Buying Vacation Rental Investments and Beach Condo Financing

Summary

In this video, Jerry Pincus, a real estate expert from Myrtle Beach, South Carolina, discusses the ins and outs of vacation rental investments and financing for beach condos. He shares practical advice on starting small, the importance of local zoning compliance, and the current trends in resort property financing. Jerry emphasizes the significance of working with local lenders who understand the unique dynamics of resort properties and the impact of Fannie Mae and Freddie Mac's tightened lending rules on vacation rentals. His goal is to guide viewers in making informed decisions and avoiding costly pitfalls in the vacation rental market.

Takeaways

• 🏠 Vacation rental investments are popular due to strong buyer demand in resort areas and the potential for generating income.
• 💰 Jerry Pincus, with 36 years of experience, emphasizes the importance of understanding the vacation rental business before investing.
• 👍 Starting small with one property is a common approach for new investors to test the waters and learn about managing vacation rentals.
• 📈 Many clients have grown their vacation rental businesses from one unit to multiple, similar to a game of Monopoly.
• 📝 A crucial tip is to check local zoning regulations before buying a property for Airbnb or VRBO to ensure it's compliant.
• 💼 Buyers often use home equity loans, cash from profits in real estate or the stock market, or hard money lenders to finance vacation rentals.
• 🏦 Access to credit for second home buyers is limited, and banks are more cautious compared to the past, requiring buyers to have 'skin in the game'.
• 💡 Local lenders who understand the resort area and its properties can be a better resource for financing vacation rentals.
• 🚫 Fannie Mae and Freddie Mac have tightened rules on loans for condos and resort properties, making it harder to secure financing.
• 🏨 Condo hotels or 'condotels' that function like resorts with nightly rentals can affect financing options and are considered a different category.
• 🤝 Aligning with a local expert is essential for navigating the vacation rental market, understanding local regulations, and finding profitable properties.

Q & A

What is the main topic of the video script?

The main topic of the video script is vacation rental investments and how to secure financing for beach condo properties, with a focus on Jerry Pincus's experience and advice in the real estate market of Myrtle Beach, South Carolina.

What is Jerry Pincus's background in real estate?

Jerry Pincus has been investing in real estate, specifically in land, resort, income, and vacation rental properties, for the last 36 years. His properties are mostly located on or near the water.

Why is buyer demand strong in resort areas according to the script?

Buyer demand is strong in resort areas because people seem to be migrating to the water, and there is an increasing trend of people running vacation rental businesses as a side hustle or side income from their homes.

How did Jerry Pincus transition from a side business to a full-time real estate business?

Jerry Pincus transitioned from a side business to a full-time real estate business by growing his vacation rental income to a point where he could quit his full-time job, eventually moving to the beach and managing his properties through a team of experts.

What is the first step Jerry suggests for someone starting in vacation rental investments?

Jerry suggests that the first step for someone starting in vacation rental investments is to start small, with one property, to test the waters and ensure it's a manageable and profitable endeavor before expanding.

What is a common mistake that new investors make when investing in vacation rentals?

A common mistake new investors make is not checking local zoning regulations to ensure that short-term rentals like Airbnb or VRBO are allowed in the area before purchasing a property.

What are some of the ways people are financing vacation rental properties according to the script?

People are financing vacation rental properties by using home equity loans, paying cash from profits made in real estate or the stock market, or going to hard money lenders for short-term financing.

How has the lending landscape changed for vacation rental properties?

The lending landscape has changed for vacation rental properties as banks are not lending as freely as they did in the past, with Fannie Mae and Freddie Mac tightening rules on high vacation rental areas and not buying loans on many resort-type properties.

What is a 'condotel' and how does it relate to vacation rental financing?

A 'condotel' is a complex or building whose primary focus is on nightly rentals, functioning like a resort with amenities such as a front desk. It can affect financing because it represents a hybrid of a second home and an investment property, which may have different lending criteria.

Why is it important to work with a local expert when investing in vacation rentals in a resort area?

