John Hope is considering buying cabin (named Enotah) in the Blue Ridge Mountains

John Hope is considering buying cabin (named Enotah) in the Blue Ridge Mountains

John Hope is considering buying cabin (named Enotah) in the Blue Ridge Mountains to use as an investment property. The 2 bedroom/1 bath cabin (with a hot tub) is priced at $180,000. He plans to use a property manager to oversee the property, advertise it, handle all customers and simply pay him a portion of the proceeds.
Dr. Hope plans to put 10% down and finance it for 20 years. He explored various loan options and found that his loan rate would be 3.5%. Other costs he expects over the year would be:
– HOA $200 per quarter
– Electricity $130 per month
– Internet/Cable $80 per month
– Propane Gas $500 per year + $72 Annual tank Rental fee
– Property Taxes and Insurance 15% of the mortgage payment
– Pest Control $167 per quarter
– Overall Operations and Maintenance 12% of revenue per month
Dr. Hope has found a property manager to consider. GA Mtn Cabins takes 35% of all revenue. (GA Mtn Cabins also charges booking fees and cleaning fees to the customer but this does not need to enter into your calculations.)
To get a sense of revenues, Dr. Hope has gathered the data on the second page of this assignment that predicts rent per night based on # of bedrooms, # of bathrooms and the presence of a hot tub. By running a regression model, you can predict the rent he can charge per night. Assume for January through March, his forecasted rent is 20% lower than normal. During Sept – December, assume it is 15% higher due to the fall leaves and the holidays. At the moment, he assumes a 60% occupancy rate over the year (so 60% of the nights will be rented). (Do not forget to consider that different months have a different # of days.)
You need to create a model that shows Dr. Hope his income per month for a full year and then the total for the year. (Keep in mind that Dr. Hope does not necessarily expect to make a profit. He expects the value of the cabin to appreciate.)

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