So You Want to Purchase an Investment Property?

I have probably talked more potential Lake of the Ozarks vacation rental property owners out of purchasing a property than I have talked them into purchasing something. The first thing I hear is, “I’m looking for an investment property.” That usually means that the “investor” needs the property to completely cash flow and pay all the expenses including insurance, property taxes, etc. In this day and age, that would be the exception rather than the rule. Having the proper perspective when it comes to owning a vacation rental property will make a huge difference in your overall experience.

Return on Investment

ROI or return on investment is what most people are looking for. Let’s look at the basics when it comes to getting a good return here at the Lake of the Ozarks. Keep in mind that the Lake has a really short vacation rental season compared to other locations, such as Florida or California. Here we are looking at approximately 90 days and depending on the type of property, you are only going to get weekend rentals for the most part. That would be 15 weekends between Memorial Day and Labor Day. You will also get a few outside of that time frame, but more than 80% of your rentals will fall within that 90 day window.

Example: Two Bedroom Condo

Let’s use a two bedroom condo as our model. The average selling price right now for a two bedroom waterfront condo in Osage Beach area is right around $123,000. Based on a 30 year mortgage at 4.5% interest and 20% down, your payments will be around $490.00 per month. A typical two bedroom condo rents for around $175 per night in the summer and you can expect around 40 summer nights. You can also expect around 10 off-season nights in the $140 per night range. That gives you around $8,400.00 for the season. Your average cost is going to be somewhere around $11,000.00 for the year. That would include your mortgage, insurance, taxes, quarterly assessments and electricity. Over time, you will also need to set aside some of your earnings to update your property, repaint, replace worn items, etc.

Net Income

Depending on who you use you are going to give 35-40% of your rental income to the Lake of the Ozarks property management company. That leaves you with around $5,000 to $5,500 in net income from rentals. If you are looking to cover some of your expenses like your electric, insurance and taxes then you are probably going to find the experience a lot more satisfying than if you need your rental income to cover your mortgage and assessments which will total right around $8,500 on a two bedroom condo. Even if you manage the property yourself you will, in most cases, come up a bit short. But your perspective will make all the difference!

Russell Burdette is the owner of Your Lake Vacation, a professional vacation rental management company at the Lake of the Ozarks since 1986. If you would like a vacation rental market analysis or more info on renting your home or condo as a vacation rental at the Lake of the Ozarks, please call 573-365-3367 or e-mail russell@yourlakevacation.com.

For more information please call us toll free at 1-877-284-0267!!

YourLakeVacation.com

4571 Osage Beach Pkwy, Suite A
Osage Beach, MO 65065
Local - 573-365-3367
Fax - 573-365-5076  

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