Batumi Paradise
Jul 25, 2017 · 6 min read

Have you ever seen the show called “Vacation House for Free” on HGTV? Real estate expert Matt Blashaw goes shopping with people to buy a vacation property which they will renovate and rent out to tourists for enough money to pay the mortgage and taxes. Essentially, the idea is that they get to own a vacation house for “free” because their renters are paying the mortgage.

I have watched the show several times myself and have a few issues with the title “Vacation House for Free”. First, every single person who works with Matt puts a sizeable investment into the project in the form of their down payment, which is normally around $100,000. Second, when you do the math on the amount they pay for the property, their renovation costs, and their annual taxes and expenses, you find most of these investors are taking out 20-year mortgages. With the rent payback calculation only barely covering the mortgage and taxes, this means people participating in the show will own their vacation rental property for “free” after way more than 20 years. Probably more like 40 years. Because even after paying off the mortgage, they still need to get back their initial down payment.

Now, I am not a rocket-scientist or Wall Street guru, but in my mind, waiting 40 years to get back an investment is not really all that attractive. Especially when you consider there are other risks and factors they don’t even mention on the show. What about inflation? What about repairs and maintenance on the property over time? What if the real estate market tanks? What if there is a natural disaster or other factor that causes tourist attraction in the market to drop? What if too many people enter the renting market and prices deflate? Too many things can happen in 40 years.

As a person who regularly buys, renovates, and rents out vacation real estate, I don’t think a 40-year wait is worth it. I don’t even think a 10-year wait is worth it. As a matter of fact, I wouldn’t even touch a property, if I can’t get 100% of my investment (mortgage, taxes, expenses, AND down payment) back in 5 years or less. And I do this all the time. Year after year.

There are 3 critical mistakes being made by the people on the “Vacation House for Free” show. First, they are investing way too much money into one single property with a very low rate of rent versus dollar invested. Second, they are taking out long-term mortgages, which means their total payback is way too much to be a very profitable investment. And third, they are investing in the wrong places (geography).

If you follow Matt’s plan on the HGTV show, you will pour $100,000 of your own money and take out a 20-year mortgage on a property worth around $300,000 when you buy it. After paying off your mortgage in 20 years, you will have invested at least $600,000 between your down payment and total mortgage payments. This does not include taxes, repairs, maintenance, advertising, cleaning, and other costs. This is a lot of money to invest into a property that generates about $20,000 per year in rental income. Or, to put it in other terms, this is a lot of money to invest, to earn just a little bit over inflation.

The sad truth, however, is this is the reality of vacation real estate investing for most people. And the reality of almost all rental property investing, especially in western countries such as the USA, Canada, and most of Europe. The good news is that there are a lot of better options out there, if you are willing to expand your geography a little, and look at Batumi.

How to Turn Less Than $20,000 Into $45,000 in 100 Days

The best way to invest in rental real estate in Batumi is to do what we call black carcass real estate investing. This is a very profitable process which can generate 130% to 140% return on investment in around 100 days. What a lot of people don’t realize is that most builders in Batumi offer 0% financing for up to 36 months. This gives you a huge opportunity to leverage your investment capital and maximize your return for even greater than 130% to 140% profits in 100 days.

At Batumi Paradise, our strategy is to invest less than $20,000 into each property and get back $45,000 in property resale value within 100 days along with annual rental income of at least $9,000. We do this by making a 30% down payment on a black carcass property, finishing the property into a fully rent-ready luxury vacation apartment, and then renting the property for top dollar.

Let me give you an example.

Say we buy a property that is 40 square meters and selling for $600 per square meter in black carcass condition. The total purchase price of the property would be $24,000. This means a 30% down payment would be $7,200 and we would owe the builder $16,800 which is financed at 0% annual interest for 36 months. This means our monthly payment would be $467.

At Batumi Paradise we operate our own design and construction crews. So, we can ensure the highest quality renovations for the best price possible. On average, a black carcass property would cost around $250 per square meter in design, materials, and construction labor to become a luxury rental apartment. So, our total renovation investment would be $10,000.

Our total investment of our own cash would be $17,200. This is our $7,200 down payment plus our $10,000 renovation cost.

It generally takes us 90 to 100 days to go from black carcass to rent-ready luxury apartment. So, we should also calculate 3 payments of $467 each. This means our actual out-of-pocket cash investment for this example would be $18,601.

Around 100 days after purchasing the black carcass property, we would have a rent ready luxury vacation apartment with a resale market value of around $45,000. We invested $18,601 of our own cash into the property, and we owe the builder $15,411 after making 3 payments. Our combined cash investment and mortgage balance is $34,012 which means our return on investment in 100 days is over 130%.

This 40-square meter luxury vacation apartment should generate around $9,000 per year in rental income. In Batumi the peak tourist rental season is June, July, August and September. This is nearly 140 days of rental season each year. A luxury apartment like ours should generate $80 to $120 per night, depending on the month. So, we estimate 100 days at $90 average per night. This is how we estimate $9,000 rental income each year. But that only counts the peak season. We can still rent the apartment fairly well in the off-season to winter sports tourists, business travelers, convention attendees, concert-goers, and others.

After taxes, cleaning and management expenses, utilities, repairs and maintenance, we should have a net income of around 65%, which would be about $5,850 each year. If we apply our entire net income to mortgage payments we will pay off our mortgage 33 months after the property became rent-ready.

Within 3 years of buying the property, if property values continued to increase the way they have the past 10 years in Batumi, our luxury vacation property should now be worth approximately $50,000 and we own it 100% out-right, free and clear of any mortgage. If rental rates continued to rise the way they have the past 10 years in Batumi, this same apartment should be generating us around $7,500 per year in net income, after taxes and all expenses.

Now THAT is what you call getting a vacation house for FREE. And we did it in 3 years with only $18,601. To me this is a LOT MORE ATTRACTIVE than putting $100,000 of cold hard cash into a property and waiting 40 years to get any profit.

If you are interested in getting a vacation apartment for free in Batumi, you should contact Batumi Paradise. Shoot us an email or fill out the contact form on our website. We would be happy to set up a free initial consultation with you, either in person or virtually. Our highly professional staff is exceptionally skilled and experienced. We are ready to do everything humanly possible to help you make the most profitable black carcass real estate investment possible.

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