Timing Your Way Through An Entire Year of No Mortgage Payments

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This time of year is an important time for the real estate market, in many ways.  In terms of buyers, there are usually a good number of properties available to choose from.  In terms of sellers, the plenty of buyers out there means that there are people looking to buy your home and there should not be too much Days On Market to contend with.

But this time of year is also a very good time for those individuals who are able and in the market to buy a secondary or resort home and put it up for rent.  Investing in this type of property can be done throughout the year, but if you get in on the deal now, you can ride the wave of rental income that comes through in the peak months, for the rest of the year.

Peak Season, Piques Interest of Investors

For resort properties, there is a clear-cut and definitive peak season, defined by the summer months that run from Memorial Day through to Labor Day.  Giving this season a good solid ten-week period of time, property owners typically reap the bulk of their benefits from renting out during this time frame.  Including the last two weeks of June through the first couple weeks of September, you have plenty of time to earn higher rent – enough to make up for the rest of year.  But the peak, peak season is an even shorter window within this time that falls in the last week of July and the first week of August.  This is when families are eager to get in their vacations.  This is when weddings are at an all-time high.  This is the time that working professionals get their annual time off.  And these are the weeks when summertime is at its best.

Cash That Flows For the Entire Year

So here is how this works.  With just the peak, peak weeks’ rental income alone, you will have enough in-pocket funds to carry the property’s mortgage payments through to the next year.  Does this sound too good to be true?  It isn’t.  Consider the following equation:

A mortgage at 4.5%, 30-yr term, 30 year payoff, fixed loan on a $400,000 home that had an $80,000 down payment equals monthly mortgage payments of $1621.  Add a few hundred for tax payments each month and it comes to under $2000 per month for this rental property, covering the principal loan and taxes which, by the way, have their own advantages for this type of home.  (For the same equation demonstrated on a home you may want to buy for this purpose, come in to our office and we’ll work out the number for you).

If you buy now, or by June 15th (making August 1st your first and only out-of-pocket payment), you will immediately begin receiving the highest rent income for the property, in the entire year.  After receiving three months’ rental income, all at once, you will be in a position to pay eight and a half months of rent, absolutely “free” and with no out of pocket “cost” to you.

One Size Fits All

This formula works – tried and true – for properties of all shapes and sizes.  Whether you are interested in purchasing a three million dollar beachfront estate or a small and cozy summertime cottage with a listing price of $200,00 – the peak rental season and concept mentioned here, stays the same and it applies just the same to properties of all price ranges.

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This is positive cash flow at its best and the present condition of the real estate market has no bearing on the success of resort and secondary property sales and rentals.  Even with the agent commission for rental, utilities and other things that may be needed during the three main months, the amount on our example property above still yields a sizable $16,000 net, after all is said and done.

The deal is simple.  Buy NOW.  Rent it out NOW.  Enjoy mortgage payment-free months ahead until the next cycle repeats itself.  And don’t worry – these properties are renting way in advance.  In fact, in early May, most (if not all) rental properties in Ocean City are already spoken for.  The resort/secondary home market is definitely a hidden ‘asset’ to be tapped into!