Comment by nerdponx
3 years ago
I stayed in one of these places in Miami FL, but I didn't realize what it was until we arrived. Really interesting model.
3 years ago
I stayed in one of these places in Miami FL, but I didn't realize what it was until we arrived. Really interesting model.
I can’t recommend it for most people. It’s a horrible “investment” by any sort of analysis. We barely break even and that’s only because we stay there during low season.
We also had to pay 30% down since it is considered a commercial property. But you buy it just like you would any other commercial unit through a bank. On top of that, we took a HELOC on what was our primary home to get the 30%, just as interest rates were rising. We rent our home out to our grown son and two of his friends that we have known forever.
The HELOC isn’t covered by either rental income and that only makes sense because it is offset by the state taxes we don’t pay.
The only time this makes sense for most people is if their primary home is paid off and as a vacation home and for retired snowbirders.
Also people do it to avoid taxes on real estate sales using a 1031 Exchange.
Even knowing what I know now, I wouldn’t do it under any other circumstances besides what we are doing now or as part of 1031 exchange if had taxable real estate capital gains.