Working with a local expert is important because they have in-depth knowledge of the vacation rental business in the area, including which properties are good investments and which ones to avoid, as well as understanding the local market dynamics and regulations.

What advice does Jerry give regarding the management of vacation rental properties?

Jerry advises that investors can either manage the vacation rental properties themselves, which can be very profitable but requires daily involvement, or they can put the property on a rental program where someone else manages the property for them, similar to a condotel model.

Outlines

00:00

🏖️ Vacation Rental Investments and Financing

Jerry Pincus, a real estate expert from Myrtle Beach, South Carolina, discusses the appeal of vacation rental investments and condo financing. He emphasizes the importance of understanding the market, especially the strong buyer demand in resort areas. Jerry shares his 36 years of experience in investing in resort and income properties, often near water. He advises starting small with one property and growing the investment, while also warning about the importance of checking local zoning laws before purchasing for Airbnb or VRBO purposes. Jerry's real estate team assists people in buying and selling resort properties, and he encourages viewers to subscribe for more informative videos.

05:02

💼 Financing Strategies for Vacation Rentals

This paragraph delves into the financing options available for vacation rentals. Buyers can use home equity loans, pay cash, or consult with local lenders. Jerry warns that access to credit can limit second home buyers and that banks are more cautious than in the past. He notes that many buyers are paying in cash or putting down significant deposits. Financing for vacation rentals is more challenging than for primary residences, and banks view non-owner-occupied properties as higher risk. Jerry suggests working with local lenders who understand the resort market and have tighter lending requirements. He also touches on the role of Fannie Mae and Freddie Mac in buying loans from banks.

10:04

🏘️ Resort Property Financing Challenges

Jerry explains the difficulties in securing financing for resort properties, particularly condos. He mentions that Fannie Mae and Freddie Mac have tightened their rules on loans for high vacation rental areas, focusing more on traditional real estate lending and affordable homeownership. This has led to fewer options for financing resort condos, especially those involved in short-term rentals. Jerry advises that local lenders may be a better resource, but they have tighter requirements and may not lend on smaller units. He also discusses the impact of these financing issues on the availability of funds and the timing of loans, noting that some banks may have limits on the amount they can lend at any given time.

15:06

🌐 Navigating the Vacation Rental Market

In the final paragraph, Jerry highlights the importance of working with a local expert when investing in vacation rentals. He explains that local experts can guide buyers to properties with high cash flow and help avoid those with many listings for sale, which may indicate issues. Jerry also mentions the difference between managing a vacation rental oneself and putting it on a rental program with a management company. He stresses the value of oceanfront condos for rental income and the profitability of managing a vacation rental directly. He concludes by encouraging viewers to watch more videos on his channel for in-depth information and to subscribe for more insights.

Keywords

💡Vacation Rental Investments

Vacation rental investments refer to the purchase of properties, such as beach condos, with the intent of renting them out to vacationers for profit. In the video, the speaker discusses the appeal and profitability of these investments, emphasizing the importance of understanding the market and the right strategies for success.

💡Condo Investing

Condo investing is a specific type of real estate investment where individuals buy condominiums as assets to generate income, either through renting them out or by selling them at a profit. The video script mentions condo investing as a way to diversify one's investment portfolio and as a means to generate passive income.

💡Cash Flow Properties

Cash flow properties are real estate investments that generate a positive cash flow, meaning the income they produce exceeds the expenses associated with them. The video script highlights the importance of seeking out properties that provide a strong cash flow, which is a key factor in the success of vacation rental investments.

💡Resort Property Financing

Resort property financing refers to the process of obtaining loans or financial assistance to purchase vacation properties, such as beachfront condos. The script discusses the complexities and considerations involved in securing financing for such properties, including the need for a solid financial plan and understanding of the lending landscape.

💡Jerry Pincus Real Estate

Jerry Pincus Real Estate is the company mentioned in the script, which specializes in real estate investments, particularly in resort and vacation rental properties. The speaker, Jerry, uses his 36 years of experience to provide insights and advice on investing in such properties.

