What should I look for if I am looking to purchase a home on cape cod as an investment property?

Asked by Hui, Sherborn, MA Thu May 30, 2013

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9
Heath Coker, Agent, Falmouth, MA
Thu May 30, 2013
Hi Hui,

I would look at:
- the town - how many beaches, things to do, taxes, rules that the town has for rentals
- property with a rental history already - try to buy the existing client list so your empty weeks are fewer
- property with a history of the same landscaper, plumber, electrician, etc. and ask them if the owner was cheap or not.
- interview management companies - ask for references, look at the properties they already manage (on their web page because they'll give you the nice ones if they aren't all nice.)
- learn the rental laws, forms, procedures, etc.
- If you plan to rent off season, the town is more important because some towns don't have the same need for off season rentals.
- rental demand for the area you like. You may like an area that is not necessarily a good rental area.
- ask a lender what requirements for down payment, insurance, etc.
- ask an insurance company about insurance, dogs, pools, flood, etc.


I know this guy can be a helpful mortgage person: rtranchell@totalmortgage.com
Bob Tranchell Total Mortgage Services LLC (508) 367-5731 cell



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3 votes
Kevin Vitali, Agent, Tewksbury, MA
Thu May 30, 2013
Cash flow....

If you are talking about a rental unit, what are the yearly expenses what is the yearly income, what is the yearly NET INCOME.

If the property was previously used as an investment property that data should be available to you. If not you are going to have to make an educated guess.

For many savvy investors they use a formula to determine the Capitilization Rate of a property which gives you an idea of the financial return on your investment after net income and expenses. There are many articles online about Cap Rate and it may behoove you to do some reading.

Personally, if it has previously been used as a rental property and there is several years of history of a solid return not much else matters. My family owns some seasonal rentals and as Heath pointed out try to obtain the existing client list. We have no problem booking the entire season by December it it is primarily the same people renting year after year.
2 votes
Sunny Fellman, Agent, Chatham, MA
Mon Jun 15, 2015
Hi Hui,

There are a lot of things to consider when purchasing a property. I would first ask you if this is strictly an investment property or if you would be enjoying it yourself as well or if you have plans to retire there eventually?

If it is strictly investment, which on Cape Cod usually means weekly summer rentals from June to September, here are some points to consider:

- Proximity to the water and/or town/restaurants is important to many summer renters HOWEVER any rental agent will tell you that unless the home is under 1/2 a mile to either they don't consider it walking distance. The closer to beaches and downtown areas you are the more $$ you will spend.

- As an investment property owner you will need to take into consideration maintenance of the home. Will you need to update or repair the property to get it into a rentable condition? Are there larger maintenance items (roof, boiler, etc) that may come up in the next few years which as the new owner you will need to budget for? I find that unless the Buyer client I am working with is very handy and doesn't live too far from the purchase property they often look for homes which are in move-in condition and don't require much immediate repair. On the other hand, you may be able to get a better deal on a fixer upper and there is a lot of value in improving a property in the right location!

- Basically any town on the Cape will rent but certain towns and areas do afford a higher rental rate, and in turn a higher sales price as well. I would suggest choosing a town which has the best rental rate and resale value. For example, if you can afford a bit more house in Yarmouth but you can get a higher rental rate and resale value for a home in Harwich which may not be as big, etc go for the Harwich property. Just because a property is a good price it doesn't necessarily mean it is a good investment.

- It is helpful for a home to already have a rental history and if it does sometimes the owners will pass along the previous renter list for you to contact them for the following rental season. This is ideal but not necessary. There are different options for renting a home depending on what you want your involvement level to be. Some owners choose to handle the rentals themselves and post the rental on many websites (such as homeaway or vrbo) but this does involve work on the owners end. Others prefer to pay a commission to a rental agency and let them handle the booking of the rentals as well as the weekly duties of check-ins/outs, any issues, etc.

I hope this information has been helpful for you. Please feel free to contact me if you have any further questions.

-
Sunny Fellman, Realtor
Kinlin Grover Real Estate
508-776-2692
sfellman@kinlingrover.com
1 vote
Neil Radford, Agent, Osterville, MA
Sat Jun 27, 2015
Investment properties are complicated. I manage rentals as well as summer homes. There is a strong summer and seasonal rental market. The first thing to consider is your long range plan for the property. Are you looking long term for a summer house for yourself? The Cape has a lot to offer. There are a lot of factors to finding the right investment. If you would like help please feel free to give me a call.
0 votes
Jackie Bohn, Agent, Cohasset, MA
Fri May 31, 2013
Hull,
I tend to agree with Louis. Rental property, especially vacation on the Cape, can be more trouble than itis worth. I have had headaches myself. Louis mentioned many interesting areas, but why would you want to face the traffic of going to the Cape to maintain your property- You should also look at the wonderful small towns along the South Shore like Cohasset, Scituate, Marshfield, and the beach communities that surround them.

I would be happy to discuss this thought with you in more detail if you are interested.
Good luck with your hunting.

Jacqueline Bohn
The Trapp Team
Keller Williams Showcase Properties
Braintree, MA
408-439-7769
0 votes
Sarah Goulart…, Agent, Plymouth, MA
Thu May 30, 2013
If you are looking to tap into the weekly rental market, proximity to the beach and number of bedrooms is key.

That being said, investment property can mean other things, and our year round rental market down here is also very hot and may be a way to pick up a home in a nice area and collect rent.

Finally, given the types of buyers we see a lot of, one floor living is a hugy desired property and will help you in resale if you are looking to sell in the short term.
0 votes
Louis Wolfs…, Agent, Needham, MA
Thu May 30, 2013
Hui,

Why go to the Cape to find a home to rent out????

If you are looking at it as a place you want to end up that is one thing.

The Cape has always been a volatile market in that when the economy is bad the first thing they try to sell is their second homes.

I own down there with the idea of renting it out initially, found it was not worth it. When I wanted to be there is when everyone wanted to rent it. Also emptying out personal belongings, worrying about upkeep and damage etc. And I'm use to it as I own rental properties.

I'd rather have my investments elsewhere and go to the Cape to get away from all the headaches and enjoy life.

As to rents, the higher the rent the closer to the water. There are many options if you do decide to buy in the Cape, each has its own character and amenities, Falmouth, Hyannis, Yarmouth, Dennis, Harwich, Brewster, Orleans, Chatham, Wellfleet, Turo, Ptown all have rental and depending on which area you like, I'd find a local buyer agent.
0 votes
Richard Shap…, , Framingham, MA
Thu May 30, 2013
Location to amenities and acces to beach or water.
0 votes
Ron Berquist, , Massachusetts
Thu May 30, 2013
Good Morning Hui,
There are a number of things you should be looking for. My first thought would be the location of the property. As I'm sure you are aware of, the closer you get to the water the more expensive that property will be. You might want to look at a town that has beaches on both sides. I guess the big thing is, Is the property in a FLOOD ZONE!!!
If you would like to discuss this further. Please feel free to contact me.
Ron Berquist
Authentic Home Finder
508-981-4503
0 votes
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