How rich folk can pay for college: “glamping”

Parent Cafe
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Assuming no brokers’ or rental fees, no damages which need to be fixed (big assumption in my book), no extra maintenance costs (I’d expect people in this bracket to hire a maintenance company for those 2 months - can’t picture the Master of the House getting a call at 3 AM that the toilet’s backed up), no additional insurance needs (many homeowner’s insurance policies won’t cover you if you’re renting out your property for more than 1 or 2 weeks), storage costs for those valuable items like art or furnishings that you don’t want to leave in the house, plus probably a thousand other costs that I’m ignorant of (being that it’s never going to be an issue for me!).</p>

<p>I tend to think this is one of those ideas that look better on paper.</p>

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<p>Well, I meant after costs. I highly doubt they add up to a losing proposition in reality, as it’s such a common thing for owners of large homes in vacation areas to do. They wouldn’t do it year in and year out if it wasn’t profitable.</p>

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<p>The idea of summer rentals, or anything seasonal in a certain area, is fairly common.</p>

<p>There is an international golf tournament held in our neighborhood. The residents despise it because of the traffic and inconvenience/hold up at the gates. I know many people who arrange to be out of town. There are some that have rented out their homes. I wouldn’t do it but I don’t see any harm in it. No one’s making a lot of money doing it, just taking advantage of a time they want to be out of their homes anyway. </p>

<p>There are people that rent out their homes during peak weekends in my sons university town (graduation, football season, etc.). We are looking into this for my sons graduation instead of having family scattered in hotel rooms.</p>

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<p>garland- If its a sunk cost (IE primary residence, inherited asset), then of course the extra money is pure profit as you can’t count the expenses against them. If they <em>must</em> have a beach house regardless for the other 10 months, that’s a sunk cost as well. My point is that the overall profitability is negligible and shouldn’t really be looked at as an investment but more of a depreciating luxury good, ie, they aren’t making any money (for college) with this.</p>

<p>With all the simple money making schemes in the world, this one’s a stinker. </p>

<p>Interesting topic though! More articles like this!</p>

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<p>Many years ago we one of the local pizza shops apparently had a driver that drove a Jaguar. The Jag had on one of those magnetic signs at the top of the car. I think that it was Pizza Hut or maybe Papa Ginos. People commented about it in the local newspaper forums.</p>

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<p>Rexximus, if you are trying to say that your money is better served being invested as cash (via regular savings, CD, money market, stock, whatever) than invested in a second home, nobody is arguing that. If you are trying to say that it doesn’t make sense to rent out your home to make a few extra bucks, I think you are seriously misinformed.</p>

<p>Let’s take an example. Let’s assume we have a home purchased in 2000 for $1.5MM. Assume that in 2006 it was worth $2.5MM, in 2007 it was down to $1.7, and it’s stabilized at around $2.0MM now. Assume that tax rates are 2% assessed on actual value of the home, so this year taxes come to $40,000. Let’s say your principal + interest comes to $12,000 a month, so including taxes you are talking about around $15,500 a month, and when you throw in utilities, maintenance, etc., you’re probably looking at $18,000 a month (what the heck, the numbers don’t really matter for this example).</p>

<p>This means that, no matter what, you are paying $18,000 a month. Whether you’re there or someone else is there, you’re paying $18k a month. Now, let’s say that you can manage to rent the place for $25,000 a month (realistically you’re probably looking at $20k, but let’s say you’re aggressive and found people who reeeeeally want to rent out a place). That means that if you rent your place out for two months, you have $50,000 of income that you would not have had otherwise. When you take out the $2,800 you paid for your accommodations, you have $47,200 of income. Yes, you have to pay taxes, but that is income that you had no way of getting otherwise.</p>

<p>Plenty of people purchase second homes and then rent them out for certain periods so they can afford their mortgages without needing to change their lifestyles terribly. Could the money they spend on their homes be invested elsewhere? Yes! But clearly, they enjoy these homes, and renting will mean that they have a second place to stay without necessarily breaking the bank (or, in this case, without having to choose between having a nice home and also sending kids to college). Seems like a win-win to me.</p>

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<p>I have an interesting house in a college town (less than a mile from campus) and I used to run it as a (permitted) B&B for football and graduation weekends. It was easy money and in all the years I did it I never had guests who were a problem. In fact, most were very charming and two couples stayed with us almost every football weekend year after year. (One was a chef and used to bring us incredible tailgate leftovers.) At the time you could rent a home, or rooms in it, for two weeks a year without having to declare the income.</p>

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<p>I wish the OP would stop posting Arrested Development spoilers. I haven’t been able to work my way through Netflix yet.</p>

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<p>SIL rented her small, 2bd, 2bth with finished basement in SLC during the Olympics for $10,000 per wk for 3 weeks. She rented it to a news organization that supplied their own insurance. She went to Hawaii to visit her daughter, sweet deal!</p>

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<p>People have always rented out their homes to make money on the side. Nothing new here.</p>

<p>I’m perplexed by the notion that the rental needs to cover the pro-rata portion of insurance, property taxes, etc: the big thing is that you are getting more than you would otherwise. Also, I’m assuming that the pro-rata portion of property taxes, mortgage, etc. is tax-deductible as a business expense, so it can functionally be a way to get some housing costs paid for with pre-tax income.</p>

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<p>I actually benefited from the whole summer rental thing. I was randomly assigned a roommate freshman year that I loved - and I got the luck of the draw. She was the only child of a Hollywood Producer. She convinced her mother that she wanted to live off campus starting Sophomore Year.</p>

<p>Mom found a beach front home through friends. We rented it 9 months of the year and then they rented it out all summer for big bucks. We were the envy of all our college friends… house had a swimming pool, basketball court and outdoor room with ping pong table and a keg thing!!!</p>

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<p>Is this a chain effect - do the trailer residents rent out to glampers to make a few extra bucks? Where do they live during the summer months?</p>

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<p>Back in the 90’s my SIL’s neighbor rented her house for 10 days or two weeks to Tiger Woods for $40,000. His required a place to land a helicopter and brought in his own bed, recliner chair and hot tub. </p>

<p>Some of those folks probably inherited those big old ocean front homes and use the summer rent money to pay for upkeep and taxes. Go for it…I would</p>

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<p>If you rent your house out for less than 15 days during the year, the money is tax-free, you do not have to declare it on your taxes.</p>

<p>This is ideal for the golf tournament or Olympic situation.</p>

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<p>If I was rich I just wouldn’t live in a big, fancy house.</p>

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<p>“This means that, no matter what, you are paying $18,000 a month. Whether you’re there or someone else is there, you’re paying $18k a month.”</p>

<p>Yes, chrisw’s analysis is correct: the $18K/month should not be included in the NPV calculation, because it is pretty much a fixed cost paid no matter what.</p>

<p>“Is this a chain effect - do the trailer residents rent out to glampers to make a few extra bucks? Where do they live during the summer months?”</p>

<p>Tents? Bum out in The Jungle off the Interstate 5?:)</p>

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<p>Nah. They go stay with their relatives across town.</p>

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<p>^^With their rich relatives who rent the million dollar mansion. :D</p>

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You say that now… :D</p>

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<p>H would never rent out or let strangers live in our home for any price and we’d never be able to command rental rates that would make much of a sent in college expenses. Sounds like a legal way to supplement income–why not?</p>