💡Buyer Demand

Buyer demand in the context of the video refers to the high level of interest and purchasing activity in resort areas, particularly for vacation rental properties. The script notes that people are increasingly seeking properties near water bodies for both personal use and investment purposes.

💡Airbnb Investment

An Airbnb investment involves purchasing a property and listing it on the Airbnb platform for short-term rentals. The video mentions this as a popular strategy for generating income from vacation rental properties, while also cautioning about the importance of adhering to local zoning laws.

💡Local Zoning

Local zoning refers to the regulations and restrictions set by local authorities that govern how properties can be used. In the script, the speaker advises checking local zoning laws before investing in a vacation rental property, especially when considering platforms like Airbnb or VRBO, to ensure compliance and avoid legal issues.

💡Home Equity Loans

Home equity loans are financial products that allow homeowners to borrow money based on the equity they have in their property. The video script mentions home equity loans as a potential source of funds for purchasing vacation rental properties, indicating that individuals with sufficient equity in their primary residence may leverage it for investment purposes.

💡Fannie Mae and Freddie Mac

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises that buy mortgages from banks and package them into mortgage-backed securities. The script discusses how these entities have tightened their rules regarding loans in high vacation rental areas, affecting the availability and terms of resort property financing.

💡Condotels

A condotel is a type of property that operates like a hotel but is structured as individual condominium units. The script mentions condotel as an alternative investment option for vacation rental properties, where the management of the property is handled by a third party, providing a more hands-off approach to vacation rental income generation.

Highlights

Jerry Pincus, a real estate expert with 36 years of experience, shares insights on vacation rental investments.

Buyer demand for resort properties is strong, with people migrating towards waterfront locations.

Many individuals are running vacation rental businesses as a side hustle.

Jerry discusses his transition from managing his own vacation rentals to expanding into real estate sales.

Investing in vacation rentals often starts small, with people testing the waters before scaling up.

It's crucial to check local zoning regulations before purchasing a property for Airbnb or VRBO.

Jerry highlights the importance of subscribing to his channel for access to hundreds of informative videos.

Home equity loans and cash are common methods for purchasing vacation rentals.

Access to credit is limiting for second home buyers and vacation rentals due to stricter lending practices.

Jerry explains the difference in financing for vacation rental properties compared to primary residences.

Local lenders may be more knowledgeable about resort properties and offer tailored financing options.

Fannie Mae and Freddie Mac have tightened rules on loans for high vacation rental areas.

Jerry discusses the profitability of managing vacation rentals through platforms like Airbnb or VRBO.

Condotels, which function like hotels, can affect financing and management of vacation properties.

Local experts are essential for navigating the vacation rental market and securing the best properties.

Jerry emphasizes the value of aligning with a local expert to avoid costly pitfalls in vacation rental investments.

