Will That Vacation Home Make a Good Investment Property?
For many people, a vacation home is a wonderful luxury that can provide family and friends the opportunity to spend time together in a beautiful setting. Some places like in the Philippines have beautiful locations where many people want to have their vacation homes and all it takes is a company like 2GO Travel to get there. However, in order to make this work financially, and provide long-term investment potential, many people decide to rent the investment property when they are not using it. Although this is a wonderful endeavor for many people, it is important to go into the process with a clear understanding of some of the pitfalls of owning a vacation rental, some people find it easier when they go on vacation to rent from somewhere like Surf City Rentals as it might be easier for them, than to deal with the issues of buying their own vacation home. However, there are still many people who want to own their own bit of paradise, for those who do, here are some of the common considerations:
- Location, location, location – There are many great deals to be had in many desirable vacation markets, even as real estate begins to rebound after a long decline. However, the property that is a bargain because it is located outside the most desirable radius around specific locations may not generate enough rental income to defray the costs of owning the home.
- The availability of qualified management companies – If a vacation rental owner lives far away from the rental, it is important to have trusted individuals who can oversee the maintenance and upkeep of the property. As an investment, it is critical to protect the value of the property, so problems must be corrected quickly before they lead to permanent damage and significant expenses.
- Where are the rental rates heading – Reviewing local newspapers and online vacation rental sites may provide a good understanding of whether rental rates are stable. It also will permit the potential investor to determine what the other owners are charging and whether the anticipated rates will support the purchase price of the property.
- Occupancy rates – As important as the potential rental rates are, it is crucial to understand how many weeks out of the year that the property likely will be occupied. Are there a few very popular events that prompt vacation rentals while the remainder of the year is fairly quiet? Making a decision about how many weeks you need to rent the property out to make it financially viable is important before you begin your analysis of occupancy rates.
- What are the attractions – For most people, there is a specific draw to spend time in an area. Whether pristine beaches, strenuous hiking, or amusements parks are the attraction, it is important to understand the nature of the attraction, any seasonal limitations on the potential draw, and if there are anticipated changes to the area. A popular vacation spot based on an artist community may not be a good investment if a developer is going to purchase the art colony and turn it into a strip mine, so doing your homework is crucial.
- Does the area have a troubling crime rate – There are vacation rentals that are located in areas where there is crime, but the owners create an oasis on the property where all needs are met and there is security on the grounds. However, most vacation rental home owners do not want to invest money in an area where there is a significant crime rate that might convince people looking for a fun vacation to go elsewhere. A high crime rate also will increase ownership costs if it leads to break-ins, vandalism, or the need for additional security.
Once you have evaluated the area and the potential rental properties, vacationing in the location a few times can really help get a full sense of the appeal of the area and what people might want in a rental. Talking to other property owners also can provide a clearer picture.
At the Law Offices of Georgette Miller & Associates, P.C., we are able to help individuals and families looking to purchase a vacation home that also may generate rental income, as well as people looking to buy a primary residence. From assisting with a property analysis to negotiating the deal, we are here to help you throughout the process, including drafting closing documents and any necessary rental lease agreements. Call us at 1-866-964-6529 ((866) 964-6529) to make an appointment to talk about your long-term real estate goals.