wider where we purchased. If you are buying lake property, and cannot decide between two properties, deep-water properties always sell faster and are worth more. You can get a topographical map of any lake to see where these lots are. I hope that this new source of real estate deals will be lucrative for you!