Transcripts

buying vacation rental investments and

how to get beach condo financing now in

other videos you've heard me talk

in depth about vacation rentals and

condo investing and why it makes money

and you've also heard me talk in other

videos about

cash flow and cash flow properties you

know vacation rental investing

and what to look for what to stay away

from

and i'll have some of those links below

so you can watch those but in this video

i'm going to talk specifically about

vacation rental investments

how to get them to work for you and

really

one big question everybody has is resort

property financing so

i'm jerry with jerry pincus real estate

experts here in sunny myrtle beach south

carolina

i've been investing in real estate in

land in resort

and income and vacation parental

properties for the last 36 years

so most of my properties that i've

invested in during that time

they've been located either on the water

or near the water so

i'm giving you actual experience real

life stories

uh what to avoid and and how you can win

and my real estate team does this every

single day so

first off i just want to say thank you

so much i i truly appreciate you

watching

and the second thing is if you hit the

subscribe button you're going to get

access to

hundreds of videos to help you that are

here on this channel so

if you're ready give me a thumbs up okay

so

here's the first thing is buyer demand

has been super strong in resort areas

um i don't know if you know this or not

but people seem to be migrating to

the water right so people

have been recently running entire

vacation rental businesses right from

their home it's like their side hustle

their side job

and side income so you know it's what i

did for years

on the side until i had enough cash flow

and i was able to quit my full-time job

actually

years ago i was able to actually move to

the beach and just

rent my properties so as my business

continued to grow

we expanded into the real estate sales

side so

i still have vacation rentals and i love

the income from these properties but

i have other people managing those

properties now so

my companies have grown considerably

from their humble beginnings

and the other side of the business is

the real estate sales so

as i said my team of experts has they

continue to help thousands of people

buy sell resort properties here in

myrtle beach south carolina

so how do you get started investing

in vacation rentals right so

most people what they do is they'll

start small it'll be one

property you know they stick their toe

in the water they want to see

how it works uh see if it's going to be

an issue

they're not going to get in over their

head right so they use a little bit

themselves

they enjoy this lifestyle and they also

run out their unit

you know while they're not using now we

have many clients who have started with

small units and parlayed from one to the

next to the next and

others that are actually doing this some

people

it's like the game of monopoly in real

life in many cases

because some people are making an airbnb

investment

you know they're doing those short-term

rentals

and and um while they're still working

so they've got leverage they're actually

have something else working for them

while they're working

now here's a here's a pro tip okay you

always want to check

when you're doing airbnb or vrbo and

you're doing it yourself

always check with local zoning to make

sure it's conforming

in that area before buying because we've

had people that have come to us

after the fact you know the horror

stories from newbies that

didn't have an expert who was helping

them so i just want to you know point

that out

but if you've been thinking about doing

this if you've been thinking about

buying a vacation rental

or a second home you're not alone

because i want you to think about the

beach

for example okay so look at all the

condos that are on the beach

okay someone owns each one of those

so there's a lot of people who are doing

this it's just a lot of people aren't

talking about that

you know so hey did i say to hit that

subscribe button yet

is this helpful okay let's go ahead and

hit hit the subscribe button so

okay so how are people buying how are

they doing this

okay how are they purchasing a vacation

rental

now buyers in some cases are using home

equity loans

okay they have a house they've got

equity in their loan house they can

write a check for it

or they're paying cash honestly there's

been a lot of profits made in real

estate and in properties recently

um and over the years and and for that

matter the stock market has also

made a lot of people money so what

they're doing is they're taking a little

bit of money off the table you've heard

me say this before

and investing it diversifying or they're

going to a hard money lender this is a

person who

is actually lending money just you know

lending to

lender to lender person to person or um

you may you know you want to know about

which local banks

or which local gender lenders to use um

you know whatever specific area you're

in you know

you want to go shopping in that area

your local expert

can help you with that but you know it's

always going to be specific to

where you are a lot of times now

aligning

a correct lender will help you avoid

those pitfalls because you know if

you're at the wrong thing or the

treadmill you're on and and

not getting any traction uh you know

currently you know access to credit is

going to limit a lot of second home

buyers honestly you know vacation

rentals and even some of the primary

home buyers

across the country you know may get

dinged now why is this

okay banks aren't lending like it's

