Why You Should Consider Buying an Income Producing Property on Madeline Island

Our Madeline Island community is unique in many ways, but maybe one of the most significant features of our Island is the shortage of commercial lodging available in what is widely regarded as a resort and recreational community.

Back in 2006, when we sold the Madeline Island Motel on Colonel Woods Avenue, that facility was the largest motel operation on the Island.  And since 2006, there has been a conspicuous lack of large-scale hotel/motel construction on Madeline Island.

Visitors rely on other lodging resources if they wish to stay on Madeline Island.  Many visitors reserve campground space at either Big Bay State Park (requiring a Wisconsin State Park sticker) or at Big Bay Town Park.  Other visitors who wish to stay overnight will contact a local property management/home rental firm, such as is operated by The Inn on Madeline Island. 

The latter resource is significant, because a good number of Island homeowners rent out their homes during the summer months.  In the busiest part of summer, there is great demand for rental homes, particularly those with Lake Superior shoreline.

This past summer, despite the fact that real estate sales were slow, there was a shortage of available lodging during July and August.  We could have used more rental dwelling units on Madeline Island during those months.

You may not get rich by renting your Madeline Island home, but if you're methodical and are willing to manage the expenses involved, you can probably at least net enough to pay your property taxes.  And if you own a waterfront home, that could be a significant reason to rent.

You can rent on your own, but many owners use one of the local property management firms.  Some of these firms claim that their average property management expense is around 40% of gross rentals.  However, keeping your property management expense below 50% can be challenging.

Keeping property management expenses under control requires a few basic steps:

• Most property managers offer ala carte services (and pricing) such as lawn mowing, tree trimming, home maintenance and winterizing.  These are convenient services but they add up.  Generally, you can save money by hiring out many of these services yourself, instead of picking up your phone in Minneapolis or Chicago or Madison and telling the property manager "please take care of this for me and send me the bill".
• Review your monthly property management statement and call your property manager if you see expenses in the statement that are questionable.  Sometimes a property manager will notice that your $10 coffee maker or toaster isn't working, so they'll gladly run back to their office and pick up a new one for you (which they purchased at WalMart for $10 but bill you $40-50 for) which they'll put in your cabin or cottage.  Trouble is, you don't need to pay a four hundred or five hundred per cent markup for a new toaster or coffee maker!
• If you rent during the cooler months of the year, you can save money by considering off-peak electric heat (and domestic hot water) instead of propane.  Off-peak electric is clean and efficient, not to mention relatively cheap.  There are no tanks to fill and there's no need to read the tank meter to make sure it's not empty.
• Keep track of what you pay for lawn care, snow removal, leaf raking, firewood cutting and carpet or window cleaning.  If you're property is a desirable and busy rental that makes the property manager money, try negotiating a better rate for these services.  Or consider mowing your own lawn and performing other similar tasks.

Like any worthwhile enterprise, owning a home that rents while you are away and earns you money can be rewarding, but it requires some degree of effort.  Speak with one of our real estate professionals about Madeline Island properties that are best suited for vacation rentals.