Six Tips For Buying A Vacation Rental Property
There are a lot of benefits to investing in vacation real estate, but it’s important to avoid the pitfalls. They can stop you from realizing your dream of having a great getaway home for you and your family that also pays for itself. Here are some tips to consider before you sign on the dotted line.
1. Choose a location you enjoy.
Part of the reason you’re buying is to have a place you and your family can go and enjoy year after year. The property you purchase has to be big enough to meet your family’s needs and still be within your budget.
2. Avoid timeshares.
Timeshares carry a lot of risk. You have to avoid the scammers that prey on inexperienced buyers. You have to go over any contract’s fine print to make sure you aren’t overpaying for your share before you buy it.
It can be difficult to manage short term rentals. Timeshares historically bring in less income for investors than privately owned properties. The volume of owners trying to get out of their timeshares is huge. There’s a reason for that.
3. Buy instead of build.
Building a vacation home that exactly fits your needs may be tempting, but it will take months before the home is ready for renters. In the meantime, you’ve added construction costs and interest fees to your monthly budget. If your goal is to create additional income, your best bet is to buy an existing home. That will give you an immediate return on your investment.
4. Buy in the U.S.A.
Buying vacation investment property outside the United States can be risky. Every country has its own set of rules and regulations. You are subject to the laws of foreign governments when you buy outside the U.S.
5. Factor in all your costs.
When you purchase rental property, you have to factor in more than just the cost of your monthly mortgage payments. Before you purchase, sit down and list all the expenses that could possibly be associated with the property you are considering.
You are probably already aware of monthly expenses like taxes, utilities, and maintenance, but have you considered repairs and the cost of hiring a management company? If you decide to invest in a beach house, you have to factor in wear and tear caused by the sun, sand, and salt. There may be a lot of competition for renters. You can’t let things slide and still be competitive.
6.Consider the seasonality of your choice.
Buying a vacation investment property on the beach is great, but if the beach is only habitable a few months out of the year, you will have a house sitting empty and not paying for itself the rest of the time.
It’s important to be practical when purchasing this type of investment. You want to buy in an area that attracts tourists and vacationers as much of the year as possible.