2005. now if you can

if you've been around for a while and

you've thought about this and you've

seen things

you know some people bought vacation

rental properties back in the day

with no money down right you've heard

this before you've heard these stories

and what they were doing is they're

trying to flip properties as long as the

market's going you know and you have no

skin in the game

you just flip the property and make a

little bit of money flip the property

and all that stuff but when that stops

they then you lose property okay they

were not looking

at the rental business they weren't

using their head and you looking at the

full picture

okay that's one reason why real estate

had the meltdown in 2007 in in resort

areas because

people were way over leveraged right

it's completely different today

one reason resort property business is

so strong today too

is because people are not over leveraged

okay

what i'm seeing here what my team is

seeing here is you know better than half

of the buyers

are actually paying in cash now i know

it's kind of strange it seems weird but

then other people if you are if they are

financing they're really

they're putting down 20 25 you know 35

percent they're putting

a chunk down so but if you are financing

if you are financing you do not need to

do that i'm just pointing this out

but if you are financing today you do

have to have skin in the game okay you

got

to have you got to have a solid

you got to be solid you got you have

good credit you got to keep low overhead

you know you can't be over leveraged

um you got to be living below your means

and you got to have steady income

because

that's what a bank wants they want a

solid if they're learning money they

want solid right

so vacation rental properties and beach

condo

financing is a little different than if

you were going to the bank

for your primary home where you live

full time okay now what we're talking

about here is second home or investment

property

banks look at everything that you don't

personally live in

100 of the time as a risk why you know

you're it's outside your hands you're

not there all the time

so i want you to go in with your eyes

open okay

getting a mortgage in a resort area is

especially for a vacation rental condo

or something like that

is going to be tougher it's not

impossible but there are things that you

need to know

for instance if you go to your hometown

bank somebody you've been banking with

for years

they know you you know them first name

basis even when you walk in

you go in there and you say hey i want

to buy a condo

somewhere they'll say yeah sure no

problem but what they don't know

is is the condo the where it is if it's

a

nightly rental a vacation rental that

sort of thing

they they generally when you get three

months into your deal you've been trying

to get closed and find out or a month

into your deal that you were trying to

close and it doesn't close

i'm gonna go further into this and

you're gonna find out why okay

but i'm trying to help you to avoid

these pitfalls

so the second thing would be maybe

people think think i'm going to go to

the big brand

brand banks okay these are the name guys

the big guys

the reality is on a lot of resort

properties if it is going to be used

it can be classified as a condo tell

like for instance if it's rented by the

night

by the week by the by the uh by the

couple nights it's short-term rentals

this is completely different than a

second home when you're not using it as

a rental property at all

and it's not an investment property

either so it's it's a it's a hybrid i

guess

but there are a handful of lenders local

people that are in whatever resort area

that you're looking at

that know the area they know the

property they know that that building is

over there they know it's not going

anywhere it's been there for years

there's income coming from it

and they know all that so that's why the

local lenders tend to be

a pretty good resource now there's

tighter requirements so

they aren't lending on small units okay

why because a lot of times

there's if you don't have any skin in

the game a small unit people pay cash

for these types things a small condo

you know or square footage if it's like

an efficiency okay

you know 400 square foot or 600 square

foot something small

lower okay or banks generally don't want

to loan

100 000 or less there's not enough in it

for them

to go through the whole process to make

money on it they feel like it's too much

of a risk so

this in fact limits the numbers of

lenders

for second homes okay does this make

sense all right so

limiting the availability of money you

know and timing for that matter for

instance in the local lender i know this

for a fact

when somebody comes in they'll say which

one do i use well it really depends on

when

and and where you're buying and here's

why because at certain points of the

time these small

banks will have like i get they got 10

million dollars to lend once they're out

of that 10 million dollars to land on a

property it's gone

okay and then they'll wait for more

deposits to come in and then lend out or

they don't want to over leverage they

want primary

residence they want this much in in

secondary

they have to have a balance of where

their money is flowing from and where

their comfort level is

so that's one thing that you probably

don't know i'm trying to let you know

behind the scenes of what actually goes

on so

what are the vacation rental finance

issues

okay the real reason here's the real

reason behind all of this that i've been

talking about so far

you may have heard of two names fannie

mae and freddie mac now

