Financial Planning - - SPECIAL REPORT: REAL ESTATE -

How it works: One of Michael Martin’s clients in Den­ver bought two lux­ury re­cre­ational ve­hi­cles to rent to Airbnb cus­tomers. They’re in a trailer park just out­side the city, and the client is a model host; he leaves maps of the city, puts in fresh flow­ers and makes him­self avail­able by phone or text.

In the win­ter, the client moves the ve­hi­cles to Vail, Colorado, home of the pop­u­lar ski re­sort.

The client bought two Grand De­sign Soli­tude Fifth Wheel ve­hi­cles for $70,000 each. He is fi­nanc­ing 80% of the pur­chase at 4% sim­ple in­ter­est (a type of in­ter­est ap­plied to au­to­mo­bile and short-term loans).

Up­side: Den­ver is boom­ing, and de­mand for ac­com­mo­da­tions is high.

Af­ter ad­ding the $14,000 down pay­ment to the an­nual fi­nanc­ing costs per unit and di­vid­ing that num­ber by the net an­nual in­come of ap­prox­i­mately $37,000, the client achieved a re­turn on his in­vest­ment of about 48%, ac­cord­ing to Martin.

Risks: The RVS are not ap­pre­cia­ble as­sets, and if there is a mar­ket down­turn, there is no guar­an­tee of rental in­come. What’s more, the client’s busi­ness de­pends on Airbnb, which could man­date a re­duc­tion in rates. “His fate is in some­one else’s hands,” Martin says.

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