I decided to run a quick search using their PropScout tool for an investment property in California for under $300,000. I sorted by cashflow, as I that would be a primary requirement were I ever to get into a rental property. One of the top results was a little ski chalet in South Lake Tahoe for $269,000. With a estimated positive cashflow of over $50,000 per year, I was starting to think InvestorLoft was in serious “Beta”, but decided to keep looking further. Besides, I’ve spent a good deal of time up there, so I was intrigued. Could I swing a nice little ski cabin for myself?
Cashflow Breakdown: InvestorLoft vs. My Numbers
You have to register (free) to see details, but here is the property link. Click on the “View Financials” tab to see the breakdown.
InvestorLoft’s default mortgage numbers have you putting 20% down, and financing the remaining 80% with an interest-only loan. I’d probably go with a 30-year fixed fully-amortized loan, and these days investment property have much higher interest rates. At 20% down and 7% interest, I got $1,400 for an estimated mortgage payment.
This chalet is really a townhouse, so it comes with HOA fees. Property management costs look to be estimated at 10% of gross rent, although as you’ll see below I don’t agree. No maintenance costs were estimated, but as a vacation rental with high turnover, I put in $200 per month. Here are the final numbers side-by-side:
Here’s where that crazy cashflow number comes from: The expected monthly rent was $6,700 a month. (This is also why the property management cost above was $670 a month.) “Rental estimates based on 26 comparable rental listings with matching number of bedrooms and size in a 1.5 mile radius. ” Hmmm. First of all, there’s no way a month-to-month tenant would pay $6,700 a month for this wood shack. It has to be a vacation rental, and I can only guess that they are assuming 100% occupancy.
For some comparisons, I looked up similar properties at VRBO.com – Vacation Rentals by Owner. This chalet does not have the nicest interior, but the location is above average and is near the main highway.
Roughly, it would seem like I could charge $100 a night (taxes not included) for this chalet during May-November, along with a $75 cleaning fee per stay. It could go up to $150 a night during peak ski season (December-April). Occupancy rates would have to be a conservative 50% during the offseason and 75% during peak season. If I assume that I break even on the cleaning fees, that would work out to an average monthly rental income of $2280.
(I wasn’t quite sure how much a property manager would charge for managing a vacation property with people coming and going, especially if bookings were made online, so I estimated it around 20% of gross rent.)
Too bad, it looks like I’m not going to get rich by buying this chalet. The InvestorLoft estimated monthly cashflow was a positive $4,094 a month, while my own rough numbers have me about $200 a month in the hole. I know I am being conservative in some areas, but I think that’s how you have to do it, especially for something optional like a vacation rental. The numbers actually aren’t horrible, though, it might warrant some more investigation…
InvestorLoft looks to be another one of those internet tools that you’re happy exists because you’ll play with it, but you can’t rely on them as there is still plenty of room for improvement.