what what are they they're government

they actually buy

the loans from the bank and they fund

the bank

actually is is the is not loaning you

all the time

they'll keep it on the shelf sometimes

in their bank but a majority of the time

that money is being sold they're being

funded by the government to take over

the mortgage-backed

loans okay so

uh you know when you're looking at

fannie mae and freddie mac

if you go to a traditional bank and

you're and you're going in there as your

primary residence

they'll buy that loan the bank gets the

money for it and then they put it back

into the system it keeps on going and

they service your loan they collect

the interest from it okay so if that

makes sense

but here's what's changed okay this has

totally changed

freddie mac and fannie mae are no longer

buying loans on condo or

or resort type loans from many of the

banks okay so

fannie mae and freddie mac has tightened

the rules

on these high vacation rental areas all

over the nation it's not just in one

area

fannie and freddie say that they want to

shrink their footprint in these resort

areas okay so an example

um you can get a a conventional finance

loan if i went out and bought

like an intercoastal uh condo or

or a golf course condo but it did not

have any short-term rentals now this is

truly a second home

there's there shouldn't be any issue

there but if i go into an

area or a complex where you know there's

other condos in the building even

okay that are being rented on a nightly

weekly

you know they're they're just they're

they're doing that

or a condo project that is kind of

that's going to be disqualified from

fannie and freddie finance and does that

make sense and

why is because they want to put their

their resources frannie and freddie want

to put their resources into what their

core mission is

okay it's encouraging affordable home

ownership you know as a primary

residence

or traditional real estate lending okay

so if you've looked at all your options

on a short-term rental building

okay you might say i got to go to plan b

uh

if it has hotel-like amenities and

you're in a vacation area you might be

doing that

okay some of these like oceanfront

condos here's a really good example

so oceanfront condos for the most part

are going to generate

some of the highest gross rental income

so there's value in that in itself

okay so for an example if you have a

condo that's

on the beach and you have a condo that's

somewhere else can you get more money

when you rent your condo on the beach

absolutely okay so if if you're and

here's another good one

if if you are doing all the work

yourself and you're doing it through

like an airbnb

or your your vrbo okay vacation rental

by owner and they're

and you're you're renting it directly

and you're involved in it every day

day to day all that income comes

directly to you okay

straight to the bottom line okay i can

tell you from personal experience

it can be very profitable um but you're

gonna have to put the work in for sure

or there's other options another option

you can put that vacation property

on a rental program okay where somebody

else is doing the management of the

property for you

so that's kind of like what i was

talking about before which is

a condotel you know it's run like a

hotel maybe

they do the linen service the cleaning

the turnkey you get a statement at the

end of the month you get a check

you know so what is a condotel that's

that's a complex

or building of prob projects and its

primary focus is like nightly

rentals you know it has a front desk and

it functions like a resort

okay so this can affect

the way your financing is okay so that's

that's one of those things i want to

bring on your attention and let you know

as i said i've got other videos on this

channel that go into depth into a lot of

these things and check those out in

in the comments below but and this can

affect

not only this part of it but it can also

affect financing for single family homes

in like a resort area like even if

you're doing airbnb or vrbo

so this is why you need a

local expert who has boots on the ground

you know knows the ins and outs of the

vacation rental business

and and knows which properties to look

for and

which ones to stay away from you know

some condo

complexes you've seen this you've been

out there looking right

some condo complexes or even um uh

communities

have tons of listings and there is a

reason why why do they have a ton of

listings

okay some buildings or complexes

or communities you'll see you won't see

any listings for sale so when you're

shopping on zillow or realtor homes or

one of these third-party

aggregators of of real estate

you're looking and they're showing you

stuff but it may not even be something

on there that really is the cash flow

machine right why the k the best

properties

usually aren't needed to be sold right

they have high cash flow somebody

doesn't need to get rid of those

okay so aligning with an expert locally

in your area wherever you're shopping is

going to

get you into those types of properties

or when they become available

you're going to be able to snap one of

those up and and usually that's the way

it works

uh you don't see them and if they are

they're gone the next day a lot of times

so

um did you hit the subscribe button yet

okay

i hope this helps you and gives you some

insight into the back end

of what we see because because my goal

is to help you avoid the pitfalls that

are costly

it's jerry with jerry pincus real estate

experts here in sunny myrtle beach south

carolina

wherever you are whatever you're doing i

hope you're having a fantastic day

and we'll see you in the next video take

care guys