Here's how this all got started:

While on a trip to a convention, we had some time to ourselves, so we looked around.  The weather was great.  The scenery was beautiful.  What a great place to retire.  Well, maybe not full time, but at least some of the time.

We looked at buying some property there (the Caribbean area) and I was thinking how I could justify it.  We wouldn't use it all that often.  Maybe we could get down there two or three times a year.  What about the rest of the time?  I thought that maybe we could buy it with a friend and both of our families could then use it.

I thought about this for a long time.  I could see all kinds of problems, from who would get the best weeks, what if we wanted to vacation together, and who would take care of the maintenance and repairs, and what if they didn't take as good care of the place as we did.

I concluded that this arrangement would only lead to disaster, and we would probably lose our friends in the bargain.

We really wanted the place though, so I tried to think of other ways to make the deal work. 

The solution was really simple:  we would buy the property and put it into the hands of a property management company that would rent it out when we weren't using it.

It sounded like a great idea.  We could have our place in the sun any time we wanted, and have a little income from the rentals to boot.  What a perfect solution! 

So we talked to property management companies.  There are many different kinds of real estate property managers: 

• Regular residential property managers who manage long-term rentals like apartments, houses, and condominiums.
• Commercial management companies which maintain commercial properties like stores, offices, and factories.
• Commercial leasing companies which fill vacancies in the above listed commercial properties.
• Residential property managers who manage whole condominium projects for the Homeowners Association.
• Vacation rental companies which rent houses, apartments, and condominiums by the day or week.

Ah ha!  We found our way.  The solution was at hand.  All we had to do was interview several different companies and then choose the best one.  That sounds easy, but the reality was far from easy.  In most areas there might be one or two companies that specialize in vacation rentals, and some of them only manage their own properties.  Some manage a combination of their own properties and client properties.  Very rarely you might find one that only manages client properties.

Here is what we learned:  the fees are high, anywhere from 20% up to 50% plus the cost of maintenance, repairs, maid service, etc. And we would have to completely outfit the place like a home with furniture, linens, dishes, appliances, cookware, utensils, TV, telephones, and probably Internet as well.

We would pay the maid, the gardener, and the pool man out of our share.  We would also pay all the taxes, insurance, utilities, and anything else you could imagine out of our share.  It looked like our share was getting pretty small.

But that wasn't the worst part.  The worst part for us was that they had first dibs on the place and we could only use it if no one else wanted it.

So let me see if I can state the situation as we found it:  The management company will undoubtedly give preference to their own properties when it comes to renting them out during the slow times.  Then during the moderately busy times, they will promote their properties and the properties of their special clients and friends.  It would only be during the peak season that we would get an even break.

So after paying all the expenses, we could realistically expect the place to be rented out about 25% of the time if we were lucky.

Now I am a real estate broker and I don't take well to being bullied by property managers.  And negative cash flow is not one of my favorite outcomes to investment property ownership. This whole thing was getting my hackles up. There had to be a solution to this new problem.

First I got out my pencil and tried to figure out exactly what the place was going to cost to maintain.  Then I researched the rental market to see what I could expect in income for high season, the off-season, and the in between season.  Then I applied several different occupancy rates to the various seasons and I came up with a set of values.  Not having a crystal ball handy to tell me the exact occupancy that I  would experience, I just averaged all my numbers and came up a reasonable estimate for my gross rental income, and consequently, a reasonable estimate of my net income.

Now the question was "how could I get a management company to give me these results?"  I needed to be treated equally with all clients regarding the marketing of my property.  Even if I lowered the expected revenue (the rental rate) would my house get equal exposure with all their other houses?  I just didn't feel comfortable with this prospect.

We wanted to buy the house.  We needed the rental income to help cover our costs.  I needed to think.

The Birth of the "5 Resort Plan"

Why did we want this house?  Right now (while we are both still working) we can afford to travel and stay in hotels or other resort properties.  But what about after we retire?

As part of the Baby Boom generation, we are quite typical.  I've been self-employed for the last 30 years and consequently I don't have a company funded 401(k) or any other retirement plan for that matter.

My wife has a salaried position with a major employer.  She has a 401(k) plan, but  when we analyze our needs at retirement, it comes up woefully short.  Will social security fill the gap?  I don't think so.

How can we maintain our lifestyle when we retire?  How can we stay in all the places we like after we retire?  Where will the money come from to support our travels?

Ideally, we would like to have a house or condo in at least five of our favorite places to visit.  Then we could continue to visit those places after retirement.

If we did have five places that we owned "free and clear" or which we financed but were rented out enough of the time to cover all our costs including mortgage payments, then we could maintain our lifestyle.

Is it just a dream or is it possible?

Being a believer in the power of a positive attitude (some say an eternal optimist) I say there is nothing to it but to do it.

But it has to be done in a logical manner with a definite plan, and full consideration of all the possible exigencies.

Bottom line:  we wanted to do it (buy the off-shore house), but after full consideration of all the details and the probable outcome, it just wasn't feasible at that time.

I still like the idea of owning five houses in different places so that we can afford to stay in resort areas even after we retire.  And retirement is looming its ugly head.  How can we do it?  Time for more thinking.

The problems that need to be solved are:

• We must be able to trust the property manager to give us a fair shake.
• We would like to finance the purchase.
• We need to be able to control the costs.
• We want to be able to watch over the project (since it is our first time).

Because I am a real estate broker, I can establish my own property management company to handle renting resort properties on a daily or weekly basis.  This way I know that my properties and my clients' properties will be treated fairly and honestly.

In order to finance the purchase, we decided to buy something within the United States to be able to take advantage of all the mortgage options available.

When you buy something far away you are at the mercy of others.  If something breaks, or if you need a special service or you just want to outfit your new rental, costs can have a way of escalating before your very eyes.  Or it would be before your eyes if you were there to watch.

Therefore, we decided to make our first purchase within a couple hours drive from home.

This is part 1 of a 2 part series. Stay Tuned

And the whole thing is one chapter in my book about retirement planning for Baby Boomers.